By Legal Contributors Team | Following the publication of the first story on ZimEye, Investors are in the rightful minds to be worried about the nature of the Investment schemes Qoki is operating.
Investors should start questioning whether this investment is safe for them. The points below are some of the red flags Investors should be aware of and should approach Qoki for clarification. ‘We respect the efforts in facilitating the empowerment of women through investment opportunities, however, this should be done fairly without taking any advantage of the vulnerability of others,’ is how they could begin.
The following analysis generally deals with the projects involving the purchase and development of land, however similar concerns could be raised for other Qoki projects as well.
It is also highly recommended that investors (despite of their trust and allegiance to Qoki and its founding members) obtain their own independent legal advice on this and not rely on the analysis set out below
|Loopholes that could expose the investor||Red flags|
|Founding agreement between the Investor and Qoki (What constitutes the relationship between Qoki and the Investor?)||In most cases it appears the only agreement between the Investor and Qoki is a verbal agreement, entered prior to certain representations being made by Qoki through Sithule. These representations are largely made in the form of audio messages/voice notes on WhatsApp, Fakebook posts about the Investment opportunity. Recently it has been noted on a Facebook post that some of the women have signed a Qoki’s Dreamers Document (the Qoki Women Dreamer Terms and Conditions was initially introduced on or around November 2020, after most Investors had already made payments in full or in part). It is important to understand whether this document is a mere document setting out Qoki’s initiatives, or whether it is intended to be a binding agreement between Qoki and the potential Investor. However, to be binding specifically for purposes of the investment that the potential investor is signing up for, the very same document should detail with specificity the type of investment, including its description (size, price, location, current owner), date of purchase, date title passes, conditions precedents etc. Without the specificities, the Qoki Dreamers document may simply not be an enforceable document.||The founding documents lacks certainty or clarity as to the relationship between Qoki Investments Pvt Ltd and the Investor, and there are endless issues on this, some of which include the following: There is no relationship between the Investor and Qoki.There is no explicit term detailing this relationship.There is no explicit term detailing that Qoki is purchasing a certain investment/ or entering into an agreement for the purchase of property (or any asset) on behalf of the Investor.There is no explicit term detailing that the contract of sale, or that the funds being paid by the Investor are to be used to acquire a certain piece of property, upon which a specific portion of that property will be subdivided and allotted to the Investor.There is no explicit term detailing the link that the Investor is paying for whatever property is being represented to be purchased for or on behalf of the investorThe Investor does not have a strong legal basis upon to claim title to that property upon purchase and passing of title to Qoki|
|Pooled Investments||Investors pool in their funds under the promise that they are purchasing a property together. The documents that appear to be used for this are very generic and only list the names of Investors, and the amounts they are contribution, including payments made. The document is not referred to in the Sale of Land agreement, and it does not form part to any subsequent agreement which would ordinarily be entered into by Qoki and the respective pooled Investor for purposes of then transferring title to the Investor.||The pooled funds could be used for whatever purpose Qoki may deem fit, including paying other Investors there is no mandate from the pooled investors for Qoki to purchase a piece of land on behalf of the investors.there is no certainty as to what the funds can be used for, while the funds and names of the pooled investors are listed on a document, the same document is very generic and afford little to no legal protection to the pooled investor|
|Entity being used – Directorship||Legal entity used to purchase land (Qoki Investments (Private) Limited) (“Qoki”) is a company registered in Zimbabwe with the following directors and shareholders (as at 25 August 2020): Directors Sithule Tshuma (regardless being resident in the UK, the address listed with the Registrar of Companies in Zimbabwe, is that of New Lobengula, Bulawayo – therefore any legal service against Sithule in her capacity as director of Qoki will need to be affected in Bulawayo, Zimbabwe, and not in the UK)Emmaculate Lee TshumaKaren KhumaloNompilo Moyo Shareholders (equally holding 2,000 shares): Sithule Lee TshumaEmmaculate TshumaKaren KumaloSehlile Gumbo Tapfumaneyi Nompilo Moyo||The is no relationship between Qoki (the Company) and the Investor: The shareholders are entitled to all the assets held by QokiOn winding up of Qoki (liquidation of all assets including all investments held by Qoki), and after the payment of creditors, the shareholders are entitled to all the proceedsQoki Investors do not have any legal protection that entitles them to the assets of Qoki, the Investors may launch legal proceedings against Qoki, but with the limited documents and agreements that set out the relationship between Qoki and those Investors, this is very difficult to prove|
|Possible breaches of various laws||The Qoki Investment scheme largely operates in the UK and Zimbabwe, and the conduct carried out by Qoki may (managing pooled investments) may be subject to regulations in both countries, requiring regulatory licences and/or authorisations. It is possible that without the appropriate authorisations and/or licences, Qoki may be in breach of laws in the UK and Zimbabwe UK Possible violation of financial services laws, and conduct of business may require a specific licence to obtained by the entity such as the Financial Conduct Authority Zimbabwe Possible violation by running an unregistered collective investment scheme. Violations of these laws may impose civil or criminal penalties to the directors, and a possibility of winding up of Qoki, with the proceeds of the liquidation to be paid to the Regulators. Depending on how Investors make payments to Qoki, including the remittance of funds to Zimbabwe, Qoki may be in breach of Money Laundering laws. Dealing with foreign currency may also expose Qoki to Reserve Bank regulation non compliances|
