Forum Archive Index - October 2000

["Timothy Field" <nobbis@chello.co.nz>]

Good point Oli,

IANAL, but here's my synopsis of minority buy-out rights as set out in the
Companies Act 1993.

A minority shareholder can make the company purchase their shares if one of
the following alterations are passed (all requiring a special resolution):

  (a) adopt, alter or revoke the company's constitution
  (b) approve a major transaction
  (c) approve an amalgamation
  (d) put the company into liquidation

Now, none of these are what's happening with FFS, because the FFS proposal
only requires an ordinary resolution, and the above all special resolutions.
But, don't give up hope yet.  First a definition:

  "Interest group" means a group of shareholders
  (a) whose affect rights are identical, and
  (b) whose rights are affected by the action or proposal in the same way,
and
  (c) who comprise the holders of one or more classes of shares in the
company

So, the shareholders of the existing FFS ordinary shares comprise an
interest group.  Now, Section 117 (Alteration of Shareholder Rights) states:

"The issue of further shares ranking equally with, or in priority to,
existing shares, whether as to voting rights or distributions, is deemed to
be action affecting the rights attached to the existing shares" UNLESS "the
constitution of the company expressly permits the issue of further
shares..."

So, the FFS rights issue is an action affecting the rights attached to
existing shares.  Now, the clincher is:

"A company must not take action that affects the rights attached to shares
unless that action has been approved by a _special resolution of each
interest group_."

So there has to be a special resolution (requiring a 75% majority) by FFS
holders to approve the proposal.  Now, if the interest group _does_ approve
it but an individual shareholder in the interest group casted all their
votes against the resolution, then that shareholder is entitled to require
the company to purchase their shares at a fair & reasonable price!

The procedure for exercising your buy-out rights is:

1. The shareholder has 10 working days after the passing of the resolution
to notify the company of the intention to exercise their buyout rights.

2. Then, the company has 20 working days to write back to the shareholder
giving notice of their decision to do one of 4 things:

        (a) agree to purchase the shares
        (b) arrange for someone else to purchase them
        (c) apply to the Court for an exemption
        (d) arrange for the resolution to be resolution

3. Then, if the board agrees to buyout the shareholder, it must (within 5
working days of giving notice) nominate a "fair and reasonable price" for
the shares to be acquired.

4. Then, if the shareholder considers the offer unfair or unreasonable, then
they must give notice of objection to the company.

6. Then, the company must refer the question of "fair and reasonable" price
to arbitration and also (within 5 days) pay a provisional price in respect
of each share equal to the price nominated by the board.

7. Then, the arbitrator must "expeditiously determine a fair & reasonable
price" for the shares to be purchases.  The arbitrator can decide that the
price is higher/lower than the provisional price, and the balance must be
paid/given back.  The arbitrator also has power to award interest.

Now, I haven't looked at Fletcher's constituion so it could very well
expressly permit the issuance of new shares.  If that's the case, then the
shareholders have no recourse.  But, if that isn't the case, then the course
of events that would happen if you wanted to exercise your rights is:

  1. Vote against the special resolution with all of your shares.
  2. Notify FLC of your intention to exercise your buy-out rights after the
proposal is accepted.
  3. Tell FLC that their offer is unfair + unreasonable.
  4. Cross your fingers while the arbitrator makes its decision.


Cheers,
Tim

-----Original Message-----
From: owner-sharechat@sharechat.co.nz
[mailto:owner-sharechat@sharechat.co.nz]On Behalf Of oli@vodafone.net.nz
Sent: Friday, 13 October 2000 12:15 a.m.
To: sharechat@sharechat.co.nz
Subject: [sharechat] Small shareholders - know your rights?


Well, talk has been on the rights issues of FFS (although I imagine the CC
and
FEG will be grilled tomorrow).  "Rights" in this context I always found to
be
an amusing misnomer (a bit like "bonus issue" and "share split to make
shares
cheaper").  Don't be fooled - essentially, if you don't take up your rights,
you lose value.  If you do, you maintain your status quo.  WHAT GET REALLY
INTERESTING
ARE YOUR REAL RIGHTS!
Hands up who knows their buy-out rights under the Companies Act?  With FEG
sale
turning to custard and many many unhappy shareholders feeling coerced into a
restructuring, the buy-out right comes into play.  I believe there are one
or
two transactions which may trigger these rights - no time to look at them
this
week - maybe over the weekend?  In nay event I will try to post a summary of
rights and their potential in the next week.  The main thing is - DON'T
THROW
AWAY ANY VOTING FORMS!!! The key to your rights is in actually voting...

Gotta say, I'm most unimpressed with all my shares lately.  That said, if
one
can look past the lost $$ these times are certainly entertaining from an
economic
perspective! :)

oli


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