Articles of Association - Minority Shareholders

[Jordanhill Jag]

Today as a minority shareholder I received the revised Club Articles of Association

Much has been made regards the lack of Consultation with TJF Members due to the haste of new Rules Regards Shareholding for the USA Investors

However no mention of what I would term “the Creevy Clauses” ie changes put in place as a result of the recent sacking of the Chairman 

Any Director can be sacked “ in agreement between Directors & Shareholders “ which is nice and cosy - ie there is no difference between Directors and Shareholders - and by Shareholders it means the Trusts

Shareholders hold Boards to account - however at Thistle they are morphing into one

The other significant change is that a Board Meeting Quorum is now three Directors - and they have the Power to reduce this if they fancy - which makes a mockery of Board Meetings as technically it could be one person at the meeting

There was no reason whatsovever that these additional changes had to be done “ in secret” they could have waited to the AGM in a couple of Months and be discussed and voted upon 

All along there is a reference to “ shareholders” by which they mean the Trust - however until last week the Trust owned 75% - the Weirs ( or associates ) owned another 10% and Minority Shareholders owned 15% 

Now the 15% may seem small - but they are Jags Fans who put up there own cash during Save the Jags to buy Shares to support the Club 

for 10% the US Investors get a major say in the Club and a Director 

for 15% the Minority Shareholders are no longer Consulted 

The Board and the Trustees  decide between them - there will be No dissenting Voices from Thistle Fans who used there own money to buy shares - they are now irrelevant in PTFC 

 

 

[Lenziejag]

Have we had a statement yet that clearly sets out why it had to be done so quickly, apart from the vague reference to cash shortfall, which previously we had been told had been resolved ? 

What were minority shareholders consulted on ?

[Jordanhill Jag]

1 hour ago, Lenziejag said:

Have we had a statement yet that clearly sets out why it had to be done so quickly, apart from the vague reference to cash shortfall, which previously we had been told had been resolved ? 

What were minority shareholders consulted on ?

Thats the point - there was no consultation of Minority Shareholders - the Trusts decide on behalf of there members - the Trust nominate Directors from the Trusts 

There is very little difference between the Trusts and the Board 

Shareholders who actually purchased shares with there own cash have no say on any level 

Sneaking through the Cleevy Clauses without Consultation or debate is unacceptable 

we are entitled to an explanation 

 

[Woodstock Jag]

A few observations, though some of this will be easier for folk to make sense of once Companies House has published the new Articles (which are in the vast majority of respects essentially the same as the old ones).

 

Minority Shareholders

Firstly, JJ's maths is a bit dodgy, or at least misrepresents the picture that existed before the investment deal was struck.

Prior to the issuing of new preference shares, the shareholdings were as follows:

~74% - PTFC Trust

10% - The Weir Shares

~7.5% - The Jags Trust/Partick Thistle Supporters' Association

~8.5% - More than 200 minor shareholders (only one of whom holds as much as 1% of the shares, and that's Lord Kelvin with just under 1.5%)

The idea that The Jags Trust should be lumped in with miscellaneous minority shareholders, rather than being regarded as part of the fan ownership arrangement is... eccentric. They are one of the trustees of the PTFC Trust! Their shareholding is also drastically larger than that of any of the smaller shareholders.

The position of the minor shareholders (those with less than 2% each, most with less than 0.05% each), in practice, is practically unchanged. Their voting power has always been too small to affect the outcome of any vote following the sale of the Club to Three Black Cats in 2019 (which created a single majority shareholder for the first time in decades). They would always have been outvoted by the majority shareholder on any issue, and unable to block any decisions taken by an ordinary or special resolution.

It is worth pointing out here that the main protections of minority shareholders in company law actually arise out of the Companies Act directly, rather than out of the Articles of Association or any Investment Agreements. The rights of the minority shareholders are exactly the same under the Act both before and after this investment.

 

Removal of Directors

Article 22 (which governs the termination of appointments of directors) is largely the same as it was before. For example, Article 22.1.2 - recently invoked by the PTFC Trust trustees - which allows a director to be removed by written notice endorsed by authorised representatives of the majority shareholding, is completely unchanged.

The addition of Article 22.1.8, to which Jim refers, has nothing to do with the Club Board and the majority shareholder somehow "colluding" to remove anyone. There is absolutely no need for such a jointly exercised power, because the majority shareholder can already remove a director unilaterally! They don't need the Board's agreement!

What this actually refers to is the interaction between the Investment Agreement and the right of the principal investor to appoint a director. This right depends on holding a minimum number of preference shares, and that right is lost if too many of the shares are redeemed. The new Article makes sure that the Club Articles align with that arrangement.

