A universally ignored Companies Act rule requiring detailed disclosure of value provided in return for issue of shares and options was pounced on by Nigel Keats in his long running dispute with management of Connectworks Ltd, forcing public disclosure of circumstances in which his shareholding was diluted after his October 2022 resignation as director.
Connectworks provides software used by accounting and law firms.
Mr Keats was a founding shareholder and director. He held a 5.05 per cent shareholding as at late 2025 when his latest round of litigation against the company and its management got underway, with his complaint that continuing management had improperly increased its shareholding in Connectworks from 33 per cent to 54 per cent over an eighteen month period, severely diluting his shareholding.
Registration of newly issued shares were supported by directors’ certificates baldly stating the commonly-used mantra: ‘directors are of the opinion that that the consideration and terms of issue are fair and reasonable to the company and all existing shareholders.’
Similarly worded certificates were signed on issue of share options.
In the High Court, Mr Keats argued this was insufficient detail.
In response, management provided updated information: itemising cash paid into the company in return for shares issued and disclosing that share options were issued at an exercise price of one cent per share. Terms on which options would vest were not disclosed.
Associate Judge Gambrill was unwilling to rule whether this was sufficient compliance in what was a fast-track summary judgment hearing. A full court hearing is required.
Keats v. Finch – High Court (22.05.26)
26.163