Freesteel Blog » Vero’s short meeting is complete

Vero’s short meeting is complete

Wednesday, November 4th, 2009 at 7:48 pm Written by:

Vero reported the conclusion of its 2 November 2009 General Meeting thus:

The The[sic] Board of Vero Software plc (AIM: VERO) announces that following a General Meeting of the Company held today at 10:00 a.m. at the Company’s offices, the Resolution set out in the Circular sent to Shareholders on 15 October 2009, has been duly passed.

What? They don’t even say how many people showed up? Did they have a debate? Was the vote unanimous? How about the minutes of the previous meeting? Were they read and agreed to?

What was their last General Meeting?

Oh, it was their Annual General Meeting of 18 June 2009, reported thus:

Vero Software Plc (AIM: VERO), a leading supplier of CAD/CAM software to the mould and die sector, is pleased to report that all resolutions were duly passed at the Company’s Annual General Meeting, which was held earlier today.

Obviously this is a really happening place. I believe at that meeting they took some amendments to their articles (the document crashes Open Office) involving placing their accounts on the web.

Their New Articles of Association state:

46. Quorum for general meeting No business shall be transacted at a general meeting unless a quorum is present. Two persons entitled to vote on the business to be transacted, each being a member or a proxy for a member or a duly authorised representative of a corporation which is a member, shall be a quorum. The absence of a quorum will not prevent the appointment of a chairman of the meeting in accordance with these Articles. Such appointment shall not be treated as being part of the business of the meeting.

So, basically, the CEO and the sales director could have locked themselves in the lavatory at 10 o’clock, flushed the toilet, and declared the motion carried.

But what if there was only room for one in the bog? Well…

47. Procedure if quorum not present If within fifteen minutes (or such longer time not exceeding one hour as the chairman of the meeting may decide to wait) after the time appointed for the holding of the meeting a quorum is not present, or if during meeting a quorum ceases to be present, the meeting:

  • if convened on the requisition of members, shall be dissolved; and
  • in any other case shall stand adjourned to the same day in the next week or to such other day and at such other time and place as the chairman (or, in default, the Board) may decide.
  • If at such adjourned meeting a quorum is not present within fifteen minutes after the time appointed for holding it one person entitled to vote at the business to be transacted, being a member or a proxy for a member or a duly authorised representative of a corporation of a member, shall be a quorum.

A quorum of one guy! One can easily spend a quarter of an hour locked in a cubical. And when you come out you can schedule the adjourned meeting for a week later, at which time you alone are the quorum… Or maybe someone else is… If one person is quorum then numerous people in different rooms could declare themselves to be the meeting, and there would be no way to resolve the problem.

They didn’t think of that when they pasted in these hundreds of lines of gobblygook on the formation of Deepcredit Ltd., did they?

But there’s nothing unique about this particular company constitution. Virtually all the same clauses appear in Shell Oil’s Articles of Association. Which kind of shows it doesn’t matter. Except when it does. You can imagine all the farting around with this game that goes on once a company runs out of money and falls apart.

There is no standardization in the realm of these documents. They are as random and untested as complicated business contracts, littered with unnecessary and gratuitous pitfalls that allow corporate lawyers to make money by doing socially useless work, like con-men. What a game. I look forward to webscraping this kak soon and doing some sort of textual analysis on its lineage. The whole lot should be tossed into github.

But back to the resolution that was passed:

THAT, the Company may, as borrower, enter into a loan agreement including the following terms and that such terms be and are hereby approved:

1. The outstanding balance of the Loan is payable in full on the occurrence of an Exit Event;

2. There is a stepped scale redemption premium payable on any capital being repaid as follows:

a) 15 per cent. if capital is repaid before the third anniversary of Completion;
b) 25 per cent. if capital is repaid on or after the third anniversary of Completion but before the fourth anniversary of Completion; and
c) 35 per cent. if capital is repaid on or after the fourth anniversary of Completion.

3. The lender will be issued on Completion with a Warrant to subscribe for up to 3 per cent. of the equity share capital of the Company (on a fully diluted basis) on the date of exercise of the Warrant at no cost to the lender and that the rights granted pursuant to such Warrant will be exercisable by the lender on the occurrence of an Exit Event.

What does this mean? I think it means they are taking a £2million loan at 4.8% compound interest for 3 years, or 5.7% interest for 4 years, and after 4 years they can stay in debt to the same amount till the end of time. The current government base rate is 0.5%, but that’s only available to banks so they can make money out of the economy after blowing it all on bonuses to their high-flying mismanagement experts.

What is the Exit Event?

An Exit Event is any of the following:

  • 50% or more of the equity share capital of the Company becomes beneficially owned by any one person or group of persons acting in concert (Change of Control)
  • the admission of equity securities of the Company on any exchange or market for listed securities other than AIM (where they are currently listed)
  • the admission of equity securities of the Company on AIM of more than 20% for 12 months
  • a sale of the whole or a substantial part of the business, assets and/or undertaking of the Company

This still doesn’t make a lot of sense, even though I have heavily refactored the incomprehensible original text. The Exit Event is about sales of the company, not, for example, failing to pay back the loan.

When the company gets sold, the unnamed “respectable third party institution” which offered this “mezannine loan” gets all of its money back, plus a free 3% of the company worth £156k at today’s prices– if they can sell it.

From a distance, it looks like poison pillism, which is why they needed to go through the whole General Meeting charade.

It’s possible to speculate that the unnamed “financial institution” which made its “provisional approach… that may or may not lead to an offer… for the Company” is the same company that is giving the loan. It would explain why the identity of both needed to be kept secret, instead of only one.

If it is, then it’s kind of a way of sealing a 3% advantage over any other company that is likely to bid for it, as well as discouraging the directors from soliciting for any rival offers. A lack of competition keeps the price down.

I’m pretty puzzled. It’s all fascinating stuff, but no way to get any useful code written of any kind. So I better get back to some of my other work and let this story develop for a few more months.

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