Proposed Cancellation and Notice of Meeting
12 November 2009 - 8:00AM
UK Regulatory
TIDMKURA
RNS Number : 3740C
Kurawood PLC
12 November 2009
KURAWOOD PLC (the "Company" or "Kurawood")
PROPOSED CANCELLATION OF ADMISSION AND PROPOSED REREGISTRATION AS A PRIVATE
LIMITED COMPANY
Summary
The Company announces that it is seeking Shareholder approval for the
cancellation of admission to trading on AIM of the Ordinary Shares and the
conversion of the Company from a public limited company to a private limited
liability company.
A Circular will be issued to Shareholders later today and will, together with
this announcement, explain the rationale behind the proposed Cancellation and
Conversion and why the Directors unanimously consider the proposed Cancellation
and Conversion to be in the best interests of the Company and its shareholders
as a whole and seek Shareholder approval for it.
Shareholder approval is required under the AIM Rules for the Cancellation and
under the Companies Act 2006 for the re-registration as a private limited
company.
An extraordinary general meeting of the Company will be held at 12.00 p.m. on 10
December 2009 at 3 Ralli Courts, West Riverside, Manchester M3 5FT at which the
Resolutions will be proposed to approve the Cancellation and the Conversion. A
notice convening the extraordinary general meeting is set out in the Circular.
ENQUIRIES
Justin Martin, Kurawood plc Tel: 01624 820040
Ross Andrews, Zeus Capital Limited Tel: 0161 831 1512
Tom Rowley, Zeus Capital Limited
EXPECTED TIMETABLE
+------------------------------------------+-------------------------------------+
| Dispatch of the Circular | 12 November 2009 |
+------------------------------------------+-------------------------------------+
| General Meeting | 12.00 p.m. on 10 December 2009 |
+------------------------------------------+-------------------------------------+
| Expected date of cancellation of | 18 December 2009 |
| Ordinary Shares from Admission | |
+------------------------------------------+-------------------------------------+
Information on and reasons for the proposed Cancellation and Conversion
1. Cancellation of Admission
Following careful consideration, the Directors have concluded that it is no
longer in the best interests of the Company or its Shareholders to maintain the
admission to trading on AIM of the Ordinary Shares.
The current economic crisis has led to significant falls in the values of the
global stock markets, which have been exaggerated in small cap, low liquidity
stocks. The Directors believe this has and will continue to impact the Company
if it were to remain listed on AIM.
Whilst the Company has successfully moved from operating as a manufacturer of
products to a licensor of its intellectual property, it has been unable to
generate revenues through the charging of manufacturing licensing fees
predicated on a payment per m3 of nameplate capacity and is instead having to
rely on generating revenues through the Company's ability to charge and earn
ongoing production royalties predicated on quarterly production output from its
existing and potential licensees.
As at the date of this announcement, the Company has one licensee being PG
Industries Limited, ("PGI"), the Company's former subsidiary, which has a
nameplate capacity of approximately 300,000 m3. The terms of the license
agreement include exclusivity to manufacture and sell these products within New
Zealand, subject to PGI meeting certain time sensitive minimum volume
commitments, the first commitment running for a period of 24 months from the
commencement of the license. The terms of the licence include a production
royalty of 4% of the sales revenue generated by PGI for an initial period of 5
years or until the expiry of patents filed by Kurawood, whichever is the
latter. The Directors believe the license granted to PGI could result in
significant future revenues being generated within the Company in the medium to
long term.
The Company has also recently initiated discussions with one of Great Britain's
most significant sawmilling businesses that supplies sawn timber products to
customers in the construction, pallet and packaging, fencing, decking, and
cladding product sectors. These discussions have centred on the opportunity to
establish a joint venture company that will hold the necessary rights to
manufacture, distribute and sell Vecowood from a facility located in Great
Britain using species indigenous to this region such as scots pine, ash and
poplar as the source material. Whilst, as at the date of this announcement, no
formal agreements have been entered into, the Directors are confident that a
joint venture agreement will be forthcoming following trials on the modification
of these indigenous species. The Directors believe the potential joint venture
could result in significant future revenues being generated within the Company
in the medium to long term.
It is however clear that the proposed joint venture partner and Fox Capital
Limited, the primary funder of the Company, do not wish to enter into any such
joint venture agreement whilst the Company remains in the public domain due to
the reputational risk should the trial results prove to be inconclusive.
As the Company has not yet generated any revenue through these arrangements and
since the Company is likely to generate revenue only in the medium term, the
Directors believe it is vital that they reduce costs in the short term. The
Directors believe that the Company's continued Admission results in significant
direct costs including nomad and broker fees, listing fees and professional fees
which management estimate to be in excess of GBP100,000 (including VAT) per
annum. The Directors believe it would be more beneficial for the Company's
future growth if this money was used to fund the working capital of the Company
rather than the continued Admission to AIM.
The Directors also believe that the Company's continued Admission:
* results in a disproportionate amount of senior management time being spent in
meeting the AIM Rules and related regulatory requirements, including reporting,
disclosure and corporate governance requirements; and
* may no longer serve a useful function in terms of access to capital or the
ability to use the shares of the Company to effect acquisitions.
