Cityview Shareholders respond to the company's EGM notice and the disturbing message sent by converting resolutions requesting accountability into a non-binding form.
Cityview released the required notice of EGM to the ASX on Friday December 20, 2008. This article is a response to the company's explanatory notes. For our comments on each of the resolutions click here.
Before we begin to go through each resolution however, we must make comment on the appalling decision to convert the resolutions we refer to as 'the disclosure resolutions' to a non-binding 'advisory' form.
These resolutions were intended to compel the company to answer some of the important questions that numerous shareholders have asked and to which no satisfactory response has been given. Some of these questions are difficult ones which the company appears to not want to answer. They relate to explaining events and actions that, to put it bluntly, many shareholders regard as suspicious.
Put simply, as non-binding resolutions they have absolutely no value to shareholders. The company can selectively answer the questions and leave out anything they don't want shareholders to know. We find it difficult to describe this attitude as anything other than contemptuous of shareholder concerns.
The passing of the disclosure resolutions was our primary objective. As a result of this action the only way to ensure shareholders get the answers they need is to ensure that we can get some shareholders elected to the Board so that THEY can find the answers that Board refuses to give.
The company's explanatory note makes this comment:
"The Board has power, where invalid resolutions are proposed in a meeting request, to omit them from the notice of meeting in their entirety. However, the Board values the opinions of the Shareholders and wishes to ensure the Meeting Request from the Shareholder Group is acted upon as far as practicable. Therefore, the Board has decided to give Shareholder the opportunity to propose Resolutions 4, 5, 6 and 7 as advisory resolutions, rather than to remove them from the Notice of Meeting entirely."
They appear to taking credit for allowing these resolutions to be put forward at all. We suggest that they had no choice. Given the overwhelming level of shareholder support for this EGM we believe they quite simply didn't dare to dismiss them. The public perception of a company dismissing shareholder requests for accountability and transparency would have been devastating. It is clear this was their only option.
Well... if the legal position is correct they did have one other option. The Board could have adopted the resolutions themselves. But apparently they don't want to, they recommend you vote against it. Why?
We will no doubt hear a lot of noise at the EGM about how they are taking our concerns seriously but once the EGM is over there is nothing to ensure they comply with the request in full or even in part UNLESS shareholders directors are elected to the Board.
We will investigate whether this change to the resolutions has a sound legal basis or not and if there are grounds we will challenge it. Regardless however, it is critical to show your support for these resolutions in whatever form they end up in. A clear demonstration of shareholder support will give political weight to the request which shareholder advocates will need to continue pushing for the necessary transparency.
Response to the Company's Explanatory Notes:
Note that the resolution numbers in the EGM notice are different from those in our original documents due to the company adding their own resolutions. We will refer to the company's numbering in this article:
Company Resolutions:
Resolution 1: Approval of Share issue
This appears to be related to the refinery deal given that it was recently announced will be conducted through European Oil Limited. The company has given no detail as to why this is being done so it is difficult or us make a recommendation on whether to vote in favour or not. The following comment does however give cause for concern:
"It will allow the Company to retain the flexibility to issue the maximum number of equity securities permitted under Listing Rule 7.1 without Shareholder approval"
Given the company's history with placements we question whether that 'flexibility' is a good thing. We will conduct further research and determine whether the company is able to issue these shares within the 15% per annum allowed under the listing rules. We also note that the company has, as a result of the failed rights issue, already got the authority to issue more than 400 million shares in the next 3 months and wonder if they really need any more 'flexibility'.
Resolution 2: Approval of issue of Options to David Wilson
We regard this resolution as inconsequential. The value of these options on a 20 day moving average is less than $5000. We make no recommendation to vote for or against this resolution.
Shareholder Resolutions:
Resolution 3: Removal of Director
We note with some amusement that whilst the company has provided verbose explanations why you should vote against other resolutions, they are apparently unable to give a reason to vote against this one.
For the many reasons about the fact that one man should not have this amount of power, and to ensure that his ideas as CEO are brought back to a fair board for passing, we recommend you vote YES to this resolution
Resolutions 4, 5, 6 and 7: Advisory resolutions
Otherwise referred to as "the disclosure resolutions". We have already written at length about these resolutions in the introduction to this article. It is concerning to note that even in an advisory form the Board recommends you vote against these resolutions. Again no explanation is given as to why the Board feels these disclosures are not in your interests.
Needless to say we recommend you vote YES to these resolutions.
Resolutions 8, 9 and 10: Election of additional directors
The Board has this to say:
"The appointment of four new Directors is unnecessary and no evidence has been provided of any of the nominees’ ability to fulfil the role as a Director of the Company."
We humbly ask what evidence is there that the current Board is fullfilling its role? $47 million has been spent on their watch and it is very difficult to understand what we have gained from it. Our share price dipped as low as 97.6% below it's 12 month high
The role of the directors is not to run the operations of the company, they do not need to be mining experts. It is to oversee the activities of the CEO and ensure that decisions are being taken in the best interests of shareholders. It is hard to see how the current Board is doing that.
To work out whether or not this a good option simply ask yourself: Are you happy with the way the company is being run?
We recommend you vote YES to these resolutions. Further if you do not wish to vote in favour of four directors and prefer a lesser number, we ask that you cast your votes from the TOP down rather than picking your favourite candidate. This will ensure we have the maximum possible chance of getting some directors appointed rather than spreading the votes around. We suggest that we need a bare mimimum of two directors to do this job properly. Though we would prefer to have as many as possible to make sure the job is done as well as it can be.
Resolution 11: Remuneration of directors elected under Resolutions 8, 9 and 10
The company has issued no recommendation on this resolution? Are they so sure it won't be considered that it doesn't even require a Board recommendation?
We recommend you vote YES to this resolution. If this resolution is not passed the default remuneration is $30,000 per annum rather than the $12,000 we have recommended.
Resolution 12: Amendment to Constitution
The thrust of the company's argument against this minor constitutional amendment appears to be that the definition:
"a reasonable time period"
is less ambiguous than:
"a reasonable time period. That time being a period where each director could reasonably be expected to make arrangements to travel to location of the meeting"
We fail to see how the introduction of specific defining criteria for determining "a reasonable time period" introduces more subjectivity into the definition. This is a completely nonsensical argument. We would like to ask the company how they define "a reasonable time period" in a non-subjective manner?
The company makes the further nonsensical statement:
"Moreover the issue will only arise when Directors determine that a meeting is to be held by technology. Meetings held on that basis have no location in the normal sense and therefore the concept of travelling to the location is meaningless."
They appear to have it backwards. If a director withdraws consent for a meeting to be held by technology, then the meeting will be held face to face and will therefore have a location. The clause is only relevant when a physical meeting location is in play. Regardless, the company constitution does provide for a definition of the official meeting 'location' in the event of a meeting held completely by technology.
This resolution is necessary to ensure that if consent is withdrawn with minimal notice, that your shareholder advocate directors will have time to get to the place of meeting. We fail to see why the Board would not consider this reasonable unless they felt the need to exclude a director from a meeting by stealth. We further fail to see how this will create "uncertainty and instability" as claimed.
The most disappointing thing about these completely illogical arguments is that someone was probably paid a lot of your money to come up with them.
We recommend you vote YES to this special resolution.
