The Takeovers Panel has today made a declaration of unacceptable circumstances, and final orders, in relation the affairs of Trysoft Corporation Limited (Trysoft).
The application was made by Mr Stephen Ioannides, a shareholder and former director of Trysoft. The application alleged that Trysoft's managing director, Mr Douglas Wong had entered into a voting agreement (the Robertson Agreement) with Mr Grahame Robertson and a company controlled by him, and that these parties together held approximately 44% of the shares in Trysoft. Mr Robertson is a former director of Trysoft.
The application alleged that the Robertson Agreement breached the 20% voting power threshold in section 606 of the Corporations Act (the Act) and had not been properly disclosed to the market or Trysoft shareholders.
During the course of the proceedings, the Panel also became aware of a second voting agreement to which Mr Wong, Trysoft and Mr Ioannides were parties (the Ioannides Agreement).
Trysoft provided the Panel with a copy of both the Robertson Agreement and the Ioannides Agreement.
Among other things, the Robertson Agreement required Mr Robertson to vote his shares in support of an option scheme (the Wong Option Scheme) granting options to Mr Wong as part of his employment agreement. It also gave Mr Wong a right of first refusal over shares held by Mr Robertson.
The Ioannides Agreement also required Mr Ioannides (who at the time held approximately 19% of the voting power in Trysoft) to support the shareholder resolutions necessary to implement the Wong Option Scheme, among other things.
At the 2002 Trysoft annual general meeting, the shareholders of Trysoft voted under ASX Listing Rule 10.11 to allow Trysoft to issue the Wong options. Trysoft shareholders were not advised of the terms or the existence of the Agreements, although each of Trysoft, Mr Wong and Mr Robertson submitted to the Panel that they believed that Mr Wong had revoked the Agreements before the AGM.
At the AGM, both Mr Robertson and Mr Ioannides voted in favour of the Wong Option Scheme. If their votes had not been counted, the resolution to approve the scheme would have been defeated. Approximately 21.1% of Trysoft's shares were not voted at the AGM in relation to this resolution. It is possible that some of these additional votes may have been cast at the AGM if shareholders had been aware that Mr Robertson and Mr Ioannides were to be excluded from voting in relation to the resolution. However, it is impossible to know whether such votes would have been cast in favour of, or against, the resolution.
The Panel decided that the Agreements resulted in Mr Wong acquiring a relevant interest in shares in Trysoft and in increases in the voting power of each of Mr Wong, Mr Robertson and Mr Ioannides in breach of section 606 of the Act. Despite submissions to the contrary from Mr Wong and Mr Robertson, the Panel did not accept that the Agreements had been terminated or that the breaches of section 606 had been remedied.
The Panel has also decided that the Agreements required each of Mr Wong, Mr Robertson and Mr Ioannides to give a substantial holding notice under section 671B of the Act. Each of them failed, and continues to fail, to comply with these obligations.
The Panel has declared that these breaches of the Act, and the failure to comply with the obligations under section 671B of the Act, constitute unacceptable circumstances. A copy of the declaration is included as Annexure A in the copy of this release posted on the Panel's website.
The Panel has also ordered that the Agreements be terminated with immediate effect, and that any options issued to Mr Wong under the Wong Option Scheme must not be exercised unless and until the Trysoft shareholders approve the Wong Option Scheme (subject to certain restrictions). A copy of the orders is included as Annexure B in the copy of this release posted on the Panel's website.
The Panel has also accepted undertakings from each of Mr Wong, Mr Robertson and Mr Ioannides to the effect that they will obtain advice from their legal advisers concerning when parties will be associates for the purposes of Chapters 6 and 6C of the Act.
The sitting Panel comprised Robyn Pak-Poy (sitting President), Anthony Burgess and Marian Micalizzi.
The Panel will post its reasons for this decision on its website (http://www.takeovers.gov.au/) when they have been settled.
