Avoidance of Accountability

This section describes a number of ways in which the Board of Directors actively avoided being challenged regarding the actions they had taken or the restructuring option they had selected.

S656 breach – no meeting called

S656 of Companies Act 2006 provides: 

(1) Where the net assets of a public company are less than half of its called-up share capital, the directors must call a general meeting of the company to consider whether any, and if so what, steps should be taken to deal with the situation

. 

(2) They must do so not later than 28 days from the earliest day on which that fact is known to a director of the company. 

(3) The meeting must be convened for a date not later than 56 days from that day. 

(4) If there is a failure to convene a meeting as required by this section, each of the directors of the company who – 

(a)   Knowingly authorises or permits the failure, or 

(b)   After the period during which the meeting should have been convened, knowingly authorises or permits the failure to continue,  commits an offence.

All of these rules under the Companies Act 2006 were breached and have been confirmed by hSG’s forensic accountant at Smith & Williamson.

Briefly, the facts were as follows: 

·       On 31March 2012 the net assets of hibu amounted to £324,200,000 and the amount of its paid up share capital was £23,819,952 being   2,381,995,174 ordinary share of 1p fully paid.

·       Half of the paid up share capital of hibu at 31 March 2013 was £11,909,976.

·       Either of the impairments made in respect of US (£807m) or UK (£707.2m) would have had the effect of reducing the value of the net assets of hibu from £324.2m to a negative figure and below one half of the amount of its paid up share capital. 

·       It was accordingly incumbent upon Chartered accountant and Chief Financial Officer of the Group Tony Bates to call for a general meeting of members to be convened to be held not later than 26th May 2013 (56 days after 1 April 2013).

This never happened and S656 of Companies Act 2006 was therefore breached.

In consequence, a false market in shares was created and maintained by Directors because they knew that the net assets of hibu were actually liabilities, but they continued regardless, not convening an AGM as required under S656, and allowing hibu shareholders to continue to trade in shares in hibu plc while remaining ignorant of the facts which should have been brought to their attention. 

Following hSG’s call for an EGM, on 6 November 2013 the Directors tacked the item on to the business of the meeting, but the subject was never discussed as no Director attended the EGM. 

Chairman’s threats to place company in administration

·      6 November 2013 – in a circular to shareholders:

Wigley: “Should a material number of the Proposed Directors be appointed at the General Meeting or the Company determine that this is likely to occur, it is expected that the Company will be placed into administration. Should this occur, the directors of the Company (including any appointed at the General Meeting) will cease to have any ability to control the Group or otherwise prevent implementation of the Financial Restructuring”

This is clear evidence of the Board denying shareholders their legal right to vote in their own Directors at an EGM, legitimately convened according to s305 of the Companies Act 2006, Power of members to call meeting at company’s expense.

One week before the EGM, the board carried out their threat, and not a single hibu Director attended the meeting.