The trouble for shareholders is that the RIM directors have supported Giovinazzo publicly when they were told he was not a director and provided with evidence of this. As a result, RIM has ended up accepting money which was obtained by Giovinazzo when he said he was a director or GPR but was not validly appointed. The authorities and courts will determine the outcomes of these actions, but there must be some chance they determine Giovinazzo has raised money inappropriately. There is a risk the authorities even determine the actions are fraudulent.
What would it mean for RIM directors and RIM if it were concluded it accepted money under these circumstances having been forewarned?
Mr Collins went to town because he was worried he would be on the hook for any trouble and could see what was brewing. Obviously he was right. Giovinazzo and co then called a meeting to remove him and the RIM directors recommended he be removed. That got rid of the lone dissenting voice on the board.
RIM then continued to support Giovinazzo and GPR publicly whilst Giovinazzo went about his business borrowing money from innocent investors whilst telling them he was a director of GPR. How many millions did he raise and pay RIM after Mr Collins made his warnings?
It looks bad, it smells bad and it will probably get very ugly.
The judge has ruled the loans from Giovinazzo's company Omeo Gold to GPR are not enforceable. Will Omeo Gold be able to repay the loans? Unlikely given it doesn't own any of GPR's assets.
However the judge said the following:
"449 Although GPR is not bound by the GPR/Omeo Gold Loan Agreements, because, among other things, they were executed by Mr Giovinazzo who was not a director of GPR at the time the agreements were entered into and otherwise were effected by Mr Giovinazzo’s position of obvious conflict of interest, Omeo Gold has not sought to recover the moneys advanced in this action. In that context, there is nothing to restrain. Further although Omeo Gold is not able to enforce the GPR/Omeo Gold Loan Agreements because these agreements are not binding on GPR, to the extent to which moneys were provided, however indirectly (to Rimfire for the purpose of preserving GPR’s interest in the Rimfire Agreements), this may not preclude the party which provided the funds for GPR’s benefit, presumably Omeo Gold, from seeking some form of remedy of restitutionary or quasi restitutionary nature."
Does this imply Omeo Gold or its creditors may seek recovery from Rimfire? Perhaps it does, likely they will try.
Shareholders should underestimate how serious the situation is - you should all read the judgement in full and consider all the risks.