The New Zealand Shareholders Association said today it would vote discretionary proxies it holds in favour of the non binding winding up motion proposed by Elevation Capital. This is due to be put to Marlin Limited shareholders at the company’s annual meeting tomorrow.
Association Chair John Hawkins said that while there had been claims and counter claims around the performance of the company’s external manager, Fisher Funds, the Association believed the real issue related to whether the way that Marlin was structured was in the best interests of shareholders.
On the 17 October, the Elevation Capital motion was notified to the Stock Exchange. On the same day Marlin announced that the management contract with Fisher Funds had been renewed for a further five years. Hawkins said that Marlin claimed that there were no grounds for the independent directors not to renew the agreement, but NZSA legal advice indicates that nothing in the contract prevented the board from obtaining an independent appraisal of the manager’s performance. In our view, this would have been sensible after a five year period, whether or not the Elevation proposal had arisen said Hawkins. He added that this would have also clarified the conflicting claims from the company, the Manager and Elevation which are very difficult for shareholders to compare and sort out.
Hawkins said there was clearly potential for a conflict of interest with a representative of the Manager sitting on the board of Marlin. The recent sudden departure of two experienced and respected independent directors along with the appointment of a new portfolio manager had also concerned some shareholders. The remaining independent directors sit on two other investment companies run by the same manager and this has inevitably led to questions about their independence, he said.
In the circumstances the Shareholders Association believes it is in the best interests of all shareholders that this whole matter should be revisited. The logical way to achieve this is to vote in favour of the non binding winding up resolution. With enough support, Hawkins said he hoped this would result in the Marlin board seeking an outside review to determine the best way forward. Whether this is to wind up the company, modify the existing management arrangements or retain the status quo remains to be seen he said.
Hawkins said that as a result of the issues raised in this case, the Shareholders Association would be writing to NZX. We want them to consider a listing
rule change so that directors holding multiple board seats run by the same external manager will not be deemed independent. This is the case in the UK, he said.
We are also looking at whether it is appropriate that a representative of the external manager should sit on the board of investment companies, he said.
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