- Release Date: 14/09/12 12:10
- Summary: WAV/RULE: NZE: NZE - Waiver from NZSX Listing Rules 3.5.1 and 9.2.1
- Price Sensitive: No
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NZE 14/09/2012 10:10 WAV/RULE REL: 1010 HRS New Zealand Experience Limited WAV/RULE: NZE: NZE - Waiver from NZSX Listing Rules 3.5.1 and 9.2.1 NZX Market Supervision Decision New Zealand Experience Limited ("NZE") Application for waiver from NZSX Listing Rules 3.5.1 and 9.2.1 Background 1. NZE is listed on the NZX Main Board. 2. H Anthony Arrell and Arthur Richard Andrew Scace as executors and trustees ("Trustees") of the estate of George Ryerson Gardiner (the "Estate"), own 74.86% of the shares of NZE. 3. On 3 August 2012, NZE released an announcement to the market stating that: (a) The Trustees of the Estate had told NZE that they wished a process to be commenced seeking expressions of interest for their shareholding in NZE (the "Process") and that they wished NZE to assist in the Process; and (b) The Directors of NZE had advised the Trustees that they would be willing to assist, while acting in the interests of all NZE shareholders. 4. On 22 August 2012, NZE released a further announcement to the market to the effect that: (a) NZE and the Estate had entered into a process agreement ("Agreement") whereby: (i) NZE will assist the Estate with the Process ("Services"); and (ii) the Estate will bear NZE's actual costs incurred in providing the Services (including any costs relating to time spent by NZE's Directors) by reimbursing NZE for the costs; and (b) Should the Estate receive an offer acceptable to the Estate, then the bidder would be obliged to make an offer to all NZE shareholders in the form and manner required by the Takeovers Code unless an alternative form of offer is presented to the Estate, in which case, the Board of Directors of NZE may vary this takeover offer requirement if it is in the interests of shareholders. 5. The Estate is a Related Party of NZE for the purposes of NZSX Listing Rule ("Rule") 9.2.3(b), as it has a Relevant Interest in more than 10% of NZE's shares. 6. As at the date of NZE's waiver application, NZE's Average Market Capitalisation was $13.56 million. Therefore, if the total amount paid by the Estate to NZE for its Services exceeds $135,600, the Services will be a Material Transaction for the purposes of Rule 9.2.2(e). 7. Under the Agreement, the charges for time spent by the Directors of NZE in providing the Services to the Estate will be fixed at an hourly rate (the "Director Costs"). Timesheets recording time spent by the Directors will be submitted to the Estate with any reimbursement request. The Estate will not be required to reimburse (or refund) any costs recovered by NZE from bidders who make a takeover offer. The amount of the Director Costs is at this stage unknown. 8. Payment by NZE of Director Costs to each Director will constitute the payment of remuneration to that Director in his capacity as a Director of NZE. The Director Costs will be in excess of the amount of director remuneration authorised by the shareholders of NZE under Rule 3.5.1. 9. NZE has applied to NZX Market Supervision ("NZXMS") for a waiver from: (a) the requirement in Rule 9.2.1 to seek shareholder approval of the Services to be provided to the Estate; and (b) the requirement in Rule 3.5.1 to seek shareholder approval for the payment of Director Costs to the Directors of NZE. Application One 10. In support of its application for a waiver from Rule 9.2.1 NZE makes the following submissions: (a) the policy objective of Rule 9.2 is to prevent a listed company from entering into a transaction with a Related Party (which may have a degree of influence over the listed company) that is unduly favourable to the Related Party; (b) the Estate will reimburse the actual costs incurred by NZE in providing the Services. There will be no element of negotiation of the costs between NZE and the Estate and no opportunity for the Estate to bring pressure to bear on NZE in respect of the amounts recovered; (c) it may be that the total costs payable by the Estate for the Services under the Agreement will not exceed 1% of NZE's Average Market Capitalisation. If they do exceed that figure, they are not likely to exceed it by a substantial margin; (d) if the sale of the Estate's interest in NZE proceeds by way of a third party making a Takeovers Code compliant offer for the NZE shares, the third party purchaser will be obliged to reimburse NZE for its costs in dealing with that offer from the time notice of the