 

Quorum for a Club Board Meeting

The quorum for a meeting of the Club Board was three before these new Articles and it's still three now. This can only be changed by unanimous resolution of the board members.

[Jordanhill Jag]

Thanks for the Clarification and confirmation that if your a US Investor with 10% you can get the Articles of Association altered to suit your requirements and a seat on the Board

but if your the 8.5% shareholders who gave there cash willingly to the Club then you have no say in Club Decisions as “ the Trusts” will decide

the Board can change a Quorum to one member if they so wish - if this had been proposed at an open AGM it would have been laughed at -there was no need to make these changes without Consultation - they were not “ urgent “ 

as for the Jags Trust have a Trustee with a direct say on what goes on at the Club with 7.5% shares its noted 

8.5% of the Shares mean nothing - the hard earned cash that those shareholders put into the Club - means nothing 

In all my Years as a minority shareholder you were treated as just that - a proper shareholder - now your shares are irrelevant 

 

 

Edited October 14, 2023 by Jordanhill Jag

[Lenziejag]

I am finding it a bit bemusing that TJF are now arguing the establishment position when, correct me if I am wrong, they don’t actually own any shares. We still need to know the facts around the urgency of making the decision without consultation.

[lady-isobel-barnett]

8 minutes ago, Jordanhill Jag said:

the Board can change a Quorum to one member if they so wish 

....and if that' ever happened what's the betting that one member would fall out with himself/herself? 😀

[Jordanhill Jag]

11 minutes ago, Lenziejag said:

I am finding it a bit bemusing that TJF are now arguing the establishment position when, correct me if I am wrong, they don’t actually own any shares. We still need to know the facts around the urgency of making the decision without consultation.

The changes are for the Greater Good of all things Thistle 

[Woodstock Jag]

19 minutes ago, Lenziejag said:

I am finding it a bit bemusing that TJF are now arguing the establishment position when, correct me if I am wrong, they don’t actually own any shares. We still need to know the facts around the urgency of making the decision without consultation.

This will be explained in more detail in a TJF update (I hope) very soon. These things take time to communicate thoroughly, accurately and in a legally watertight way.

And please remember that TJF's board consists entirely of 9 elected volunteers, each one of which has a full time job over and above this stuff.

[Jordanhill Jag]

12 minutes ago, Woodstock Jag said:

This will be explained in more detail in a TJF update (I hope) very soon. These things take time to communicate thoroughly, accurately and in a legally watertight way.

And please remember that TJF's board consists entirely of 9 elected volunteers, each one of which has a full time job over and above this stuff.

Can you explain how 7.5% gets you a Trustee and an equal Vote over the 75% Shareholding 

How 10% gets you a Major Say in Club decisions and a Director 

but 8.5% as you have confirmed - now means nothing - the Money these shareholders put in is of no consequence 

Can you also explian why the changes that were not associated by the USA Investment were not made at the AGM which is the norm for these changes - why were they made in Secret - they had nothing to do with the Investment ? 

Edited October 14, 2023 by Jordanhill Jag

[eljaggo]

I think I am right in saying that the US investors have been given preference shares.  These normally do not carry voting rights, but have first call on dividends or any assets following the winding up of a business.

Since the likelihood of PTFC declaring a dividend is equal to the square root of bugger all, I wonder what their motives are?

[Woodstock Jag]

Just now, eljaggo said:

I think I am right in saying that the US investors have been given preference shares.  These normally do not carry voting rights, but have first call on dividends or any assets following the winding up of a business.

Since the likelihood of PTFC declaring a dividend is equal to the square root of bugger all, I wonder what their motives are?

It is a mechanism to allow an exit in the event the Club no longer requires the working capital brought with an investment. No more or less than that.

[eljaggo]

Thanks  WJ.  All very altruistic.

[eljaggo]

Just a sudden thought.  By what mechanism do they withdraw their cash in the event of a disagreement at board level on whether the cash flow/Club finances could withstand a withdrawal/exit?  They have no votes on the Board I believe.

[Woodstock Jag]

15 minutes ago, eljaggo said:

Just a sudden thought.  By what mechanism do they withdraw their cash in the event of a disagreement at board level on whether the cash flow/Club finances could withstand a withdrawal/exit?  They have no votes on the Board I believe.

The principal investor has the right, under the Investment Agreement, to appoint a director or observer to the board, provided that they continue to hold a minimum number of preference shares. Once on the board, any such director would have one vote, just like any other director.

The Investment Agreement has a mechanism built-into it that provides for the redemption of preference shares only with respect to a proportion of the excess above cash reserves of £2 million. The investors can’t simply walk away and get their cash back whenever they like. That would, simply put, completely defeat the purpose of the transaction!

