You said "It probably didn't even cross anyone's minds that this would create a bit of a fuss". I'm not screaming for the homicide squad or the dreaded ASIC attack dogs, but my point precisely is that it
should have been picked up as an issue when reviewed by governance which surely all acquisitions must be subject to before being approved by the Board. As a shareholder, I want to see a competent board doing their due diligence and maintaining proper oversight.
Of course it is a ridiculous idea to recycle a company owned and controlled by the MD and hand it over to the vendors to put assets into that the company then acquires. The first thing anyone reviewing that should have said is "hang on - that might make this appear as a related party transaction". Before AF followed through with his brilliant idea to "gift" a company he personally owned (a company that was formerly named "Cirralto Pty Ltd" no less) to the vendor so they can change the name and sell it to Cirralto, you would hope that he would have had the thought to run that by the Cirralto's legal council and the Chairman. If he didn't, that was a mistake he should learn from. If the Chairman was not advised of this that is another mistake that should be instructive to management and the board.
Any curious shareholder doing their own due diligence is going to find out that the company being acquired has a link to the MD in no time (as happened when
@Croactive did a simple ABN search within four hours of the announcement).
In any case, you don't recycle shelf companies. That is the whole purpose of a shelf company - it is a clean vessel that has no past and so has no potential liability of claim from previous activities. When I set up the company trustee for the family SMSF, I didn't go around asking my mates if anyone had a Pty Ltd company they didn't need anymore that I could acquire all the shares in and appoint myself as director in. That would be insane! No one does that. No accountant is going to suggest you do that. You just set up a shelf company. It takes almost no time and very little money.
Often the reason you hold onto a company is because it has tax credits. But you can't sell a company that has a tax credit for that purpose because that's called a "Bottom of the Harbour" scheme and is illegal. So, of course Cirralto would have had to perform a complete due dilligence on Greenshoots Technology Pty Ltd given that the entity was incorporated in 2014 and of course, in that process, it would have been obvious that the entity was related to the MD. That due process probably should have involved obtaining an indemnity from the past director, namely Adrian Floate. (I am sure there are others here that have purchased Pty Ltd companies as going concerns, which I have done).
Surely, someone on the board or the company legal counsel would have flagged during due process the perception (if not legal fact) that the transaction appears to be a related party transaction as something that should be addressed.
Well, I've said about as much as I can on the matter. Other's opinions will differ.
(20min delay)