Synlait Milk Limited – Amendment to Waiver Decision

NZX Regulation
NZX Limited
Level 1, NZX Centre
11 Cable Street
PO Box 2959
Wellington 6140
New Zealand
Tel +64 4 472 7599

www.nzx.com

30 October 2018

Synlait Milk Limited – Amendment to Waiver
Decision

Further to NZX Regulation’s (NZXR) waiver decisions relating to Synlait Milk Limited (SML), dated 24
June 2013 (the Waivers), NZXR has granted amendments to the Waivers to allow for the new position of
Board Appointed Director on the SML Board as explained in SML’s Notice of Annual Meeting released on
NZX and ASX today.
The Waivers were granted at the time of SML’s Initial Public Offering (IPO) to allow SML’s majority
shareholder, Bright Dairy and Food Co Limited (which holds its shares through a subsidiary, Bright Dairy
Holding Limited) (Bright Dairy), to continue to consolidate SML into its accounts following the dilution of
its shareholding after the IPO.
Currently the SML Board is comprised of eight directors as follows:
 Four directors are appointed by Bright Dairy;
 Three directors are not appointed by Bright Dairy, and are “Independent Directors” as defined
by the NZX Main Board Listing Rules (the Rules); and
 One Managing Director, who is appointed by the Board.

SML wishes to now appoint either a Managing Director or a new position, the “Board Appointed
Director”. The Board Appointed Director is a non-executive director, appointed by the SML Board in
accordance with Rule 3.3.14, and can be appointed instead of the Managing Director. As noted in the
Notice of Annual Meeting, John Penno is proposed to be the Board Appointed Director to better reflect
his role with SML since he stepped down as CEO in August 2018.
SML is proposing to amend its Constitution to allow for the position of Board Appointed Director and
will put this New Constitution to SML shareholders for their approval at its Annual Meeting on 28
November 2018. Consequently, amendments to the Waivers are required to reflect this new role.
NZXR is satisfied that the creation of the position “Board Appointed Director” does not result in a
substantive difference to the Governance Arrangements (as defined in the Waivers), and the reasoning
for the Waivers continues to apply. Accordingly, NZXR is satisfied that the amendments to the Waivers
are consistent with the rationale for granting the Waivers.
These amendments have been considered and incorporated into the attached decision which replaces
the decision released on 24 June 2013.
ENDS

---

NZX Regulation Decision – Synlait Milk Limited
Application for various Waivers from the NZSX Listing Rules
As Amended at 30 October 2018
24 J
une 2013
(As Amended at 30 October 2018)
NZX Regulation Decision
Synlait Milk Limited
Application for Various Waivers from the
NZSX Listing Rules
Background
1.Synlait Milk Limited (“SML”) is proposing to undertake an initial public offer (“IPO”) and list
on the NZX Main Board, on or about 23 July 2013 (“Listing Date”).
2.SML’s majority shareholder, Bright Dairy and Food Co Limited (which holds its shares
through a subsidiary, Bright Dairy Holding Limited) (“Bright Dairy”), has indicated that i
t
w
ill support the IPO only if following the IPO it is able to continue to consolidate SML into
its group financial statements (that are prepared under China GAAP).
3.B
right Dairy currently holds 51% of the ordinary shares in SML. This shareholding will be
diluted as a result of the IPO process. Bright Dairy’s exact shareholding following the IPO
(the “Initial Percentage”) is currently unknown, however, it must be no less than 37% of
SML’s ordinary shares in order for SML to List on the NZX Main Board
.
4.T
he Initial Percentage on its own will not be sufficient for Bright Dairy to continue to
consolidate SML into its group financial statements under Chinese GAAP. Bright Dairy has
agreed with SML that for so long as Bright Dairy continues to hold between the Initia
l
P
ercentage and 50% (inclusive) of the shares in SML, the following governance
arrangements will apply to SML (the “Governance Arrangements”):
(a)the board of SML (“Board”) will comprise eight directors, made up of the following:
(i)
Four directors appointed by Bright Dairy (“Bright Dairy Directors”):
(
A)none of whom will be required to retire by rotation under NZSX Listing
Rule (“Rule”) 3.3.11 or subject to removal by Ordinary Resolution;
(
B)one of whom must be ordinarily resident in New Zealand and be
a
di
rector of such standing, and with such commercial and governance
experience in New Zealand as is appropriate for a director of a NZX
listed company; and
(
C)all of whom are required to have appropriate skills and experience to
ensure that SML has a suitable mix of skills and experience on t
he
B
oard;
(
ii)Three directors who are not appointed by Bright Dairy and who must
be
I
ndependent (as that term is defined in the Rules (the “Independen
t
D
irectors”). At the time of SML’s IPO, there will be two Independent

