Ann: Appointment of Two Directors , page-2

A classic defensive move

Here we go, what may be described as a classic defensive move by “the three musketeers”, making sure there are no vacant board seats available which the Rebel group can fill.

All of a sudden, we apparently need to have two new directors, no explanation, no justification, just here you go shareholders, you now have two more directors.!


“Central Petroleum Limited (“Central”) advises that Mr Andrew Philip Whittle and Mr Bruce William Elsholz have been appointed as directors of the Company.”

I observe that Mr Elsholz is a Chartered Accountant and has been Central Petroleum’s Chief Financial Officer and a Company Secretary since August 2009.

Apparently we need to have his experience at Board level. !! Really , he is an employee, why the extra expense (Directors emoluments) approx $60,000 per annum.

Why not just ask him the course of his daily duties. ?


So now we have two accountancy types on the board Mr Faull and Mr Esholz,

As for Mr Andrew Philip Whittle, I observe that he holds a B.Sc. degree with First Class Honours in Geology from the University of Adelaide. I presume to replace the expertise of John Heugh , if he is removed.


Now I am not going to suggest that John Heugh did or did not do the work of two people.

That may or may not be correct, besides it is not the important issue here,

What is the important is that the “the three musketeers ” have filled the only two vacancies at board level with people who have been selected by “the three musketeers” and the timing of that decision.

Now let me say, it may well be perfectly legal for them to do this, provided it does not contravene s 182 Corporations Act 2001, and is not contrary to the law as laid down in

Brian Keith Mcmaster As Administrator of Eznut Pty Ltd (Administrators Appointed) & Anor v Eznut Pty Ltd (Administrators Appointed) & Ors [2006] WASC 109 (16 June 2006)


“What it means is that there is a need for compelling caution on the part of directors whose term of office is coming to an end not to make decisions which fall within the category of fundamental or significant.'"


S182 Corporations Act 2001

Use of position--directors, other officers and employees

(1) A director, secretary, other officer or employee of a corporation must
not improperly use their position to:
(a) gain an advantage for themselves or someone else;


the question I ask is , are these appointments in the interests of the Company as a whole or does it fall in the category of s182, and potentially gaining an advantage for themselves.

Are these decisions which fall in the category of being “fundamental or significant”

I leave that decision to others to make.

I ask myself, why ?

Why is it necessary to appoint two new directors ?.


Additional expense to the company with what benefit ? At least one of the new appointments is already an employee of the company.


“Mr Elsholz is a Chartered Accountant and has been Central Petroleum’s Chief Financial Officer and a Company Secretary since August 2009” .


He is in the offices on a daily basis, he is already a senior manager in the company, controlling certain business and management matters.

So why the need to invite him to the board ?..

So let me see, the ““the three musketeers” terminate John Heugh’s employment contract as manager !.

Then they lock him out of the offices by changing the locks to the office !

Now they say they will seek to remove him as a director at an egm.

I will leave it to others to draw their own conclusions .


Dynamics

Lets now look at the dynamics of this move on the basis of the old composition of the board (4 directors)

Previously there were 4 board members (and has been for 6 Years since going public), then the three musketeers are placed on notice that they need to start looking for alternate work.

Now let me say up front that I believe that Mr Askin will go at the egm, so my hypothetical is based on the assumption that Mr Askin hopes he will remain in place, but is realistic to know that Faull and Dunmore will go, and possibly J Heugh staying on the board, and with at least 2 new directors elected, leaving himself in a very vulnerable position.

So, on the basis of that assumption, lets assume that at least Richard Faulls and William Dunmore were removed at the egm leaving Mr Askin in place.

In essence all would be all alone unless he kisses and makes up with John Heugh. (if he JH retains his seat)

Mmmmmmmmmmmmmmmm Making up with J Heugh not likely in my humble opinion.


4 seats currently filled 2 seats available to be filled. (Constitution limits directors to 6)

Faul and Dunmore go, leaving Askin and Heugh in place, now there are 4 seats available to be filled by the rebels. (2 for Faull and Dunmore and 2 vacancies not previously filled)

3 rebel guys get elected, plus Mr Askin in place and John Heugh stays leaves 1 seat vacant.

Power is transferred from Mr Askin and his other two directors (total 3 of 4 old board composition) to the Rebel group (3 independent directors) as a consequence Mr Askin would probably lose his Chairman’s position and casting vote.


So by bringing in the two new directors, and Mr Askin stays, he has currently (as at today) 5 in his camp. (Mr Askin plus 4 others) then Faul and Dunmore go, leaving Askin and Heugh in place, (Total 2 retained and 2 new directors appointed as at today (total 3 in Askin camp)


Therefore, people will need to ask themselves the question, and arrive at their own decision.

Does the decision to bring in two new directors fall within the prohibition as laid down below and s182 Corporations Act 2011.

“What it means is that there is a need for compelling caution on the part of directors whose term of office is coming to an end not to make decisions which fall within the category of fundamental or significant.'"


S182 Corporations Act 2001

Use of position--directors, other officers and employees

(2) A director, secretary, other officer or employee of a corporation must
not improperly use their position to:
(a) gain an advantage for themselves or someone else;


I suspect that CP will serve his own s249D requisition seeking the removal of those two new directors and seeking the election of his own candidates at the forthcoming egm.

Am I certain, no I am not, do I think it is likely, yes I do, he has a significant amount of shares in CTP.

He is either going to try and gain control of the board or he will sell out.

At the moment ,it would appear that he has less than 5% ,so unless he joins forces with a friendly party, he will need to buy shares either on or off market.

However, he will need to gain a significant amount of votes to guarantee the outcome of the egm.

I suspect he will need at least 300 probably closer to 400 mil shares.

The share price would not stay at this level with that amount of buying going on in the market.

You make up your own mind which one is more likely

CB