Ann: WAV/RULE: CNU: CNU - Ruling Listing Rule 3.3

• Release Date: 11/09/12 14:24
• Summary: WAV/RULE: CNU: CNU - Ruling Listing Rule 3.3.11
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CNU
11/09/2012 12:24
WAV/RULE

REL: 1224 HRS Chorus Limited (NS)

WAV/RULE: CNU: CNU - Ruling Listing Rule 3.3.11

11 September 2012

NZX Market Supervision Decision
Chorus Limited ("CNU")
Application for Ruling - NZSX Listing Rule 3.3.11

Background

1. Chorus Limited ("CNU") was incorporated on 1 July 2011 as a wholly owned
subsidiary of Telecom Corporation of New Zealand Limited ("TEL").
2. On 30 November 2011 (the "Demerger Implementation Date") CNU Demerged from
TEL following approval from TEL shareholders. In the context of determining
whether to approve the Demerger, TEL shareholders were provided with a Scheme
Booklet (the "Scheme Booklet") that outlined the proposed governance
structure of CNU.
3. In connection with the Demerger, CNU applied for various waivers and
rulings from the NZSX Listing Rules ("Rules"), and NZXMS provided its
decision effective 30 August 2011 ("Original Decision") and an additional
decision relating to TEL on 19 October 2011 ("TEL Decision").
4. In the Original Decision NZXMS granted CNU a waiver from Rule 3.3.6 that
requires Directors appointed by the Board to stand for re-election at the
next annual meeting of shareholders on the conditions that:
(a) the composition of the CNU Board (including biographies) was
appropriately disclosed in the Scheme Booklet and NZXMS approves the Scheme
Booklet; and
(b) half of the Chorus Board (rounded down to the nearest whole number)
retire by rotation at the 2012 annual general meeting.
5. In the TEL Decision, NZXMS Ruled that for the purposes of Listing Rule
3.3.11, each TEL Director immediately after the Demerger Implementation Date
was deemed to have been newly elected to office by the TEL Board as a TEL
Director from the Demerger Implementation Date.
6. Ms Sue Sheldon was appointed to the CNU Board prior to the Demerger and
was the only TEL Director who remained on the CNU Board following the
Demerger. Ms Sheldon's biography was disclosed in the Scheme Booklet. At the
time that CNU applied for the Original Decision it was intended that Ms
Sheldon be formally appointed as a Director of CNU on Demerger, however Ms
Sheldon was not formally re-appointed to CNU's Board. As a result, Ms Sheldon
is the longest serving CNU Director in office and will be required to stand
for re-election at CNU's 2012 annual meeting.
7. In addition Mr Ratcliffe was not appointed as a CNU Director until 9
December 2011 following the Demerger. Information regarding Mr Ratcliffe's
appointment as a Director was therefore not contained in the Scheme Booklet
as the decision to appoint him to CNU's Board was made after the Demerger
Implementation Date. In accordance with Rule 3.3.6 Mr Ratcliffe will stand
for re-election at CNU's 2012 annual meeting.

Application

8. CNU has applied for a Ruling that:
(a) for the purposes of Rule 3.3.11 each CNU director in office immediately
after the Demerger Implementation Date (being 30 November 2011), be deemed to
have been newly elected to that office on the Demerger; and
 (b) Mr Ratcliffe may be counted as one of the retiring Directors for the
purposes of fulfilling the condition of the Original Decision that half of
the CNU Board (rounded down to the nearest whole number) retire by rotation
at the 2012 CNU annual meeting.
9. In support of its application, CNU has submitted that:
 (a) it is appropriate that Mr Ratcliffe retire by rotation in accordance
with the requirements of Rule 3.3.6 as his appointment as a Director was not
anticipated in the Scheme Booklet;
 (b) in accordance with the Original Decision all six CNU Directors following
the Demerger are regarded as director appointments along with Mr Ratcliffe
and absent the waiver all seven would be required to retire by rotation. In
the Original Decision NZXMS reached a view that this would be inappropriate
in the context of the Demerger and imposed a condition that half of the CNU
Board rounded down to the nearest whole number would be an appropriate
condition to waiving Rule 3.3.6;
 (c) at the time the Original Decision was granted it was anticipated that
all CNU Directors including TEL Directors would be formally appointed to the
CNU Board and the fact that Ms Sheldon is technically the longest standing in
office arises solely from the technical process and timing relating to her
appointment to CNU's Board;
(d) it would be unusual for both CNU's Chair and CEO to be required to stand
for re-election at the same annual meeting; and
(e) the application is consistent with NZXMS's 19 October Decision.

Decision

15.  On the basis that the information provided to NZXMS is full and accurate
in all material respects, NZXMS rules that:
 (a) for the purposes of Rule 3.3.11 each CNU director in office immediately
after the Demerger Implementation Date (being 30 November 2011), be deemed to
have been newly elected to that office on the Demerger; and
 (b) that Mr Ratcliffe may be counted as one of the retiring Directors for
the purposes of fulfilling the condition of the Original Decision that half
of the CNU Board (rounded down to the nearest whole number) retire by
rotation at the 2012 CNU annual meeting;
on the condition that the effect of this decision is disclosed in CNU's 2012
Notice of Meeting.
Reasons

17. In coming to its decision contained in paragraph 16, NZXMS has considered
the following matters:
(a) Mr Ratcliffe's appointment as a Director was not disclosed in the Scheme
Booklet, it is therefore appropriate that he retire by rotation in accordance
with Rule 3.3.6;
(b) the condition imposed in the waiver from Rule 3.3.6 contained in the
Original Decision that half of CNU's Board retire by rotation was intended to
strike an appropriate balance between the need to all members to retire (if
no relief from the Rule 3.3.6 requirements has been provided) and the
requirement in Rule 3.3.11 that one-third of an Issuer's Board retire at an
annual meeting;
(c) NZXMS accepts that in the context of the Demerger it would be
inappropriate to require more than half of CNU's Board to retire by rotation
at CNU's first annual meeting post Demerger; and
(d) NZXMS accepts that the reason that Ms Sheldon is the longest serving in
office arises due to the technical process that was followed in respect of
the Demerger and that it is appropriate to consider all of the CNU Directors
on the CNU Board immediately post the Demerger Implementation Date as newly
elected "Director appointments".
ENDS
End CA:00227155 For:CNU    Type:WAV/RULE   Time:2012-09-11 12:24:27