As Amended at 30 October 2018 2 of 15
Directors. SML is in the process of recruiting a third Independent Director,
who will be appointed to the SML Board as soon as practicable, and in any
event, within three months of the IPO;
(iii) one Managing Director or one Board Appointed Director, who will be
appointed by the Board. The Managing Director will be deemed to be
interested in any matter relating to the appointment or removal of the
Managing Director from office, any matter relating to the Managing Director’s
remuneration, and any matter relating to the appointment of a new Managing
Director or Board Appointed Director. The Board Appointed Director is
deemed to be interested in any matter relating to the appointment or removal
of the Board Appointed Director and any matter relating to the appointment of
a new Board Appointed Director or Managing Director.
(b)The chair of the Board, who must be one of the Independent Directors, will have a
casting vote. The chair of the Audit Committee must also be an Independent
Director.
(c
)In relation to the appointment of alternate directors
:
(
i)no director shall have the power to appoint an alternate director and
accordingly SML’s constitution (“Constitution”) provides that no director may
appoint an alternate director, a deputy or an agent to act in his or her absence
or
unavailability;
(
ii)given that three of the Bright Dairy Directors are likely to be resident outside of
New Zealand, in the event any Bright Dairy Director is unable to attend a
meeting of the Board, that director is permitted to appoint another Bright Dair
y
Di
rector to exercise his or her voting rights at that meeting.
(d)A quorum in respect of a Board meeting must include at least 2 Independent
Directors.
5.T
he Governance Arrangements would apply only for as long as Bright Dairy (or any
subsidiary) continues to hold between the Initial Percentage and 50% (inclusive) of the
shares in SML. Immediately upon Bright Dairy ceasing to hold between the Initial
Percentage and 50% (inclusive) of the shares in SML:
(a)Bright Dairy must procure the resignation or removal of a number of Bright Dairy
Directors so that the proportion which the number of remaining Bright Dairy Directors
bears to the total number of directors that will hold office immediately after suc
h
r
emoval or resignation does not exceed the proportion of the total shares of SML
held by Bright Dairy. Any Bright Dairy Director who remains in office must retire by
rotation at the next annual meeting of SML, and will form part of the one-third of
directors required to retire by rotation at that annual meeting, and any other directors
who would have otherwise been required to retire by rotation at that annual meeting
will retire by rotation at subsequent annual meeting(s) in accordance with the usual
rotation requirements;
and
(
b)the Governance Arrangements s et out in paragraph 4 above would cease to apply
and the standard governance provisions of the Rules (reflected in the Constitution)

As Amended at 30 October 2018 3 of 15
would then apply, including the normal appointment and rotation provisions of the
Rules (with no shareholder having any right of appointment under Rule 3.3.8).
6.B
right Dairy has advised SML that the Governance Arrangements are necessary in order
to allow Bright Dairy to consolidate SML into Bright Dairy’s group financial statements for
the purposes of Chinese GAAP.
7.S
ML has applied for a waiver from the governance requirements in Rules 3.1.1 (as this
requires the Constitution to contain provisions consistent with or having the same effect as
Rules 3.3.7 and 3.4.4), 3.3.1(a), 3.3.5, 3.3.8(a) and 3.3.11, to allow the Constitution and
the composition of the Board to reflect the Governance Arrangements described above.
The waivers sought will apply only for so long as Bright Dairy (or any subsidiary) continues
to hold between the Initial Percentage and 50% (inclusive) of the shares in SML.
8.P
rior to the IPO, Synlait Limited, who currently holds 49% of the shares in SML, will
distribute its holding in SML to its shareholders (the “SL Shareholders”) by way of an in
specie distribution. SL Shareholders approved the winding up of Synlait Limited an
d
di
stribution of the SML shares at a shareholders’ meeting held on 31 May 2013. The SL
Shareholders may then retain that direct holding in SML, or choose to sell some or all of
those shares to a “sell down company”. The “sell down company” will transfer those shares
it receives to applicants under the IPO.
9.The SL Shareholders who retain SML shares will be subject to escrow arrangements
contained in Schedule 2 of the Constitution, under which the SL Shareholders will be
restricted from selling, transferring, or otherwise disposing of their SML shares until at least
the first day after the date on which SML releases to NZX its preliminary announcement of
its financial results for the 2014 financial year (the “Restricted Period”). The SL
Shareholders will however be able to sell up to $300,000 worth of shares (based on t
he
IPO price) during the Restricted Period.
10.S
ML also seeks a waiver from Rule 11.1.1 and NZXR approval under Rule 11.1.5 in
relation to the restrictions on transferring interests in shares as set out in Schedule 2 of the
Constitution.
Application 1 – Waiver from Rule 3.3.8(a)
11.Rule 3.3.8(a) requires that the proportion of directors on a Listed Issuer’s Board appointed
by a shareholder does not exceed the proportion of votes attached to the securities held by
that shareholder.
12.SML has applied for a waiver from Rule 3.3.8(a) to allow Bright Dairy to appoint four
directors to the Board, even though that number of directors is in excess of the proportion
of directors Bright Dairy would be entitled to appoint under Rule 3.3.8(a).
13.In support of its application, SML submits as follows:
(a)SML’s majority shareholder, Bright Dairy, has indicated that it will support the IPO
only if it is able to continue to consolidate SML into its group financial statements
and in order to consolidate SML into Bright Dairy’s group financial statements, Bright
Dairy must be able to control SML’s Board;

