VCT waiver from NZSX Listing Rule 9.3.1
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Vector Limited (VCT) | 3:06 pm, Monday 6 October 2008 | VCT | 1.950 |
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(+1.04%) |
12 September 2008
NZX Regulation Decision
Vector Limited
Application for Waiver in relation to NZSX Listing Rule 9.3.1
Background
1. Vector Limited (“VCT”) is listed on the NZSX Market. VCT is intending to put an Ordinary Resolution to its shareholders at its next annual meeting increasing Directors’ remuneration (“the Resolution”).
2. NZSX Listing Rule (“Rule”) 9.3.1 disqualifies Directors intended to receive such an increase, and any Associated Person of such a Director, from voting in favour of any resolution under
Rule 3.5.1, fixing either:
(a) a monetary sum per annum payable to all Directors of the Issuer taken together; or
(b) a monetary sum per annum payable to any person who from time to time holds office as a Director of the Issuer.
3. The trustees of the Auckland Energy Consumer Trust (“AECT”) currently jointly hold 75.1% of VCT’s ordinary shares. There are five trustees of AECT. Two of these trustees are currently
Directors of VCT, making AECT an Associated Person of those Directors for the purpose of the Rules.
4. As AECT is an Associated Person of two Directors of VCT, Rule 9.3.1 prevents AECT from voting in favour of the Resolution.
Application
5. VCT has applied to NZX Regulation (“NZXR”) for a waiver from Rule 9.3.1 to the extent necessary to allow AECT to vote in relation to any Ordinary Resolution to increase VCT’s Directors’ remuneration. In support of the application VCT submits that:
(a) The terms of the Directors’ remuneration will be set on an arm’s length and commercial basis. VCT’s Remuneration Committee has commissioned a report by an independent expert on the appropriate level of Directors’ remuneration. The proposed
remuneration to be put to shareholders will be consistent with the level recommended in this report.
(b) In addition to the trustees referred to in paragraph 3 there are currently six other directors of VCT, all of whom are Independent Directors for the purpose of the Rules. Any increase in Directors’ remuneration will not distinguish between Directors’ fees payable to the Independent Directors and those payable to the Directors who are trustees of the AECT, solely on the basis of whether or not the Director is an Independent Director or a Director associated with the AECT.
(c) AECT has confirmed that it will not require the trustees who are Directors of VCT to pass on to AECT any portion of the remuneration received by such Directors in their roles as directors of VCT. Therefore, AECT will not receive any direct or indirect benefit arising from the Directors’ remuneration payable by VCT.
(d) AECT will provide written confirmation to NZXR that a trustee of AECT will not take any part in the decision making process of AECT to determine whether or not to vote in favour of the resolution to increase Directors’ remuneration, where that trustee:
i. has been nominated to be elected as a Director of VCT at its next annual meeting; or
ii. is currently a Director of VCT and will either continue to be a director immediately following VCT’s next annual meeting or will stand for re- election as a Director of VCT at such annual meeting.
(e) VCT considers that the purpose of Rule 9.3.1, as it relates to Rule 3.5.1, is to ensure that the personal interests of shareholders who are Directors, or who are close to Directors, will not influence the outcome of the resolution voted on by shareholders under Rule 3.5.1. VCT considers that AECT has an interest equivalent to any other VCT shareholder, and has no personal interest in the Resolution. Rule 9.3.1 is not intended
to preclude a majority shareholder from voting on a transaction in the circumstances of this application.
(f) The requested waiver will allow AECT to exercise its right to vote on the Resolution and will therefore result in AECT being treated equally with other VCT shareholders.
(g) The waiver decisions granted by NZXR to Contact Energy Limited on 12 May 2008 and 13 November 2003 provide precedent for the granting of a waiver in these circumstances.
6. VCT have further applied for the waiver to be granted on an ongoing basis. This will have the effect of extending the waiver not only to the Resolution currently contemplated, but to allow
AECT to vote in relation to all future Ordinary Resolutions of VCT on the setting of Directors’ remuneration.
Rules 3.5.1 and 9.3.1
7. Rule 3.5.1 provides that:
3.5.1 Fixing Remuneration: 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.
Each such resolution shall express Directors' remuneration as either:
(a) a monetary sum per annum payable to all Directors of the Issuer taken together; or
(b) a monetary sum per annum payable to any person who from time to time holds office as a Director of the Issuer.