|Contracts of Land||It appears that the sale of the land is done through a Memorandum of Agreement of Sale. The Memorandum of Agreement of sale shows in most cases shows that Qoki is purchasing the Property from the seller who is the current owner or executor of a deceased estate. The Memorandum of Agreement does not make any reference to the Investors, or that Qoki is acting in an agency capacity on behalf of the Investor. It means that after the successful completion of the sale, Qoki is entitled to receiving title of ownership through a title deed.||The agreement of sale of land is between the seller and Qoki, this creates a few challenges for the Investor, namely: On passing of title to Qoki, Qoki becomes the owner of the propertyQoki enjoys all the rights that come with ownership of propertyQoki in its full discretion (through its directors) decides what it wants to do with the property Qoki can decide in its absolute discretion to honour its representations made to its Investors by transferring title and to the Investor. However, Qoki does not have a legal obligation to do this and if the directors decide not, they simply can keep the title indefinitelyIn the event Qoki does not transfer title to the Investor, the Investor does not have a strong legal basis (if any) to claim the transfer of title, it would be difficult to prove that the Investor is entitled to receiving title in the absence of an express agreement detailing that sale of land from Qoki to the Investor, or an agency agreement between Qoki and the Investor, detailing that Qoki is purchasing the property as agent on behalf of the Investors, or an agreement conferring the right to acquire land.In the event of Qoki’s Insolvency, the Investor does not have a legitimate claim against the assets held by Qoki, and as such do not rank as a creditor. Investors are likely not to get any of the payments they would have made to Qoki for the purchase and the development of land.The Investor invests in this scheme highly at their own risk, at the hope that Qoki honours its representations made about the potential transfer of title on completion of the project. The investor does not have any legal protection. In the event of the death of the Investor, the heirs of the Investors will have difficulty in including the right to acquire land or claims of money paid to Qoki as part of the deceased estate|
|Land development projects||Most of the Qoki projects involve the purchase and development of land. The agreements that are often shared with Investors at the onset are for purposes of purchasing the land, and not necessarily for the development of that land. There have been concerns on lack of transparency with regards to the actual costs involved with the land development, as this are not disclosed initially, at the time when an investor signs up for the purchase of the land. It would seem prudent (and perhaps safer for the Investor) that upon Qoki acquiring the land, as a first step, undertakes the subdivision process and then grant the title deeds to the Investor prior or simultaneously with the development of the land||With the current legal uncertainty of land ownership including whether Investor funds are being used to fund the purchase of the land they believe to be based on representations made at the marketing of the Qoki Project, the Investor cannot be entirely certain that their funds are being used for what they have been told, and they cannot ascertain this information from Qoki. The risk in doing this is that funds can be pooled in to develop a project that the Investor did not even sign up for.|
|Payments and updates on purchased investments||The invoices that are usually provided prove funds deposited with Ncube and Partners are of a generic nature, they appear to lack certainty and could relate to any transaction that Qoki is undertaking. There are concerns that a single invoice could be used for multiple projects|
|Initial Investors||There is a consistent theme in Sithule being one of the first investors in each project that is announced. This can be highly suspicious and typical to a pyramid scheme|
|Ownership of land||There has been a lot of talk about title deeds being given to Investors at the completion of projects. It does not seem that this is clearly documented in the agreements that the Investor signs up to, and it is a highly risky scenario for any Investor. Without an explicit term in the agreement detailing how and when title will pass onto the Investor, the Investor should not be investing into Qoki.||As stated above, without any explicit term in the agreement on the passing of title from Qoki to the Investor, the Investor has little or no protection from the law on acquiring title despite having fully paid the amounts required by Qoki. The critical agreement in this entire investment transaction is the sale of land of between Qoki and the seller of the land (an agreement that the Investor is not part of). That is the agreements that results in title passing from the seller to Qoki. There however is no subsequent agreement between Qoki and the Investor, that sets out among other things, an obligation by Qoki to transfer a portion of the land to the Investor. Without this agreement (either in the form an agreement for a right to acquire land / agency agreement / sale of land agreement between Qoki and the Investor), the Investor does not have any legal protection to enforce the transfer of title. This is an incredibly dangerous position for the Investor to be in, regardless how they trust Sithule or Qoki as an entity. If Qoki (the Company) changes its directors, or if Sithule ceases to be a director for whatever reason, the Qoki company through its new directors could decide not to honour any promises made on social media with regards to transferring title if these|