With this in mind, the Board has decided to propose cancelling admission to
trading on AIM of the Ordinary Shares to focus on continuing to grow the
inherent value of the Company. It will also carry out a strategic review to
consider how to best maximise Shareholder value and enhance the Company's
ability to meet the needs of its present and future licensees and joint venture
partners.
2. Conversion to a limited company
In an effort to reduce costs further, the Board is also proposing to re-register
the Company as a private company limited by shares by passing a special
resolution to do so and to adopt new articles of association of the Company
reflecting the Company's status as a private limited company and the
implementation of the 2006 Act. This change will enable the Directors to
negotiate lower annual audit fees for the Company. Upon passing of this
resolution the Board will complete a Form RR02 accompanied by copies of the
resolution and a copy of the company's proposed new articles of association, as
set out in Part II of the Circular, to meet the company's new circumstances.
Shareholders should note that the proposed new articles of association of the
Company reflect the Company's proposed new status as a private limited company
and are different from the Company's current articles of association. In
particular the proposed new articles of association:
(a) entitle the directors to refuse to register a transfer of shares;
(b) contain provisions that would enable the holders of 51% of the Ordinary
Shares who wish to sell their shares to a bona fide arms length purchaser to
require other shareholders to sell their shares to such purchaser; and
(c) contain provisions that would require any purchaser of shares (other than an
existing shareholder) who acquired control of the Company to offer to purchase
the other shareholders shares.
The articles of association as set out in Part II of the Circular make reference
to the Model Articles for private companies limited by shares contained in
Schedule 1 to the Companies (Model Articles) Regulations 2008. A copy of the
Company's adopted new articles and the Model Articles will be made available to
Shareholders on the Company's website at www.kurawood.com.
3. Effect of the Cancellation and Conversion on Shareholders
The principal effects of the Cancellation and Conversion would be that:
(a) there would no longer be a formal market mechanism enabling the Shareholders
to trade their shares on AIM or any other market or tracking exchange and the
CREST trading facility will be cancelled;
(b) the Company would not be bound to announce material events or material
transactions nor to announce interim or final results;
(c) the Company would no longer be required to comply with any of the additional
specific corporate governance requirements for companies admitted to trading on
AIM; and
(d) the Company will no longer be subject to the AIM Rules and Shareholders will
no longer be required to vote on certain matters as provided in the AIM Rules.
The Board will, however, continue to:
(i) post information relating to the Company on its website at
www.kurawood.com;
(ii) hold general meetings in accordance with the applicable statutory
requirements and the Company's articles of association; and
(iii) send Shareholders copies of the Company's audited accounts in
accordance with the applicable statutory requirements. By converting from a PLC
to a limited company the Company may be entitled to prepare its accounts in
accordance with the special provisions of part 15 of the Companies Act 2006 and
the Financial Standards for Small Entities (effective January 2007) relating to
small companies.
The provisions of the City Code on Takeovers and Mergers will continue to apply
to the Company following the Cancellation and conversion from a public limited
company to a private limited liability company for a period of 10 years from the
date of Cancellation.
4. Proposed Change to the Board of Directors
If the Cancellation is approved, Mr Peter Hammonds will tender his immediate
resignation as Non-executive Director of the Company and terminate his letter of
engagement with the Company from the date of Cancellation.
5. Approving the Cancellation and Conversion
Under the AIM Rules, it is a requirement that the Cancellation must be approved
by not less than 75 per cent. of the Shareholders voting in the General Meeting.
Accordingly, the notice of General Meeting contains a special resolution to
approve the application to the London Stock Exchange for the Cancellation. If
the resolution is approved, it is expected that the Cancellation will take
effect on 18 December 2009, being at least 5 business days following the passing
of the resolution.
Under the Companies Act 2006, it is a requirement that the Conversion of the
Company must be approved by not less than 75 per cent. of the Shareholders
voting in the General Meeting. Accordingly, the notice of General Meeting
contains a special resolution to approve the Conversion. If the resolution is
approved, it is expected that the Conversion will take effect on 18 December
2009.
6. Exercise of Fox Capital Warrants
In relation to the Warrant Agreement dated 23 February 2009 entered into with
Fox Capital Limited, a Notice of Exercise of Warrants has been received by the
Directors from Fox Capital Limited to subscribe for 4,000,000 new ordinary
shares in the Company at a price of 2 pence per share. The Board of Directors
has resolved to accept this Notice of Exercise of Warrants which results in Fox
Capital Limited having a beneficial interest of 66.08 per cent of the enlarged
issued Ordinary Share Capital in the Company. On exercise of the warrants, the
Company received a credit note from Fox Capital Limited for GBP80,000 which has
been set off against the existing liabilities due to Fox Capital Limited.
7. Irrevocable undertakings and voting in relation to Kurawood plc
The Company has received an irrevocable undertaking to vote in favour of the
Resolutions to be proposed at the General Meeting from Shareholders (including
Directors) holding an aggregate 23,822,000 Ordinary Shares representing
approximately 66.17 per cent of the entire issued share capital of the Company
at the time of the proposed General Meeting.