As Amended at 30 October 2018 4 of 15
(b)full and accurate disclosure of all material aspects of the Governance Arrangements
and any waivers granted must be contained in the Offer Document, so shareholders
participating in the IPO are essentially approving the non-standard governanc
e
t
erms by subscribing for shares under the offer;
(c)full and accurate disclosure of the Governance Arrangements and the effect of any
waivers granted will be contained in every annual report of SML relating to a period
during which the waiver is relied on; and
(d)SML will bear a “Non-Standard” designation to act as a notification to the market of
SML’s unique Governance Arrangements.
Application 1 – Rule 3.3.8(a)
14.R
ule 3.3.8(a) provides as follows:
"The Constitution may give a Security holder the right to appoint Directors, so long as:
(
a)the proportion which the number of such Directors bears to the total number of
Directors expected to hold office immediately after such appointment does not
exceed the proportion of the total Votes of the Issuer attaching to Securities held by
the appointer..."
Application 1 – Decision
15.Subject to the condition in paragraph 16 and on the basis that the information provided to
NZXR is full and accurate in all material respects, NZXR grants SML a waiver from Rul
e
3.
3.8(a) to allow the Constitution to confer a right on Bright Dairy to appoint four d irectors to
the Board, even though that number of directors is in excess of the proportion of directors
Bright Dairy would be entitled to appoint under Rule 3.3.8(a).
16.The waiver provided in paragraph 15 is subject to the following conditions (the
“Governance Conditions”):
(a)that Bright Dairy holds no less than 37% of the shares in SML at the Listing Date;
(b)that the Governance Arrangements are contained in the Constitution and will cease
to apply when Bright Dairy ceases to hold between the Initial Percentage
and 50%
(inclusive) of the shares in SML.
(c
)that full and accurate disclosure of all material aspects of the Governanc
e
Ar
rangements (including Bright Dairy’s ability to control the Board) and SML’s
reliance on this waiver is contained in the Offer Document and in every Annual
Report for SML relating to a period during which this waiver is relied upon;
(d)that SML bear a Non-Standard designation to act as a notification to the market of
SML’s unique Governance Arrangements;
(e)that SML appoint an additional Independent Director as soon as practical in
accordance with clause 6 of Schedule 1 of the Constitution, and in any event, within
3 months of its Listing Date;

As Amended at 30 October 2018 5 of 15
(f)that for so long as Bright Dairy holds between the Initial Percentage and 50%
(inclusive) of the shares in SML, SML complies with the following provisions of its
Constitution:
i.clause 25.7; and
ii.clauses
6 to 11 (inclusive) and 13 of Part A of Schedule 1.
(g)that immediately upon Bright Dairy ceasing to hold the Initial Percentage of the
shares in SML, SML complies with clause 1 of Part B of Schedule 1 of the
Constitution.
Application 1 – Reasons
17.In coming to the decision to grant the waiver in paragraph 15 above, NZXR considered
t
hat:
(a)f
ull and accurate disclosure of the Governance Arrangements of SML and the effect
of any waivers granted must be contained in the Offer Document, so shareholders
participating in the IPO will be aware of the non-standard governance terms and will
invest on the basis of the non-standard Governance Arrangements. NZXR has also
had an opportunity to review and approve that Offer Document;
(b)disclosure of all material aspects of the Governance Arrangements and the effect of
any waivers granted will be provided in every annual report of SML relating to a
period during which the waiver is relied on;
(c)SML will bear a “Non-Standard” designation to act as a notification to the market of
SML’s unique Governance Arrangements;
(d)current shareholders of SML will approve the Governance Arrangements by
adopting the Constitution prior to the IPO;
(e)the Governance Arrangements are intended to balance the rights of minority
shareholders and the rights of Bright Dairy to appoint directors to the SML Board;
(f)SML has submitted that Bright Dairy will not support the Listing of SML unless Bright
Dairy is able to consolidate SML into its group financial statements under Chines
e
G
AAP and the Governance Arrangements are necessary to enable Bright Dairy to
do this; and
(g)A shareholder holding 37% or more of the ordinary shares in a widely held company
would have significant influence over the issuer, including with respect to the
appointment of directors, and the passing of ordinary and special resolutions.
Application 2 – Waiver from Rule 3.1.1(a) in relation to Rule 3.3.7
18.SM
L has applied for a waiver from Rule 3.1.1(a) to the extent that Rule 3.1.1(a) would
require the Constitution to incorporate by reference provisions consistent with or having the
same effect as Rule 3.3.7. Rule 3.3.7 allows directors to appoint an alternate director with
the consent of the majority of the Board and provides that no director may be appointed to
act as an alternate for another director.