offer is given; and (e) to comply with Rule 9.2, NZE would be required to convene and hold a meeting of shareholders and to obtain an independent appraisal report. The cost of doing so would be completely disproportionate to any benefit to minority shareholders achieved by applying Rule 9.2. Application One - Rules 11. Rule 9.2.1 states that: "An Issuer shall not enter into a Material Transaction if a Related Party is, or is likely to become: (a) a direct or indirect party to the Material Transaction, or to at least one of a related series of transactions of which the Material Transaction forms part; ... unless that Material Transaction is approved by an Ordinary Resolution of the Issuer." 12. Rule 9.2.2 states that: "For the purposes of Rule 9.2.1, "Material Transaction" means a transaction or a related series of transactions whereby an Issuer: .... (e) provides or obtains any services (including without limitation obtaining underwriting of Securities or services as an employee) in respect of which the actual gross cost to the Issuer in any financial year (ignoring any returns or benefits in connection with such services) is likely to exceed an amount equal to 1% of the Average Market Capitalisation of the Issuer." 13. In addition Footnote 1 to Rule 9.2.1 states that: "NZX may waive the requirement to obtain the approval of a resolution for the purposes of Rule 9.2.1 if it is satisfied that the personal connections with, or involvement or personal interest of a Related Party are immaterial or plainly unlikely to have influenced the promotion of the proposal to enter into the transaction or its terms and conditions." Application One - Decision 14. On the basis that the information provided to NZXMS is full and accurate in all material respects, NZXMS grants NZE a waiver from the requirement of Rule 9.2.1 to seek shareholder approval of the Services. 15. The waiver in paragraph 14 is granted on the conditions that: (a) The Directors of NZE certify to NZX that, in their opinion, the Services to be provided are in the best interests of the minority NZE Shareholders (being the NZE Shareholders other than the Estate); and (b) NZE's annual report that relates to the period for which NZE relies on this waiver will contain a description of this waiver and its effects. Application One - Reasons 16. In coming to the decision to grant NZE a waiver from Rule 9.2.1 NZXMS has considered the following matters: (a) The policy behind Rule 9.2.1 is to ensure that there is no actual, or perceived, favourable treatment given to a Related Party that is a party to a Material Transaction. NZXMS takes comfort from the Directors' certificate that this is not the case. NZXMS is satisfied that, when considering Footnote 1 to Rule 9.2.1, the present circumstances are such that a waiver will not impugne the policy considerations of Rule 9.2.1, and should therefore be granted; (b) NZXMS accepts NZE's submission that, were NZE required to convene and hold a meeting of shareholders, and to obtain an independent appraisal report, that the cost of doing so would be completely disproportionate to any benefit to minority shareholders achieved by applying Rule 9.2; and (c) NZXMS will receive a certificate from the Directors that the Services to be provided are in the best interests of the minority NZE Shareholders (being the NZE Shareholders other than the Estate). Application Two 17. In support of its application for a waiver from Rule 3.5.1, NZE makes the following submissions: (a) The policy underlying Rule 3.5.1 is to ensure that undue influence is not exercised by a Director to cause a transfer of value from an Issuer to the Director without scrutiny and approval of the shareholders of the Issuer. This policy is not offended in this case because: (i) the Directors will be paid for time and attendances at an agreed fixed hourly rate. Timesheets recording the time spent by Directors will be submitted to the Estate with any reimbursement request. Accordingly, the Director Costs will reflect a genuine reimbursement for the time incurred by the Directors in relation to the Process (and any transaction that results from the Process). NZE submits that, in these circumstances, there is unlikely to be any actual influence brought to bear by the Directors to secure an excessive or unfair payment; (ii) there will be no transfer of value from NZE (or its shareholders, other than the Estate) to Directors as the Director Costs will be paid to NZE by the Estate; (iii) there will be no cash-flow or counterparty risk to NZE as NZE will only