Former investment banker James Dunphy is urging the NZX to send someone to tomorrow's NZ Oil & Gas annual meeting and consider revisiting official policy relating to independent director representation.
Dunphy, whose activism played a key role in minority shareholders rejecting a takeover offer from NZOG's Singapore-based majority shareholder, has been critical of the explorers' corporate governance, in particular the independent directors' haste in recommending the failed offer.
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Both independents – Dr Rosalind Archer and Rod Ritchie – recommended shareholders accept the original 62c-a-share takeover offer. However, despite the offer being raised to 74c, enough minority shareholders voted against the Scheme of Arrangement to reject it amid a chorus of protest.
Questions were raised about the quality and accuracy of advice in the scheme documents, including valuations of key assets.
NZOG is holding its annual meeting in Wellington tomorrow with Ritchie up for re-election to the board.
On Friday Dunphy wrote to NZX chief executive Mark Peterson, saying NZOG was in breach of the stock exchange's corporate governance code, whose policy was to have a majority of independent directors.
In NZOG's case the board mix is five non-independents and two independents. The board composition is a consequence of the company's ownership structure with OG&G a 70 per cent shareholder, something the company explains in its annual report.
In his letter to Peterson obtained by the Herald, Dunphy says it comes as no surprise that the OG&G-controlled board has recommended the re-election of the incumbent independent director as opposed to two other candidates, Brian Roulston and Samantha Sharif, who he describes as qualified independents.
"NZX's policy in relation to independent directors makes perfect sense," Dunphy wrote.
"NZOG's rejection of the policy only makes sense for the majority shareholders.
"Representation of independent directors is being determined by the major shareholder. This is farcical, worse so in the face of shareholder opposition to the two current independents.
"I urge NZX to attend or listen to the AGM on Thursday. A change in policy is required."
In response, Chris Holland, a compliance officer at NZX, said NZOG had not breached any listing rules and the code recommendation is not binding when an issuer has explained the circumstances leading to them not complying with one or more of the code recommendations.
In the absence of an apparent breach under the NZX listing rules the election of particular directors is a general company law concern, and … falls outside NZX's regulatory remit.
"For these reasons, at this stage we have no plans to attend the NZO AGM".
In a follow-up letter, Dunphy said that approach was asinine.
"NZOG, presumably reflecting the wishes of OG&G, says the board structure is a consequence of the company's ownership structure and this is regarded as an adequate response? You have to be kidding."
He then made the following points:
• The major shareholder has attempted to buy out the minority shareholders cheaply;
• The structure OG&G chose was a scheme presumably to circumvent the issues around acquiring 90 per cent of the shares;
• A scheme can only proceed with the approval of the independent directors;
• The shareholders overwhelmingly disagreed with the recommendation of the independent directors;
• The majority directors (OG&G appointees) want to keep the failing independent directors on the board;
• The minority shareholders appear to think this is against their best interests; and
• There are better independent director candidates
"There are now diametrically opposed interests of the major and minority shareholders," Dunphy wrote. "One wants to buy, the others don't want to sell."
"Minority shareholder rights are being obliterated. Please send someone to the NZOG AGM."
Dunphy later said he has been invited to attend the annual meeting and he intends making a presentation himself.
At an earlier meeting held for shareholders to vote on the takeover offer, Archer said she and Ritchie recommended the offer because they did not see another pathway offering a comparable chance of achieving a similar return.
"We truly believe that this company is at a crossroads," Archer said.
The AGM will be held at Te Wharewaka Function Centre in Wellington at 2pm tomorrow.