As Amended at 30 October 2018 6 of 15
19.SML wishes to include an express provision in its Constitution which states that “no director
may appoint an alternate director, a deputy or an agent to act in the absence or
unavailability of the director”, which would apply while Bright Dairy holds between the Initial
Percentage and 50% (inclusive) of the shares in SML. A waiver from Rule 3.3.1(a) is
necessary to allow SML to include provisions in its Constitution which remove the right of
directors of SML to appoint another person to act as his or her alternate.
20.SML also wishes to include an express provision in its Constitution that allows a Bright
Dairy Director who is unable to attend a meeting of the Board, to appoint another Bright
Dairy Director to exercise his or her voting rights at that meeting. A waiver from Rule
3.3.1(a) is also required to allow SML to include this provision in its Constitution.
21.In support of its application for a waiver from Rule 3.1.1(a), in respect of the requirement t
o
i
nclude provisions consistent with, or having the same effect as Rule 3.3.7 in its
Constitution, SML submits that:
(a)SML considers that while the constitutional provision, as outlined in paragraphs 19
and 20, is inconsistent with Rule 3.3.7, it is of benefit to shareholders as it is the
appointed or elected directors making up the Board who have the appropriate and
requisite skills and expertise to govern SML and its affairs. The prohibition
on
appo
inting alternates will result in the directors consistently attending SML’s Boar
d
m
eetings, and attending to SML matters personally;
(b)While Bright Dairy holds between the Initial Percentage and 50% (inclusive) of the
shares in SML, SML wishes to allow any Bright Dairy Director who is unable to
attend a meeting of the Board to appoint another Bright Dairy Director to exercise his
or her voting rights at that meeting. These arrangements acknowledge the positi
on
t
hat three of the Bright Dairy Directors are likely to be based offshore and may
logistically have difficulty in attending every Board meeting; and
(c)Such appointments will be permitted only on a case-by-case basis and must be
notified to the chairman of the board (being one of the Independent Directors).
Application 2 – Rules 3.1.1(a) and 3.3.7
22.Rul
e 3.3.1(a) provides as follows:
"The Constitution of each Issuer shall:
(a)ei
ther incorporate by reference or contain provisions consistent with, and having
the same effect as, the provisions listed in Appendix 6, as such provisions apply
from time to time and as modified by any Ruling relevant to the Issuer; and.."
23.Appendix 6 includes a reference to Rule 3.3.7.
24.R
ule 3.3.7 provides that:
"No Director may appoint another person to act as alternate Director for him or her, except
with the consent of a majority of his or her co-Directors. That appointment may be revoked
by a majority of his or her co-Directors or by the Director who appointed the alternate. A
Director may not be appointed to act as alternate for another Director. No Director shall
appoint a deputy or agent otherwise than by way of appointment of an alternate."

