Foot-loose at Nority
28 October 1999
In an article on Webb-site.com on 10-Oct-99 we told you how the executive directors of Nority International Group had granted themselves options over 10% of the company, exhausting the share option scheme in one swoop. We noted that the disclosure under the Securities (Disclosure of Interests) Ordinance printed on 6-Oct-99 did not contain information on the exercise period or date of grant.
It now appears that the options were granted by way of letters as long ago as 8-Sep-99 and that the Executive Directors accepted them on 30-Sep-99. 30% of these options were granted to Mr. Feng Shen Chuan, the Chairman, breaching the 25% limit in the Stock Exchange listing rules. The options were exercisable from Apr-2000.
Not only did Mr. Feng's options break the rules, but also no board meeting was held to approve the grant of the options. Companies are normally allowed to do things by "written resolution of the board" but only if all directors (including the non-executive directors) sign the resolution. In an announcement dated 23-Oct-99, the executive directors admitted that this had not been done "due to an oversight on their part".
This "oversight" meant that South China Industries, the 39.9% shareholder (through their wholly-owned subsidiary Micon Ltd), were not aware of the grant on 8-Sep-99. When they found out, they evidently were not amused. They filed a high court writ disputing the validity of the options but did not serve it pending a board meeting on 25-Oct-99. At that meeting, the board concluded that the options were not validly granted, and even if they were, all the grantees withdrew their acceptances of the options.
That's not the end of the story. The board resolved to convene another meeting by next Monday, 1-Nov-99, to consider a request made by Micon (100% owned by South China Industries) for the appointment of additional non-executive directors to the board.
Clearly South China, with only one director on the board of Nority, has not been able to exercise the degree of control it might expect from being the largest single shareholder. If the executive directors do not agree to appoint new South China representatives to the board, then we may be about to see a proxy battle for control of Nority.
After Mr. Feng's summer purchases of the stock, he owns 26.5% of Nority, while his fellow executive directors own 4.5%, making 31.0% against South China's 39.9%. That's close enough for the other shareholders to determine the outcome. Watch this space!
© Webb-site.com, 1999
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