lock out

Here we go again. A Jervois director was locked out of the Computershare website last week. Why?

The company secretary's explanation was that the proxy service wasn't a standard service available to shareholders because the company had made special arrangements.

The logic here is hard to follow.

By statute and by common law a director must have free access within normal business hours to the accounts, the premises and to the registry to protect shareholder interests and ensure the company follows proper procedures and acts honestly at all times.

This is why Boards are often called Boards of Governors. In the case of directors there has been a merging of the "governorship role" and the business advisory role which are so integral that the corporations act(s) doesn't draw that distinction.

So now we have breaches of three basic aspects of the directors role; the first two breaches were at the end of last year and now we have a third.

While this breach has been reported to ASIC, Jervois management knows that ASIC has a long work load and will be unlikely to get to this matter quickly. However, if we go back to the Federal Court, there are likely to be consequences. This is a chain of conduct that strikes at the very essence of a director's duties.

It is not just a matter of abstract principle either.

Imagine the judge's thinking process.

"So you're telling me that management can have access to the progress of the proxy vote, but others can't."

"Well we paid for it."

"But didn't the shareholders just contribute cash to the company. I would have thought the shareholders paid for this service indirectly."

"Yes, but management controls the money"

"...but in the interests of shareholders. Directors are supposed to act in a trustee role, or did when I first studied principles of equity."

"We are looking after shareholder's interests."

"But in this case only one group of shareholders. Associates of management can be told and not others?

"We wouldn't do that."

"Yes, but a nod and a wink say a lot. I was a commercial barrister; I didn't come down in the last shower."

"No, we wouldn't do that. It would be illegal to give a preference like that. It would mean a custodial sentence."

"So you haven't been discussing the short-fall with potential funding parties? "

"Well, I wouldn't say that."

"And there are no strings attached to this placement?"

Silence.

"Interesting answer. And as for the this proxy count, itself, didn't directors just agree to an updated constitution that adds several new pages about 'continuous disclosure'.?"

"Yes, we did. Very good thing too. We always disclose relevant and material information."

"Excellent to hear that, but in this case you're not so keen on disclosing something that is basic and fundamental to the future of the company?"

"This is different. The director concerned might tell his #?/%& mates."

"But you might tell your mates. Wouldn't it be more in the spirit of the continuous disclosure rules if every sharehoder knew what the situation with the count actually is?"

"Maybe."

"No maybes at all. Now one last issue. It is hypothetically possible that those in the know in this case could take financial advanatage of the situation."

"In what way?"

"Very easily. For example, excluding actual indviduals, what if it were well known in a case such as this that one group includes a well known developer of companies. A man of considerable means and reputation. A company builder. If his team won the shares could appreciate sharply."

"Not necessarily."

"And conversely if the existing team won, the shares could, I say COULD, drop sharply. Jervois management may have worked hard for years but it is plain as a pike staff that the outcome for shareholders has not been stunning. Better than some of my Babcock shares maybe, but not in the premier league. You obviously have many unhappy campers on the registry. They may flee the registry if their hopes are dashed."

"That would be insider knowledge. You can't act on inside knowledge."

"Eaxactly, you're getting the hang of this. Nevertheless I will make my order for the applicant as I did in February. This is becoming very repetitive."