As Amended at 30 October 2018 7 of 15
Application 2 – Decision
25.Subject to paragraph 26 and and on the basis that the information provided to NZXR is full
and accurate in all material respects, NZXR grants SML a waiver from Rule 3.1.1(a) to the
extent that Rule 3.1.1(a) would require the Constitution to incorporate by referenc
e
pr
ovisions consistent with or having the same effect as Rule 3.3.7.
26.The waiver provided in paragraph 25 is subject to the Governance Conditions outlined in
paragraph 16.
Application 2 – Reasons
27.In granting the waiver described in paragraph 25, NZXR has considered the factors
outlined in paragraph 17 and that:
(a)Removing the directors’ ability to appoint an alternate director is appropriate in thes
e
circumstances given the unique Governance Arrangements;
(b)Given that it is likely three of the Bright Dairy Directors will be resident outside of
New Zealand, it is appropriate that they are able to appoint another Bright Dairy
Director to exercise their vote at a Board meeting they are unable to attend; an
d
(c
)It is appropriate for Bright Dairy Directors to appoint another Bright Dairy Director to
exercise his or her vote, as all Bright Dairy Directors represent the interests of Bright
Dairy.
Application 3 – Waiver from Rule 3.1.1(a) in relation to Rule 3.4.4
28.SM
L has applied for a waiver from Rule 3.1.1(a) to the extent that Rule 3.1.1(a) would
require SML’s Constitution to incorporate by reference provisions consistent with or having
the same effect as Rule 3.4.4. Rule 3.4.4 allows directors of Issuers who are registere
d
under
the Companies Act 1993 (the “Act”) who are “interested” in a transaction to b
e
c
ounted in the Board quorum and vote on a resolution at hand, if an express provision of
the Act requires the directors to sign a certificate.
29.Section 161 of the Act provides that Directors who vote in favour of authorising payment of
remuneration must sign a certificate that the payment is fair to the company, and the
grounds for that opinion. By virtue of Rule 3.4.4, the Managing Director would be permitt
ed
to vote on a Board resolution relating to his remuneration.
30.SML wishes to include a provision in its Constitution prohibiting the Managing Director from
voting on any matter relating to the Managing Director’s remuneration. Because Rule 3.4.
4
m
ust ordinarily be included in an Issuer’s Constitution by virtue of Rule 3.1.1(a) (the effect
of which would be to permit the Managing Director to vote on his remuneration), a waiver
from these inclusion requirements is needed for the Constitution to include this provision.
31.In support of its application SML submits that:

As Amended at 30 October 2018 8 of 15
(a)Directors’ remuneration is a matter in respect of which directors are required to sign
a certificate under section 161 of the Companies Act 1993. Accordingly, a waiver is
required as the provision in the Constitution which prohibits the Managing Director
voting on such matters is inconsistent with Rule 3.4.4;
(b)SML considers that the Managing Director is conflicted on the matters relating to his
remuneration and therefore prohibiting him from voting more accurately reflects his
position as conflicted on such matters; and
(c)Prohibiting the Managing Director from voting on his own remuneration will prevent a
situation arising whereby a director who has a vested interest in a transaction may
authorise the entry into, or the implementation of, matters that could be detrimental
to the interests of shareholders as a result of that interest.
A
pplication 3 – Rules 3.1.1(a) and 3.4.4
32.Rule 3.1.1(a) is set out in paragraph 22.
33.Appendix 6, as referred to in Rule 3.3.1(a), includes a reference to Rule 3.4.4.
34.Rule 3.4.4 provides that:
"Notwithstanding Rule 3.4.3, a Director of an Issuer which is a company registered under
the Companies Act 1993 may vote in respect of and be counted in the quorum for th
e
B
oard for the purposes of a matter in which that Director is interested if that matter is one i
n
respect of which, pursuant to an express provision of that Act, Directors are required to sign
a certificate or one which relates to the grant of an indemnity pursuant to section 162 of the
Companies Act 1993.”
Application 3 – Decision
35.Subject to paragraph 36 and and on the basis that the information provided to NZXR is full
and accurate in all material respects, NZXR grants SML a waiver from Rule 3.1.1(a) to the
extent that Rule 3.1.1(a) would require the Constitution to incorporate by reference
provisions consistent with or having the same effect as Rule 3.4.4.
36.The waiver provided in paragraph 31 is subject to the Governance Conditions outlined in
paragraph 16.
Application 3 – Reasons
37.In granting the waiver described in paragraph 35, NZXR has considered:
(a)that restricting the Managing Director’s ability to vote on his own remuneration is
consistent with the overarching policy of Rule 3.4.3, which is to prevent situations
arising whereby directors may vote on transactions in which they have a vested
interest (which would be to the detriment of shareholders);
and
(
b)Rule 3.4.4 is permissive, and it is not inconsistent with the policy of Rule 3.4.3 t
o
al
low SML to impose a more restrictive provision than that contained in Rule 3.4.4.
Application 4 – Waiver from Rule 3.3.5

