Last month, Egyptian B2B e-commerce platform Capiter made headlines after its founders Mahmoud Nouh and Ahmed Nouh were ousted by their board as CEO and COO. The reasons were unclear, as neither side has publicly commented on the situation; But there have been reports from various local news outlets, from financial mismanagement to the board’s failure to report to the potential merger, as well as internal disagreements over management methods.
In a statement to TechCrunch last month, Capiter’s board said the company’s claims of assets being stolen were untrue and that it had not moved to remove the founders because of suspicions of theft and fraud. “Rather, this action took place after the founders stepped down, failed to enact corporate actions approved by the board, and began to actively undermine the company’s ability to stabilize its financial and operational affairs. After that time, an interim CEO (the company’s chief financial officer, Majid El Ghazuli) became necessary to appoint.
When the news broke, the ousted CEO, Mahmoud Nuh, denied the allegations when contacted by TechCrunch saying that he and his brother Ahmed had not received an official notification of their ouster. But unexpectedly, the founders, in a statement to TechCrunch, are accusing the board of spreading “false and untrue allegations” that cast doubt on their reputation. Last week, Noah took to LinkedIn to give his full account of the drama.
Meanwhile, statements received from Capiter’s board and founders included a lot of finger-pointing, leaving Capiter employees confused about their current situation. Many of these workers, clueless about the company’s direction, have yet to receive their August salaries and severance packages. Some expressed their displeasure on LinkedIn (other posts can be found here and here ).
Although 50% of salaries have been paid for the month of August, a few workers with TechCrush who wished to remain anonymous said the board has yet to announce any schedule or date for payment of salaries. “The board has told us that they are following legal procedures to finalize anything that needs to be done before paying them. Also, suppliers and lenders are calling some of us and asking for their money, which should be our responsibility, not the company’s,” said one of them, many of whom have not yet moved to new opportunities and have yet to go public. They were fired at Capiter.
Founders with investors
Last September, Capiter raised $33 million in Series A funding to compete in the country’s growing B2B e-commerce and retail space. It was one of the largest of that phase, and things seemed to be going well with the company until it laid off many workers between June and July, citing global macroeconomic trends. But according to various sources, the company’s issues are internal rather than external, because Capiter is a business with a poorly managed workplace, no structure and a high burn rate.
The company had planned to raise a series of rounds to solve its problems, but faced a challenging fundraising situation. What happened next led to a rift between founders and investors.
According to sources, Capital’s investors wanted to sell the company to a similar player based in Saudi Arabia, Retalio, but the founders refused. Existing investors want to inject more capital into the cap. A source close to the company confirmed to TechCrunch. “It is true that in the last nine months, due to the amazing business built by Kapiter, the company has received inbound interest from several players in Egypt and neighboring countries,” said the person. “At the same time, investors raised millions of dollars in capital in two rounds (on top of the Series A raised last year) based on the progress of these talks and the traction of the business. Although the events of the past two weeks have disrupted these efforts, there are still active M&A discussions at this time.”
The board said that around September 1, during these discussions, Capiter’s founders left Egypt. By doing so, they stopped solving the company’s operational and financial situation. They also argued that the founders denied key employees access to email and restricted the ability to view and transact important bank accounts. “These actions have derailed efforts to stabilize the company, particularly its ability to negotiate with creditors, pay employees and improve capacity,” the board said in a statement.
The board said that it supported the capital to pay August’s salary with sufficient capital and instructed the founders to make these payments. The founders unilaterally and without permission diverted most of the capital to low-priority lenders and now frozen bank accounts. According to the board, any liability for salaries and employment benefits rests with Noah Brothers and Capiter Egypt, and the board is comprised of only the two founders.
Yes, you read that right: Quona Capital and MSA Capital’s major investors include Capiter Technologies Holding Ltd., a venture capital firm originally based in Mauritius and now based in Abu Dhabi. They claim to hold board seats. In contrast, Capiter Egypt has only two board members: the Noah brothers. Therefore, all liabilities currently under investigation are fully settled by Capiter Egypt, Capiter Technologies Holding Ltd. Where he has no management rights or signatory authority.
Now, here’s where it gets interesting. On September 5, Capiter’s board appointed new management, appointing El Ghazouli as interim CEO. In a statement, the Noah brothers said the board had not initiated any official process or formal process to dismiss them and strike their names “to the best of their knowledge” from Capiter’s legal register. In its response, the board said that since the two founders are the sole managers, signatories and legal representatives of Capiter Egypt, the effort to make a change of control should follow the proper process according to the instructions given by the Egyptian legal counsel and may take up to 60 days. . The board said the legal procedural challenges outlined above undermined the legality of formally completing this process.
As Capital Management hangs in the balance, neither the company’s board nor its founders take full responsibility for the wages paid to employees and the money paid to creditors, which according to people familiar with the matter will amount to between $3 million and $5 million. While the board’s jurisprudence may seem reasonable, it conveniently absolves them of liability. So it is not clear whether he will be caught or not. It also doesn’t help that the Noah brothers say they can’t handle management duties, including paying workers’ wages and settling creditors’ payments.
In the month leading up to these events, Kapiter’s founders asked the board to immediately agree to liquidate the company as a legitimate way to protect the company’s employees and creditors – and promised to pay the company’s debts to the employees. And creditors want to keep the company running in hopes of a future M&A deal while the future accounts are created.
“Instead of acting responsibly, they have delayed and disagreed with our solutions, ignoring the rights of the company’s employees and creditors, leaving them unpaid in the current crisis,” the founders said. “The new administration has not offered back wages or negotiated a debt restructuring plan for creditors.”
The Noah brothers argue that the proper closure of the capital was a fundamental right that the board denied them and that their illegal dismissal was a ploy by the board to cover its obligations to creditors and employees. As a result, Noah threatened in a LinkedIn post to involve Capita shareholders, limited partners, in the case.
We ask the founders to share their evidence with the LPs to open an internal investigation and to support the shareholders LPs to help the shareholders pay off the company’s debts and liabilities (for which the shareholders have signed their consent). Creditors and employees, to promote environmentally responsible behavior. The founders believe that the board’s actions are aimed at covering up the main issue, which is that the company remains indebted to creditors. This situation was very harmful to the company, its founders, creditors and the entire ecosystem.
Meanwhile, after the board stated that the debts for wages and employment benefits are owed to Noah Brothers and Captain Egypt, the board stated that the shareholders will keep some of them even though they have no financial or legal obligation to ensure that the August salaries are paid. effort” to the effort.
“The board is working to find a legally and operationally appropriate way to pay the August salary balance as quickly as possible, which does not affect the financial and legal restructuring process or violate Egyptian law,” the board said in a statement. “Employees will be updated once the timing and method of this distribution is confirmed. While we understand the financial burden of this situation, the Board is making every effort to support employees in finding new positions and employment opportunities and will spare no efforts to make this a reality.”
This is a developing story…