this part: they explained it well,
wonder why ASX would want to know this ?
8 Please provide a copy of the loan agreements for the loans to the subsidiary of Etherstack (not for release to the market) or, if there are no such agreements, an explanation of why that is so.The loan documents are provided as Attachments 8.1 – 8.5It should be noted that the loans were directly negotiated between the respective Chief Financial Officers of each entity. The director that was common to both entities was not involved in, nor had knowledge of, any of the loans prior to their execution. These documents are to be treated as confidential under LR3.1A.
9. Were the loans to the subsidiary of Etherstack secured? If so, please provide a copy of the security documentation (not for release to the market).Yes, the loan referenced the personal property of Mr David Deacon who is a Director of Etherstack as the pledged security. Given the short nature of the loans, a formal charge was not lodged over this property.
10. The Annual Report states that the loan ‘transactions were completed at arm’s length’ (see paragraph F above).Please outline the factors that the directors took into account in making the determination that the exception in section 210 of the Corporations Act applied to the loans to the subsidiary of Etherstack, specifically referencing ASIC Regulatory Guide 76: Related Party Transactions (‘RG 76’) including paragraph 76.70 therein.
The following is a brief account that addresses some of the factors in RG76, however section 210 and RG 76 are not actually legally applicable to the loans. This is because ISX and Etherstack are not related entities within the meaning of section 228 of the Corporations Act. The loans were reported in Note 26 to the statutory accounts under 'related party transactions' because of the common director between the corporate groups (noting the common director does not control Etherstack and did not stand to personally benefit from the borrowing).ISX did consider the question of management of any potential conflict of interest and therefore did not inform the common director until after the arrangement was made. It also reported it in the note to its accounts to err on the side of openness.The Chief Financial Officers of each respective company coordinated the commercial discussion in relation to the loan with Managing Director approval of each entity following.The prevailing factoring rates for the loan which were in excess of normal lending rates ensured that these were indeed commercial and arm’s length transactions. These rates are noted within the executed contracts which we have provided as a part of question 8 above, but to reconfirm the interest rate for each of the loans was 20% on the initial advance through the term of the loan until repaid.
