Excelsior Capital ECL ASX directors acting in best interest – Leanne Catelan
If one wants to read about the background of how Excelsior Capital ECL ASX turned into an ASX listed cashbox late last year, then you can check out the below article where I mention the major asset sale taking place.
My wishful thinking for the festive season was that the company might consider higher fully franked dividends.
Not much happened on that front.
You can read up more on some of the recent history of ECL ASX since December if you subscribe to The Australian, I shall place some links at the end.
For now, I just wanted to ponder myself an ASX announcement from the company last week mentioning a Federal Court application.
FROM ASX ANNOUNCEMENT ON APRIL 26th
Excelsior Capital Limited (ASX:ECL) advises that the Company has been served with an application by a shareholder, London City Equities Limited, (ASX:LCE) to place the company into liquidation. The application has been filed in the New South Wales registry of the Federal Court. The application is brought under the Corporations Act and alleges that it is just and equitable to wind up the company, or alternatively the Company should be wound up on the grounds that the affairs of the company have been conducted in a manner that is unfairly prejudicial to shareholders. Both grounds rely on the assertion that board of the Company should not invest the proceeds of the sale of the CMI business, but instead distribute the proceeds to shareholders.
A TOUGH CALL AHEAD FOR THE COURT
88% of shareholders who voted on whether to wind up the company today were in favor of winding up the company.
Or, 97 out of 110 shareholders.
The 13 shareholders who were against winding up the company, one wonders how they arrived at such a view. Do they not follow the situation closely, logged into the registry and saw a vote come up where they simply followed the board recommendation? Do they know the board well perhaps?
This 88% of shareholders voting today, own more than 30% of the company’s entire capital and are in favor of a wind up.
The substantial shareholder who voted against the wind-up proposal owns a bit more than 50% of the company.
Will the Federal Court find that 97 shareholders who own more than 30% of the company do not know what is best for them? The group that are only concerned with sensibly maximizing shareholder returns.
Or will it find that the fair way to act in the best interests of the company is to go with the alternative strategy and continue to invest the company’s funds? The strategy that only 13 shareholders favored, including a shareholder controlling a bit over 50% of the company. A shareholder which benefits in other ways aside from simply shareholder returns. A shareholder who may wish to further boost their control of the company in the future at way less than its true market worth. Similar to that indicated by their ASX notice on December 4 last year which noted their on market buying of shares at circa 25% discount to NTA (without including the value in the franking credits balance).
Will the Federal Court find that the fair way to act in the best interests of the company of a share price that has traded around $3 lately is to sit on a franking credit balance of $1.30 a share indefinitely?
Will the Federal Court find that the fair way to act in the best interests of the company is instead to deploy 90% of its entire assets in a new investment portfolio, when the company has had no historical success of such investing and neither has laid out any specific future investing plans? A company that struggles with basic mathematics relating to its recent NTA announcements?
As the title suggests above it will be a tough call.
After all, I cannot see any clear signs that directors are acting in self-interest or contrary to the company’s interests above.
I asked the below man if he could see any of the signs above and he did not respond.
After being staggered in the past the way some company directors interpret the requirement to act in the best interests of the company as a whole, in 2020 (after being bored from imprisonment by Dan Andrews) I decided to study the Company Directors Course™ (aicd.com.au).
Good on the AICD for trying to be an independent trusted voice of governance and trying to support directors in understanding duties such as above.
Directors have a duty to act in good faith and the best interests of the corporation.
Let’s see if the biggest take away from my expensive AICD company directors’ course is that the well-intentioned mission for directors to act in the best interests of the company are in reality looked upon as a joke by corporate Australia.
Further reading: (paywalled)
Excelsior’s valuation a head scratcher; From Hiro to zero | Margin Call | The Australian
Investor fight over $120m ASX-listed cashbox Excelsior Capital | The Australian
Nicholas Bolton buys up Vintage Energy to squeeze Metgasco| Margin Call | The Australian
Scyne Advisory partner taken to court over sudden Downer switch | The Australian
Fels takes his toll on Premier; Excelsior figures don’t add up | Margin Call | The Australian
Christopher Pyne jumps the gun on deal with Andrew and Nicola Forrest’s Tattarang | The Australian