TruScreen, the cervical cancer test developer which is listed on the NZX Alternative Market, has been publicly censured by the New Zealand Markets Disciplinary Tribunal for having just one New Zealand resident director for 18 business days, falling short of the requirement for at least two, after former director Tim Preston withdrew his nomination on the eve of the company's annual meeting in September.
The stock market's disciplinary tribunal said TruScreen had only one director who was ordinarily resident in New Zealand following its September 21 annual meeting. Still, it noted Preston's withdrawal from re-election was not known until the AGM and the company took immediate steps to find a suitable replacement and promptly appointed new director Ron Jones.
"The corporate governance provisions of the rules are important to the integrity of the market," the Tribunal said in a statement posted on the NZX. The policy "is to ensure issuers have directors who are available to both New Zealand resident shareholders and the New Zealand regulatory authorities."
Preston, who has a capital markets background, joined the TruScreen board in 2014 ahead of its listing that year and had unanimous board support for re-election in the notice of meeting to shareholders on September 5.
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However, he withdrew his nomination and the resolution wasn't put to shareholders, saying that the company's governance needed greater diversity and a wider skill set to help roll out its products into international markets.
In its ruling published today, the Tribunal noted that directors, for various reasons, may resign without warning and it recognised the appointment process for a replacement director must be robust and that boards need sufficient time to identify and select suitable candidates.
"However, if an issuer has only the minimum number of directors to satisfy the corporate governance requirements in the rules it must have an adequate succession plan in place to avoid breaching the rules in the event of an unexpected resignation," the Tribunal said.
"This could include making an interim appointment while a permanent appointee is being identified."
The Tribunal said mitigating factors included that TruScreen self-reported its breach, it didn't know about Preston's withdrawal from re-election until the AGM was held on September 21, it took immediate steps to find a suitable replacement and promptly appointed a new director, it had one New Zealand director on its board for the duration of the breach, it cooperated with the investigation, it had not previously been referred to the Tribunal, and it had implemented changes to its succession planning to reduce the risk of a lengthy delay in the event of any further unexpected resignations.
TruScreen and NZX reached a settlement over the breach, involving a public censure by the Tribunal and requiring TruScreen to pay Tribunal costs, if any, and $1,800 of costs to NZX.
TruScreen shares last traded at 17.5 cents and have gained 45 per cent the past year.