As Amended at 30 October 2018 9 of 15
38.Rule 3.3.5 provides that there must not be any restriction on the persons who may be
nominated as directors by security holders, nor any precondition to the nomination of a
director other than compliance with the time limits set out in Rule 3.3.5.
39.SML has applied for a waiver from Rule 3.3.5 to allow a prec
ondition to be imposed in
respect of persons who may be nominated by SML’s shareholders (“Shareholders”) to fill
the three non-Bright Dairy Director positions, that those candidates be “Independent” (as
defined in the Rules).
40.In support of its application SML submits as follows:
(a)Bright Dairy will have the right to appoint four directors to the Board, and the Board
will have a maximum of eight directors. The requirement that the balanc
e of directors
on the Board (other than the Managing Director and Board Appointed Director) be
independent is required to meet the provisions of Rule 3.3.1(c), which require the
SML board to include at least three Independent Directors; and
(b)The policy behind Rule 3.3.5 is to allow security holders to nominate shareholders
for appointment is not detracted from by the imposition of this condition.
Application 4 – Rule 3.3.5
41.Rule 3.3.5 provides as follows:
"No person (other than a Director retiring at the meeting) shall be elected as a Director at
an annual meeting of Security holders of an Issuer unless that person has been
nominated by a Security holder entitled to attend and vote at the meeting. There shall be
no restriction on the persons who may be nominated as Directors (other than the holding
of qualification shares, if the Constitution so requires) nor shall there be any precondition
to the nomination of a Director other than compliance with time limits in accordance with
this Rule 3.3.5. The closing date for nominations shall not be more than two months
before the date of the annual meeting at which the election is to take place. An Issuer
shall make an announcement to the market of the closing date for Director nominations
and contact details for making nominations no less than 10 Business Days prior to the
closing date for Director nominations. Notice of every nomination received by the Issuer
before the closing date for nominations shall be given by the Issuer to all persons entitled
to attend the meeting together with, or as part of, the notice of the meeting and the Issuer
shall specify in such notice the Board's view on whether or not the nominee would qualify
as an Independent Director."
Application 4 – Decision
42.Subject to the condition in paragraph 43 and on the basis that the information provided to
NZXR is full and accurate in all material respects, NZXR grants SML a waiver from Rul
e
3.
3.5 to allow a precondition to be imposed in respect of persons who may be nominat
ed
b
y Shareholders to fill the three non-Bright Dairy Director positions, that those candidates
be “Independent” (as defined in the Rules).
43.The waiver provided in paragraph 42 is subject to the Governance Conditions outlined in
paragraph 16.

As Amended at 30 October 2018 10 of 15
Application 4 – Reasons
44.In coming to the decision to grant the waiver in paragraph 42 above, NZXR considered the
f
actors outlined in paragraph 17, and that:
(a)T
he pre-condition is an additional protection for shareholders, and will ensure that
additional directors with Disqualifying Relationships are not appointed to the Board
to fill the non-Bright Dairy Director positions; a
nd
(
b)The pre-condition is required to ensure that SML will be able to comply with
Governance Arrangements contained in its Constitution and the Governance
Conditions.
Application 5 – Waiver from Rule 3.3.11 (Rotation of Independent Directors)
45.Rule 3.3.11 requires one third of an Issuer’s directors to retire by rotation at each annual
meeting. The Bright Dairy Directors, the Managing Director and the Board Appointed
Director would be included in the number of directors
upon which the calculation of the one
third is based, but would be exempt from the requirement to rotate.
46.SML has applied for a waiver from Rule 3.3.11 so that the reference to ‘Directors’ in Rule
3.3.11 refers solely to the Independent Directors, with the effect that only one out of the
three Independent Directors is required to retire by rotation at each annual meeting.
47.In support of its application SML submits as follows:
(a)Given the proposed composition of the Board to include four Bright Dairy Directors
and one Managing Director or Board Appointed Director who are not required to
retire by rotation, the effect of Rule 3.3.11 is that the balance of the Board, being the
three Independent Directors, would have to retire by rotation every year;
(b)This is an undesirable consequence of Rule 3.3.11. If all the Independent Directors
on the Board had to retire and offer themselves for re-election every year, this has
the potential to deter high quality directors from taking up such positions; and
(c)It further disadvantages shareholders other than Bright Dairy in respect of their
representation on the Board, as
they will expect and need some continuity from year
to year to get the right mix of experience. Too high a turnover of Independent
Directors will not serve the interests of the shareholders or SML and for that reason
SML submits it is appropriate that the referenc
e to directors in Rule 3.3.11 should be
taken to refer to the Independent Directors with the effect that only one Independent
Director shall be required to retire by rotation at each annual meeting of Synlait Milk.
Application 5 – Rules 3.3.11 and 3.3.12
48.Rule 3.3.11 provides as follows:
"Subject to Rule 3.3.12, at least one third of the Directors, or if their number is not a
multiple of three then the number nearest to one third, shall retire from office at the annual
meeting each year, but shall be eligible for re-election at that meeting. Those to retire shall
be those who have been longest in office since they were last elected or deemed elected.”

