Julian Kroll was for five years a director of Envirocon, manufacturer of precast concrete wall units. His abrupt departure in 2023 now sees argument over value of his sixteen per cent shareholding, with the High Court refusing him Companies Act access to financial information post-dating his departure.
Envirocon Ltd management told the High Court of concerns that Mr Kroll was asking for commercially sensitive information, potentially of benefit to competitors.
Mr Kroll took up his sixteen per cent Envirocon shareholding in 2018, funded with a loan from majority shareholders, a Russell family trust.
He claims company management has not provided adequate financial information to enable valuation of this shareholding as at the May 2024 date when he was removed as a shareholder.
His shares were forfeited when the Russell family trust called in its loan. He wants to know what surplus value, if any, exists in his former shareholding, above what was owed on the Russell loan.
Mr Kroll was given a draft share valuation report prepared by chartered accountants Grant Thornton, based on Envirocon’s financial statements for year ended March 2023, a date some fourteen months prior to his removal as shareholder. The court was told this draft has never been finalised.
He subsequently made a Companies Act application for disclosure of further company financial information; financial statements for the year ended March 2024 plus access to Envirocon’s current accounting records held with Xero. This was needed to get a complete picture of his former shareholding’s value as at May 2024, he claimed.
Envirocon refused access. It did belatedly provide Mr Kroll with management accounts covering the period April-December 2023, providing some extra financial information.
His Companies Act application for further financial information was dismissed. The purpose of this rule is to ensure accountability by management to shareholders, Justice Walker said.
This shareholder right was lost when he was removed as a shareholder, she ruled.
Alternative court processes to order discovery of relevant information from third parties like Envirocon are available to Mr Kroll, Justice Walker said. Companies Act investor protection rules are not to be used as a cheap shortcut to get pre-claim information, she said.
Generally, it can be very expensive to force information from third parties as part of pre-trial discovery; third party costs incurred gathering this information must be paid in full.
Kroll v. Envirocon Ltd – High Court (13.03.25)
25.083