Ann: Invitation - Shareholder Briefings, page-48

There is a risk of limping before being kicked here.

This is only the first offer, which given the history with Todd, we all expected to be offensive. We may not have expected a cash burning roadshow giving the overwhelming feedback that our board has received from minority holders.

The question is now, will we see a fair offer in the near future (or at least soon enough to save the State Gov rail agreement)?

The idea that OUR board, under the direction of FMS major shareholder, TODD, could and would try to in some way phoenix PIOP, given their very public and easily demonstrable track record, is farcical to me for several reasons: -

•    In addition to ASIC/ ASX oversight (OUR Board is already clearly on their radar for all the wrong reasons), I believe there would be clear grounds for a legal challenge, very probably including action against individuals, were it to transpire that a deliberate effort was being made to load FMS with debt to the point of bankruptcy - especially if the creditor was another Todd controlled company. This would be seen as deliberately negligent which takes it into a totally new realm. And the evidence trail towards intent is historically overwhelming.

•    Todd would be at risk of losing PIOP with the rest of us, as well as the BBI deal.

•    When we minority holders vote this deal down, everything should stop, within reason. Including OUR boards ability to sanction activity that might load us with unreasonable debt. This is where deliberate negligence would come into play.

I also wouldn’t be worrying about what OCJ are going to do. Whatever they decide, ALL minority holders are affected equally. We need to back the fact that they don’t want to take a bath on what has been a long-term and considerable investment for them also.

It’s good to be alert to all possibilities, but worth taking a breath and waiting to see how this will play out post the upcoming rejection of offer.

Having said all that, a few well placed letters to our friends at ASIC, just to keep them vigilant, and put minority holder concerns on record (in case this is needed in any future action) might not be a bad thing.


The above is my opinion only, the following however, are extracts of law. Useful reading for some..........

Directors’ duties
Directors must act for the benefit of “the company as a whole”. In general, this means that directors must act in the interests of all members collectively.

The key duties of directors are to:
■ act in good faith in the best interests of the company;
■ exercise their powers for the purposes for which they were conferred;
■ act with reasonable care and diligence;
■ avoid conflicts of interest; and
■ not improperly use company information or their position to gain an advantage for themselves or

A director who breaches any of their duties is liable to civil penalties. If the breach is reckless or dishonest the director may also incur criminal penalties.

2.4 Duty to act for a proper purpose
Directors must exercise their powers and discharge their duties for a proper purpose.
It is not sufficient that a director honestly believes their actions are for a proper purpose if a court considers that purpose to be improper.
A director who makes a “business judgment” is taken to satisfy their duty of care and diligence in respect of the judgment if they:

■ rationally believe that the judgment is in the best interests of the company.

Misuse of position or information
Overlapping with the preceding general rule, directors have a statutory duty not to improperly use their position, or information obtained by virtue of their position, to gain an advantage for themselves or someone else or to cause detriment to the company.
Such conduct is “improper” if it breaches the standards of conduct that would reasonably be expected of a person in the director’s position, regardless of whether the director considers it improper.
The duty not to misuse company information can apply to information which is not confidential. A general duty of confidence also applies in relation to information which is confidential.

Duty to prevent insolvent trading
Directors have a duty to prevent the company from trading while insolvent. A director breaches this duty if:
■ the director fails to prevent the company from incurring a debt;
■ the director is aware that there are reasonable grounds for suspecting that the company is insolvent
or would become insolvent by incurring the debt, or a reasonable person in the circumstances would be so aware; and
■ the company is insolvent or becomes insolvent by incurring the debt.
A debt may be incurred not only by incurring a liability in the course of trading but also, for example, by declaring or paying a dividend or making a capital reduction.
A director who breaches this duty may be ordered by a court to pay a civil penalty and/or to pay to the company, its liquidator or the relevant creditor compensation equal to the amount of loss suffered by the creditor. In addition, a director who breaches this duty dishonestly may incur criminal penalties.