pay the Directors the Director Costs once NZE has received payment of those costs from the Estate; (iv) immediately after the Board authorises the payment of the Director Costs, particulars of the payment must be entered in NZE's interests register in accordance with section 161(2) of the Companies Act 1993 (the "Act"); (v) the Director Costs will be disclosed to the shareholders of NZE in the annual report as section 211(e) of the Act requires disclosure of particulars of entries in the interests register and section 211(f) of the Act requires disclosure of the total remuneration received by a Director, in each case during the relevant accounting period; and (vi) the waiver will be disclosed by NZX and in NZE's annual report (as required by Rule 10.5.5(f)); (b) The following suggested conditions will establish appropriate and sufficient shareholder protections that are consistent with the policy grounds behind Rule 3.5.1: (i) NZE will only pay the Directors the Director Costs: (A) for actual attendances by Directors in connection with the Process (and any transaction that results from the Process) at the agreed fixed hourly rate set out in the Agreement; and (B) only after NZE has received payment of the Director Costs from the Estate; (ii) the Directors sign the directors' certificate required by section 161 of the Act stating that, in their opinion, the payment of the Director Costs is fair to NZE and the grounds for that opinion, and provide NZX with a copy of that certificate; and (iii) the decision to make payment of the Director Costs is unanimously approved by the Directors; (c) NZE's next annual meeting is not due until the end of October 2012. Accordingly, absent a waiver, NZE will need to incur the cost (in both time and money) of preparing a notice of meeting and holding a meeting of shareholders in circumstances where there is no actual cost to NZE or the shareholders (other than the Estate) from the payment of the Director Costs. NZE submits that the costs involved in convening and holding a meeting of shareholders in these circumstances would be disproportionate to any perceived benefit to the shareholders; (d) the granting of a waiver will have no material adverse effect on NZE shareholders. To the contrary, it will enable NZE to avoid the costs and delays associated with convening a shareholders meeting in circumstances where there is no actual cost incurred by NZE. Application Two - Rule 18. Rule 3.5.1 states that: "No remuneration shall be paid to a Director in his or her capacity as a Director of the Issuer or any Subsidiary, other than a Subsidiary which is Listed (including any remuneration paid to that Director by a Subsidiary, other than a Subsidiary which is also Listed) unless that remuneration has been authorised by an Ordinary Resolution of the Issuer."... Application Two - Decision 19. On the basis that the information provided to NZXMS is full and accurate in all material respects, NZXMS grants NZE a waiver from the requirement in Rule 3.5.1 to seek shareholder approval for the payment of Director Costs. 20. The waiver in paragraph 19 is granted on the following conditions: (a) NZE will only pay the Directors the Director Costs: (i) for actual attendances by Directors in connection with the Process (and any transaction that results from the Process) at the agreed fixed hourly rate set out in the Agreement; and (ii) only after NZE has received payment of the Director Costs from the Estate; (b) the Directors sign the directors' certificate required by section 161 of the Act stating that, in their opinion, the payment of the Director Costs is fair to NZE and the grounds for that opinion, and provide NZX with a copy of that certificate; (c) the decision to make payment of the Director Costs is unanimously approved by the Directors; and (d) NZE's annual report that relates to the period for which NZE relies on this waiver will contain a description of this waiver and its effects. Application Two - Reasons 21. In coming to the decision to grant NZE a waiver from Rule 3.5.1, NZXMS has considered the following matters: (a) Payment by NZE of the Director Costs will not result in any transfer of value from NZE to the Directors because the Director Costs will be paid to NZE by the Estate; and (b) NZXMS will receive certification from the Directors that, in their opinion, the payment of the Director Costs is fair to NZE, and the grounds for that opinion. ENDS End CA:00227309 For:NZE Type:WAV/RULE Time:2012-09-14 10:10:43
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