Rule 9.3.1
8. Rule 9.3.1 provides that: 9.3.1 Restriction: Notwithstanding anything to the contrary in the Rules, on any resolution of the nature listed in column 1 of the table below, no Vote in favour of any such resolution shall be cast on any Securities held by a person of the nature listed in respect of that resolution in column 2 of the table below, or by any Associated Person of such a person.
Decision
9. On the basis that the information provided to NZXR is full and accurate in all material respects, NZXR grants VCT an ongoing waiver from Rule 9.3.1 to the extent that AECT would otherwise be prohibited from voting in favour of resolutions pursuant to Rule 3.5.1.
10. The waiver is granted on the conditions listed below, which will apply every time AECT seeks to cast its votes on a resolution pursuant to Rule 3.5.1 in reliance on this waiver. These conditions are that:
(a) The VCT Remuneration Committee commission an independent expert’s report on the appropriate remuneration level for Directors’ remuneration.
(b) There is no distinction between the Directors’ fees payable to the Directors who are trustees of AECT (“Associated Directors”) and other directors, based solely on whether
or not a Director is an Associated Director.
Column 1
RESOLUTION Column 2
DISQUALIFIED PERSON
Resolutions under Rules
3.5.1 and 3.5.2 The Director intended to
receive a payment.
(c) The independent members of the VCT Remuneration Committee provide a certificate to NZXR stating that:
i. the proposed Directors’ fees were set on an arm’s length and
commercial basis;
ii. the proposed level of Directors’ remuneration is consistent with the level suggested in the independent expert’s report; and
(d) AECT provides written confirmation to NZXR that:
i. no trustee covered by paragraph 5(d) of this decision will take part in any decision of the trustees of AECT on whether to abstain, or vote for or against, any Resolution the subject of this waiver.
ii. neither AECT nor any Associated Person of AECT (other than the trustees of AECT who are Directors of VCT) will receive any direct or indirect benefit arising from Directors remuneration payable by VCT.
(e) Details of the waiver, the conditions imposed by NZXR, the independent expert’s recommendation and the Remuneration Committee’s certificate, are included in the notice of meeting to be circulated to VCT shareholders in respect of any resolutions
voted on by AECT in reliance on this waiver.
(f) This waiver will continue in force only as long as the material facts on which this waiver is based, and Rules 9.3.1 and 3.5.1, remain the same. If the relevant material facts or
Rules change VCT must reapply for the waiver.
Reasons
11. In coming to the decision to grant VCT a waiver from Rule 9.3.1 NZXR has considered the following matters:
(a) The restriction in Rule 9.3.1, as it relates to Rule 3.5.1, provides a safeguard to non- related shareholders that personal interests or connections will not influence the level
of Director remuneration set by a Resolution put to shareholders. In these circumstances NZXR considers that the independent expert’s report and the Remuneration Committee certification will provide comfort to non-related shareholders that AECT will have no undue influence on the formulation, design or negotiation of the adjustment to the Directors’ remuneration.
(b) In 2002 the Regulation Panel released a Policy Note that provides guidance in interpreting the relationship between Rules 9.3.1 and 3.5.1. This Policy Note stated that it is neither commercially sensible nor fair to exclude a majority shareholder from voting in a resolution where the majority shareholder has the same interest in the outcome as other shareholders. NZXR considers that this waiver is consistent with the policy endorsed in the Policy Note.
(c) NZXR considers that comfort is provided that AECT will not be influenced as to how to vote with regard to the Resolution as:
i. no Associated Directors, or potential Associated Directors, will take part in the decision made by AECT with regard to how AECT will vote as a shareholder of VCT on the Resolution; and
ii. neither AECT nor any Associated Person (other than the Associated Directors) of AECT will receive any direct or indirect benefit from the increase in Directors’ remuneration.
(d) In allowing AECT to vote, all shareholders will be treated equally and none of the shareholders of VCT will be disenfranchised from their voting rights.
(e) The waiver decisions granted by NZXR to CEN on 12 May 2008 and 13 November 2003 provide precedent for the granting of a waiver in these circumstances.
ENDS
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