Conroy Gold shareholder alleges oppression

A minority shareholder in a gold mining company has concerns about corporate governance issues including payments of more than €4 million to board members over seven years, more than half of its operating profits in that time, the High Court has heard.

Patrick O’Sullivan, Howth Road, Dublin, intends to bring proceedings under the Companies Act against Conroy Gold and Natural Resources plc alleging oppression of him as a shareholder, his counsel Jim O’Callaghan SC said.

The company was established in 1995 by Prof Richard Conroy to find gold deposits in Northern Ireland and northern Finland and has a nine member board chaired by Prof Conroy.

Mr O’Sullivan acquired shares in the company in autumn 2009 and now holds a 28 per cent stake but is not a director.

He says he has become increasingly frustrated over alleged failure to adhere to “reasonable corporate governance standards”, “misallocation of resources”, including an “oversized” board, and ratio of board remuneration to operating expenses.

He served a notice in late May to propose resolutions for removal of six directors and their replacement with three different directors to have a more “streamlined” board. His proposals have met with significant resistance from board members but he believed a majority of shareholders, as presently constituted, would vote in favour of them, he says.

Mr O’Callaghan applied ex parte (one side only represented) to Mr Justice Paul Gilligan on Thursday for interim orders against the company arising from his client’s apprehension the board is contemplating measures to dilute the current members’ shareholdings before an extraordinary general meeting on August 4th with a view to defeating his resolutions.

Counsel said his client has been concerned about failures to adhere to corporate governance standards and excessive remuneration paid to members of the board. More than €4 million had been paid within a seven-year period.

His client had become apprehensive that members of the board were taking measures for preserving control that were not bona fide, counsel said.

Mr O’Sullivan had received information earlier this week that board members had met principals of another company to discuss acquiring an asset and was apprehensive there was no “bona fide” reason for any such acquisition.

His client believed the motivation for acquisition reflected a desire of board members to preserve their control and solicitors for his client had sought and failed to secure undertakings from the board prior to the egm.

Mr O’Callaghan said letters from William Fry, solicitors for the board, stated his client’s concerns were misplaced, that the board was fully conscious of its obligations to act in the best interests of the company, had always done so and would continue to do so.

The letters stated the board considered the undertakings sought would utterly fetter its discretion at the behest of a single minority shareholder, it was not appropriate to provide them and the board considered Mr O’Sullivan wanted the undertaking solely for his own self-interest and to obtain or enhance a voting interest for himself at the expense of other shareholders.

Mr O’Callaghan said his client did not want to enhance his stake but rather to preserve it.

The judge said the letters from Fry’s merit clarification. While they in one way indicated there was nothing to be concerned about, the letters also declined to give the undertakings sought and the court required further explanation, he said.

The matter may be capable of being resolved on such explanation and, in the circumstances, he would return it to Friday, the judge said.