In addition and as announced on 21 August 2009, Peter Duncan McArthur and Ian
Douglas Macrae entered into a Deed of Release and Voting in relation to Kurawood
plc to vote in favour of all future resolutions proposed by the Directors at any
General Meeting of the Company. As of the date of this announcement, Peter
McArthur and Ian Macrae together own 3,413,600 issued shares of the Company.
Accordingly, the Company has received in aggregate, irrevocable undertakings and
voting in favour of the proposed Resolutions from Shareholders holding an
aggregate of 27,235,600 Ordinary Shares representing approximately 75.65 per
cent of the entire issued share capital of the Company.
8. Following the Cancellation
Whilst the Board believes that the Cancellation is in the Shareholders'
interests, it recognises that the Cancellation will make it more difficult for
the Shareholders to buy and sell Ordinary Shares should they so wish.
Following the Cancellation, the Board intends to set up a matched bargain
facility to enable Shareholders to trade Ordinary Shares. Under this facility,
it is intended that Shareholders or persons wishing to acquire shares will be
able to leave an indication with a matched bargain facility provider that they
are prepared to buy or sell at an agreed price. In the event that the matched
bargain facility provider is able to match that order with an opposite sell or
buy instruction, the matched bargain facility provider will contact both parties
and effect the bargain. Shareholders who do not have their own broker may need
to register with the matched bargain facility provider as a new client. Once the
facility has been arranged details will be made available to Shareholders on the
Company's website at www.kurawood.com.
9. Recommendation
For the reasons set out above, particularly in paragraph 1 and 2, the Directors
consider that the Cancellation and Conversion will promote the success of the
Company and is in the best interests of the Company and its Shareholders as a
whole. Accordingly, the Directors unanimously recommend Shareholders to vote in
favour of the Resolutions as they have irrevocably undertaken to do so in
respect of their own beneficial holdings of 23,822,000 Ordinary Shares,
representing approximately 66.17 per cent. of the entire issued share capital of
the Company.
DEFINITIONS
+--------------------------------+-----------------------------------------------+
| "1985 Act" | the Companies Act 1985 (as amended) |
| | |
+--------------------------------+-----------------------------------------------+
| "2006 Act" | the Companies Act 2006 |
| | |
+--------------------------------+-----------------------------------------------+
| "Admission" | the admission of the Ordinary Shares to |
| | trading on AIM |
| | |
+--------------------------------+-----------------------------------------------+
| "AIM" | a market operated by London Stock Exchange |
| | plc |
| | |
+--------------------------------+-----------------------------------------------+
| "AIM Rules" | the AIM Rules for Companies published by the |
| | London Stock Exchange from time to time |
| | (including, without limitation, any guidance |
| | notes or statements of practice) which govern |
| | the rules and responsibilities of companies |
| | whose shares are admitted to trading on AIM |
| | |
+--------------------------------+-----------------------------------------------+
| "Board" | the board of directors of the Company at the |
| | date of this announcement |
| | |
+--------------------------------+-----------------------------------------------+
| "Cancellation" | the proposed cancellation of the Company's |
| | Ordinary Shares from admission to trading on |
| | AIM, subject to the passing of the |
| | Resolutions |
| | |
+--------------------------------+-----------------------------------------------+
| "Circular" | the circular posted to Shareholders on 12 |
| | November 2009 |
| | |
+--------------------------------+-----------------------------------------------+
| "Company" or "Kurawood" | Kurawood plc |
| | |
+--------------------------------+-----------------------------------------------+
| "Conversion" | the proposed conversion of the Company from a |
| | public limited company to a private limited |
| | company, subject to the passing of the |
| | Resolutions |
| | |
+--------------------------------+-----------------------------------------------+
| "CREST" | the computer based system established under |
| | the Uncertificated Securities Regulations |
| | 2001 (SI 2001 No. 3755) which enables title |
| | to units of relevant securities to be |
| | evidenced and transferred without a written |
| | instrument and in respect of which Euroclear |
| | UK & Ireland is the operator |
| | |
+--------------------------------+-----------------------------------------------+
| "Directors" | the directors of the Company |
| | |
+--------------------------------+-----------------------------------------------+
| "General Meeting" or " GM" | the extraordinary general meeting of the |
| | Company, convened for 12.00 p.m. on 10 |
| | December 2009 which will consider the |
| | Resolutions |
| | |
+--------------------------------+-----------------------------------------------+
| "Group" | Kurawood and its subsidiaries |
| | |
+--------------------------------+-----------------------------------------------+
| "Ordinary Shares" | ordinary shares of 1p each in the capital of |
| | the Company |
| | |
+--------------------------------+-----------------------------------------------+
+--------------------------------+-----------------------------------------------+
| "Resolutions" | the special resolutions to be proposed at the |
| | General Meeting |
| | |
+--------------------------------+-----------------------------------------------+
| "Shareholders" | holders of Ordinary Shares and "Shareholder" |
| | means any one of them |
| | |
+--------------------------------+-----------------------------------------------+
| "UK" | the United Kingdom of Great Britain and |
| | Northern Ireland |
| | |
+--------------------------------+-----------------------------------------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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