Nigel Morris, Director, Takeovers Panel
Level 47, Nauru House, 80 Collins Street, Melbourne VIC 3000
Ph: +61 3 9655 3501
Annexure A - Declaration of unacceptable circumstances made by the Panel
A. Mr Douglas Wong, Trysoft Corporation Limited (Trysoft), Mr Grahame Robertson and TSA ME3 Pty Ltd (TSA ME3) entered into a heads of agreement (the Robertson Agreement) dated on or about 11 October 2002.
(a) requiring Mr Robertson and TSA ME3, as shareholders in Trysoft, to support the shareholder resolutions necessary to effect certain option schemes to be implemented by Trysoft (part of the implementation of these schemes resulted in the granting of options (the Wong Options) to Mr Wong);
(b) providing, in certain circumstances, for Mr Wong to have the power to exercise the voting power (as defined in the Corporations Act 2001 (Cth) (the Act)) attached to approximately 19% of the shares in Trysoft that are held by Mr Robertson; and
(c) providing Mr Wong with a right of first refusal in relation to all of the shares Mr Robertson holds in Trysoft (but not including the shares in Trysoft held by TSA ME3 Pty Ltd).
C. Mr Wong, Trysoft and Mr Stephen Ioannides entered into a heads of agreement (the Ioannides Agreement) dated on or about 11 October 2002.
D. Among other things, the Ioannides Agreement required Mr Ioannides, as a shareholder in Trysoft, to support the shareholder resolutions necessary to implement the option schemes referred to in paragraph (a) of recital B of this Declaration.
E. A partial, but not full, release of the obligations of Mr Robertson and TSA ME3 under the Robertson Agreement, and Mr Ioannides under the Ioannides Agreement, was purported to be given on 6 November 2003.
F. The Panel has determined that the entry into the Robertson Agreement and the Ioannides Agreement (together the Agreements) resulted in Mr Wong acquiring a relevant interest in shares in Trysoft and increases in the voting power of each of Mr Wong, Mr Robertson, TSA ME3 and Mr Ioannides in breach of section 606 of the Act. That breach has not been remedied.
G. The Panel has also determined that the entry into the Agreements resulted in each of Mr Wong, Mr Robertson, TSA ME3 and Mr Ioannides being under an obligation under section 671B of the Act to give a substantial holding notice in accordance with the requirements of that section. Each of those parties failed, and continues to fail, to comply with this obligation.
Under section 657A of the Corporations Act, the Panel declares that the circumstances relating to:
(b) the failure by each of Mr Wong, Mr Robertson, TSA ME3 and Mr Ioannides to comply with their obligations under section 671B of the Act (as discussed in recital G),
constitute unacceptable circumstances in relation to the affairs of Trysoft.
3 July 2003
President of the sitting Panel
Annexure B - Orders made by the Panel
In the matter of Trysoft Corporation Limited
Pursuant to section 657D of the Corporations Act 2001 and pursuant to a declaration of unacceptable circumstances made by the President of the sitting Panel on 3 July 2003, the Takeovers Panel HEREBY ORDERS:
(a) that the heads of agreement executed on or about 11 October 2002 between Mr Douglas Wong, Trysoft Corporation Limited (Trysoft), Mr Grahame Robertson and TSA ME3 Pty Ltd is terminated in full, such termination to take effect immediately;
(b) that the heads of agreement executed on or about 11 October 2002 between Mr Douglas Wong, Trysoft Corporation Limited (Trysoft) and Mr Stephen Ioannides is terminated in full, such termination to take effect immediately;
(i) a Services Agreement dated on or about 20 September 2002 between Trysoft and Mr Wong; and
(ii) a resolution passed at the 2002 Trysoft annual general meeting on 29 November 2002 approving the grant of the options to Mr Wong,
must not be exercised unless and until the grant of the Options has been ratified at a meeting of the shareholders of Trysoft convened after the date of this order and in relation to which votes cast by associates of Mr Wong have been disregarded (other than votes cast by such persons as proxy for a person who is entitled to vote where the vote is cast in accordance with directions on the proxy form);
(d) that Trysoft must not issue any shares following any exercise of options by Mr Wong unless and until ratification of the grant of the Options complying with requirements set out in paragraph (c) has been complied with.
Dated 3 June 2003
President of the sitting Panel