Redemption also does not have to occur if the annual accounts don’t show net positive cashflow or no distributable reserves.

The redemption mechanism has very deliberately been set up to protect the Club and to ensure that the investment is only ever exited from as and when the Club is in a position of (unprecedented) financial strength.

[eljaggo]

Thank you.

[The Legend Blows]

Another day dawns and the PTFC boardroom shenanigans rumble on. I for one would love to know what the master plan is from those changing articles and issuing statements on the official site. Thistle support being treated like utter mugs as per usual. 

[Lambies Lost Doo]

The thing for me is minority shareholders are not 1 block.  I appreciate them putting in £ especially during "Save The Jags".  Quite excited to see Lord Kelvin in there.

[Woodstock Jag]

4 minutes ago, Lambies Lost Doo said:

The thing for me is minority shareholders are not 1 block.  I appreciate them putting in £ especially during "Save The Jags".  Quite excited to see Lord Kelvin in there.

I should clarify: Lord Smith of Kelvin!

[Jordanhill Jag]

54 minutes ago, Lambies Lost Doo said:

The thing for me is minority shareholders are not 1 block.  I appreciate them putting in £ especially during "Save The Jags".  Quite excited to see Lord Kelvin in there.

And your point is ? 
 

whats to stop the Club having an elected Director from the 8.5% ? 
 

why are they to be excluded from

decisions making

Two of the Trusts hold No Elections yet they have a Trustee

the Thistle Trust nominates a Director ?  

[Jordanhill Jag]

3 hours ago, Woodstock Jag said:

This will be explained in more detail in a TJF update (I hope) very soon. These things take time to communicate thoroughly, accurately and in a legally watertight way.

And please remember that TJF's board consists entirely of 9 elected volunteers, each one of which has a full time job over and above this stuff.

Nothing to see here - move along please 

So will the TJF update explain why there were changes outwith those required for the Investors -which could have been done at the AGM as is the norm - why were they done in secret - they had nothing to do with the Investment ? 

Also why is the explanation not coming from the Board as its there decision 

its becoming difficult to differentiate between the two these days ? 

 

Edited October 14, 2023 by Jordanhill Jag

[Jordanhill Jag]

59 minutes ago, Woodstock Jag said:

I should clarify: Lord Smith of Kelvin!

 But he only has 1.5% ? 

[harrywrag]

Surely to change the rules they must first be proposed and seconded then taken to the A.G.M. To be passed by the shareholder looks like the old board has been replaced by similar giving no respect to others

[Woodstock Jag]

6 minutes ago, harrywrag said:

Surely to change the rules they must first be proposed and seconded then taken to the A.G.M. To be passed by the shareholder looks like the old board has been replaced by similar giving no respect to others

Whilst the decision to change the Articles of Association of a private limited company can be taken at an AGM (and often are), that is not a requirement and never has been (in modern times).

Section 21 of the Companies Act 2006 stipulates that modification of Articles of Association of any company may be done by special resolution.

Special resolutions do not require a general meeting of the company. They require only the agreement of 75% of the voting share capital.

Where decisions need to be taken quickly and within the confines of legal and commercial confidentiality constraints, companies will often use a written resolution procedure rather than convene an AGM (which includes things like notice periods that can add delay).

For what it's worth - in my personal view - Jim has a point when he says that the provision around altering quorum for Board Meetings is one that would be better dealt with at an AGM. I think this would be an entirely reasonable point for him, as a shareholder in the company, to raise at the AGM in November.

[Jordanhill Jag]

18 minutes ago, Woodstock Jag said:

Whilst the decision to change the Articles of Association of a private limited company can be taken at an AGM (and often are), that is not a requirement and never has been (in modern times).

Section 21 of the Companies Act 2006 stipulates that modification of Articles of Association of any company may be done by special resolution.

Special resolutions do not require a general meeting of the company. They require only the agreement of 75% of the voting share capital.

Where decisions need to be taken quickly and within the confines of legal and commercial confidentiality constraints, companies will often use a written resolution procedure rather than convene an AGM (which includes things like notice periods that can add delay).

For what it's worth - in my personal view - Jim has a point when he says that the provision around altering quorum for Board Meetings is one that would be better dealt with at an AGM. I think this would be an entirely reasonable point for him, as a shareholder in the company, to raise at the AGM in November.

Thank You-  and for what its worth I will also be raising the lack of representation for minority Shareholders 

if 10% gets you a Director 7.5% a Non Elected Trustee 

Then 8.5% should have a Board Place and an alternative voice to the Trust Nominees