As Amended at 30 October 2018 11 of 15
49.Rule 3.3.12 provides as follows:
“The following Directors shall be exempt from the obligation to retire pursuant to Rule
3.3.11:
(a)D
irectors appointed pursuant to Rule 3.3.8; and
(b)D
irectors appointed by the Directors, who are offered for reelection pursuant to Rule
3.3.6; and
(c)one
Executive Director (if the Constitution so provides).
The Directors referred to in (a) and (c) shall be included in the number of Directors upon
which the calculation for the purposes of Rule 3.3.12 is based. The Directors referred to in
(b)
s
hall be excluded from that number."
Application 5 – Decision
50.Subject to the condition in paragraph 51 and on the basis that the information provided to
NZXR is full and accurate in all material respects, NZXR grants SML a waiver from Rule
3.3.11, so that only one out of the three Independent Directors is required to retire by
rotation at each annual meeting.
51.The waiver provided in paragraph 50 is subject to the Governance Conditions outlined in
paragraph 16.
Application 5 – Reasons
52.In coming to the decision to grant the waiver in paragraph 50 above, NZXR considered the
f
actors outlined in paragraph 17 above, and that:
(a)T
he Board composition requirements require a minimum of three Independent
Directors to be appointed to the Board. As the Bright Dairy Directors will be exempt
from the requirement to retire by rotation at SML’s annual meeting, the application of
Rules 3.3.11 and 3.3.12 would result in all of the three Independent Directors being
required to retire by rotation each year; a
nd
(
b)NZXR accepts SML’s submission that this is an undesirable consequence, and
requiring all the Independent Directors to retire by rotation each year could lead to
instability on the SML Board, and deter quality Independent Directors from joining
the SML Board;
and
(c
)As only Bright Dairy has the power to appoint and remove the Bright Dairy Directors,
it is not appropriate to include those directors in the number required to retire by
rotation. This result is consistent with the policy of Rule 3.3.12(a).
Application 6 – Waiver from Rule 3.3.11 (Rotation of Bright Dairy directors)
53.R
ule 3.3.11 provides that the directors to retire by rotation shall be those who have been
longest in office since they were last elected or deemed elected.

As Amended at 30 October 2018 12 of 15
54.SML has applied for a waiver from Rule 3.3.11 so that SML may require those Bright Dairy
Directors remaining in office at the first annual meeting following the date on which
Bright Dairy ceases to hold the Initial Percentage of the shares in Synlait Milk, to retir
e
by
rotation, notwithstanding that they may not have been the longest in office.
55.I
n support of its application SML submits as follows:
(a)While it is likely such directors will be those longest in office (given they were
previously not required to retire by rotation as a result of Rule 3.3.12(a)), in the event
this is not the case SML wishes to be sure that it is the remaining Bright Dairy
Directors who are required to retire under Rule 3.3.11 at the first annual meeting
after Bright Dairy ceases to hold at least the Initial Percentage of the shares in SML;
and
(
b)SML considers that this is consistent with the policy behind the Rule, to ensure that
shareholders regularly get a chance to vote on the appointment of directors making
up the Board (other than those appointed pursuant to Rule 3.3.8). As the remaining
Bright Dairy Director(s) will no longer be on the Board as a result of a continuing
appointment by Bright Dairy, it is appropriate that they should be the directors
required to retire under Rule 3.3.11 at the first annual meeting at which they no
longer hold that position.
Application 6 – Rule 3.3.11
56.Rule 3.3.11 is set out in paragraph 48 above.
Application 6 – Decision
57.Subject to the condition in paragraph 58 and on the basis that the information provided to
NZXR is full and accurate in all material respects, NZXR grants SML a waiver from Rule
3.3.11, so that SML may require those Bright Dairy Directors remaining in office at the first
annual meeting following the date on which Bright Dairy ceases to hold the Initial
Percentage of the shares in SML, to retire by rotation, notwithstanding that they may not
have been the longest in office.
58.The waiver provided in paragraph 57 is subject to the conditions outlined in paragraph 1
6
abo
ve.
Application 6 – Reasons
59.In coming to the decision to grant the waiver in paragraph 57 above, NZXR considered the
f
actors outlined in paragraph 17 above, and that:
(a)E
ven though these non-standard rotation arrangements could result in one
Independent Director remaining in office for one year longer than would otherwise be
permitted under the Rules, NZXR considers that this consequence is outweighed by
the importance of allowing shareholders to vote on the re-election of Bright Dairy
Directors at an early opportunity after Bright Dairy ceases to hold the Initia
l
P
ercentage of the shares in SML; a
nd

