Listed companies in voluntary administration do not have to comply with NZX continuous disclosure rules, the High Court ruled in a test case involving CBL Corporation. Current CBL shareholders are left in the dark.
CBL went into voluntary administration last February following an arm-wrestle with the Reserve Bank which alleges a failure to comply with Bank directions. Trading in CBL shares is suspended. Korda Mentha is acting as administrator. Shareholders are getting no information regarding plans by two CBL directors to restructure the company.
Financial Markets Authority asked the High Court whether Korda Mentha is required to provide market updates. NZX listing rules require listed companies to make immediate disclosure of all information having ‘a material effect’ on the price of quoted securities.
Justice Venning ruled the Companies Act voluntary administration rules alone govern disclosure. These rules require administrators to file six monthly reports at the Companies Office. The reports narrate what administrators have done; they do not provide details of any price-sensitive negotiations. NZX continuous disclosure obligations are intended to preserve the integrity of the market. Since voluntary administration imposes a freeze on trading, there is no need for continuous disclosure, Justice Venning decided.
Voluntary administration suspends directors’ powers to run a company, allowing creditors time to decide the way forward at what is called a ‘watershed meeting’. The High Court was told CBL’s first watershed meeting in May resulted in a voting deadlock. Subsequent meetings have been continually postponed. The next watershed meeting is scheduled for later this year, in November.
Financial Markets Authority v. Jackson – High Court (13.08.18)
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