As Amended at 30 October 2018 13 of 15
(b)Requiring a further Independent Director to also retire by rotation could lead to board
i
nstability, if almost all of the SML directors were up for re-election.
Application 7 – Waiver from Rule 11.1.1 and Approval under Rule 11.1.5
60.R
ule 11.1.1 restricts an Issuer from imposing in its Constitution or otherwise, subject to the
provisions of any legislation, and to Rules 11.1.4 and 11.1.5, any restriction on the right of
a
hol
der of a Quoted Security to transfer that Security, or any restriction upon registration of a
properly completed transfer of Quoted Securities.
61.Rule 11.1.5 provides that an Issuer may, with the prior approval of NZX, incorporate in its
Constitution a provision restricting the issue, acquisition or transfer of Relevant Interests in
Equity Securities.
62.SML has applied for a waiver from Rule 11.1.1 to allow SML’s Constitution to contain
restrictions on the right of SL Shareholders to transfer SML shares, as set out in Schedule
2 of the Constitution.
63.SML also seeks NZXR’s approval of Schedule 2 of its Constitution, which imposes
restrictions on the SL Shareholders that are wider than restrictions on transfer.
64.In support of its application SML submits that:
(a)The restrictions imposed in Schedule 2 of the Constitution are in connection with the
distribution by Synlait Limited of the shares it holds in SML to its shareholders.
These restrictions are designed to ensure that the market for SML shares following
the IPO is not unduly impacted by SL Shareholders selling significant numbers of
SML shares into the market;
(b)The SL Shareholders are entitled to sell SML shares into the IPO under the
secondary offer at the final IPO price and it is only those shares that they do not sell
under the secondary offer that are subject to restrictions. In addition, each SL
Shareholder (other than Mitsui & Co Ltd, Mitsui & Co (Australia) Ltd and John
Penno) is entitled to sell up to $300,000 worth of SML shares (based on the final IPO
price) during the Restricted Period;
(c)The transfer restrictions have been included in the Constitution to avoid the need for
every SL Shareholder to enter into an escrow agreement with SML (there are more
than 100 such shareholders);
(d)These transfer restrictions have also been disclosed to the SL S hareholders. T
he
not
ice of meeting that was sent to SL Shareholders in relation to the shareholders’
meeting that was held on 31 May 2013 to approve the winding up of Synlait Limited
and distribution of the SML shares included details of the restrictions. Shareholders
representing approximately 89% of the shares of Synlait Limited attended the
meeting (either in person or by proxy) and voted unanimously to approve the winding
up and distribution. The SL Shareholders are therefore fully aware of the restrictions

As Amended at 30 October 2018 14 of 15
and, by implication, supportive of the restrictions in the overall context of the IPO;
and
(e)The sale and purchase agreement that will be sent to SL Shareholders (along with
the offer document in relation to the IPO) so they can agree to sell into the offer, wi
ll
also refer to the escrow arrangements and direct them to the website where a copy
of the Constitution can be reviewed. SL Shareholders will therefore have full
information when they choose whether to sell into the offer or hold shares and be
subject to the escrow (or a combination of both).
Application 7 – Rules 11.1.1 and 11.1.5
65.Rule 11.1.1 provides:
"Subject to the provisions of any legislation, and to Rules 11.1.4 and 11.1.5, no Issuer shall
impose, in its Constitution or otherwise, any restriction on the right of a holder of a Quote
d
S
ecurity to transfer that Security, or any restriction upon registration of a properly
completed transfer of Quoted Securities."
66.Rule 11.1.5 provides:
“An Issuer may, with the prior approval of NZX, incorporate in its Constitution or Trust Deed
a provision restricting the issue, acquisition or transfer of Relevant Interests in Equity
Securities.”
Application 7 - Decision
67.O
n the basis that the information provided to NZXR is full and accurate in all material
respects, NZXR grants SML a waiver to allow its Constitution to contain the restrictions
on
t
ransfer as set out in Schedule 2 of the Constitution, and hereby approves the restrictions
imposed on the SL Shareholders contained in Schedule 2 of the Constitution for the
purpose of Rule 11.1.5
.
Application 7 - Reasons
68.In coming to the decision to grant SML the waiver in respect of Rule 11.1.1 and approve
t
he restrictions in Schedule 2 of the Constitution under Rule 11.1.5, NZXR has considered
that:
(a)SML expects that approximately 41% of SML shares may be available to be traded
during the Restricted Period.
(b)SL Shareholders are aware that any shares they do not sell through the secondary
offer will be subject to certain temporary transfer restrictions, which are a key featur
e
of
the restructuring of the Synlait group to be effected prior to the IPO;
(c)SL Shareholders will have an opportunity to sell down their entire holding if they do
not wish to be subject to the transfer restrictions;
(d)SL Shareholders will be able to sell up to $300,000 worth of Shares (based on the
IPO price) during the Restricted Period. The majority of SL Shareholders are

As Amended at 30 October 2018 15 of 15
expected to hold less than $300,000 worth of Shares, so this restriction will have no
practical effect on these SL Shareholders; and
(e)It would be impractical to require SML to enter into a separate agreement with each
of the SL Shareholders.
Confidentiality
69.SML has requested that this application and the decision of NZXR remain confidential until
SML has registered the Offer Document with the Financial Markets Authority.
70.In accordance with Footnote 1 to Rule 1.11.2, NZXR grants SML’s request.
ENDS.