Waiver from NZX Listing Rule 2.7.1

NZX Regulation Decision
Livestock Improvement Corporation Limited (NS) (LIC)
Application for a waiver from NZX Listing Rule 2.7.1







31 August 2020

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Waiver from Listing Rules
Decision
1. Subject to the conditions set out in paragraph 2 below, and on the basis that the information
provided by Livestock Improvement Corporation (
LIC
)

is complete and accurate in all material
respects, NZX Regulation (
NZXR
) grants LIC a waiver from NZX Listing Rule 2.7.1 (
Rule
),
to permit LIC’s Elected Directors’ terms to be extended as set out at paragraph 9 of Appendix
One.
2. The waiver in paragraph 1 above is provided on the conditions that:
a. LIC’s shareholders approve the Proposed Governance Changes, including the extension
to the existing Elected Directors’ terms of tenure as part of the transitional arrangements,
by special resolution at the 2020 Annual Shareholders Meeting approving changes to
LIC’s Constitution (incorporating such transitional changes); and
b. this waiver, and its effects on LIC, is summarised in each annual report of LIC.
3. This decision relates to the prior waivers and ruling decision granted by NZXR to LIC on 1
July 2019.
4. The information on which this decision is based is set out in Appendix One to this decision.
This waiver will not apply if that information is not or ceases to be full and accurate in all
material respects.
5. The Rules to which this decision relates are set out in Appendix Two to this decision.
6. Capitalised terms which have not been defined in this decision have the meanings given to
them in the Rules.
Reasons
7. In coming to the decision to provide the waiver set out in paragraph 1 above, NZXR has
considered that:
a. the policy behind Rule 2.7.1 in relation to director rotations is to ensure that shareholders
have the ability to regularly elect (or re-elect) individuals who are representatives of the
shareholders to the Issuer’s board. Prior to this waiver, LIC already had a waiver from
Rule 2.7.1 permitting four year terms beginning 1 June of the year the Director was
elected/re-elected. The introduction of this new waiver does not affect LIC shareholder
representation because the shareholders will continue to be represented by Elected
Directors;
b. in addition to LIC’s previous waiver from Rule 2.7.1, LIC has a number of other waivers
from the Rules to permit its governance structure. As a result, LIC bears an NS
designation;
c. while this is a waiver to a fundamental obligation under the Rules, it is a one-off
amendment to the Elected Directors’ terms to streamline the transition to allow LIC to
implement the Proposed Governance Changes. As such, NZXR does not consider this
decision creates a precedent for other issuers to contemplate amendments to a
fundamental obligation relating to director rotation;

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d. In accordance with condition 2a. LIC’s shareholders will ultimately determine whether
this waiver will have effect or not by voting on the proposed changes at the 2020 Annual
Shareholders Meeting. The Proposed Governance Changes require approval by special
resolution, which requires at least 75% of votes cast to be in favour of the resolution;
e. LIC’s shareholder base is limited to eligible LIC product and service users who have to
meet certain criteria to be eligible to become members of the co-operative. This means
members of public are generally not able to invest in LIC, and LIC’s co-operative nature
creates a shareholder network which allows its members to have greater control and say
in the governance of the co-operative; and
f. LIC relies on an existing waiver to Rule 2.7.1 dated 1 July 2019, which permits LIC’s
Elected Directors to be appointed on four year terms. If the Proposed Governance
Changes are approved by LIC shareholders, and following the implementation process
set out in paragraph 9 of Appendix One below, LIC will comply with the director rotation
requirements under the Rules and this waiver will fall away.

Confidentiality

8. LIC has requested this decision be kept confidential until the release of the notice of 2020
Annual Shareholders Meeting.
9. In accordance with Rule 9.7.2(a), NZXR grants LIC’s request.

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Appendix One
Background
1. Livestock Improvement Corporation Limited (
LIC
) is a Listed Issuer with a “Non Standard”
(
NS
) designation.
2. LIC is a farmer-owned co-operative company registered under the Companies Act 1993,
operating in the dairy industry in New Zealand.
3. LIC has approximately 10,000 shareholders, spread across four regions (Northern, Midland,
Central and Southern regions as defined in LIC’s Constitution) (
Regions
). LIC shareholders
are only able to nominate and vote for Directors that represent their region (
Elected
Directors
). The respective Elected Directors make up seven out of the ten Directors, with
the remaining being Board appointed Directors from outside of the co-operative.
Proposed Governance Changes
4. LIC is proposing to make changes to its governance structure as part of its ongoing review
of the co-operative. It wishes to introduce the relevant proposal (
Proposed Governance
Changes
) at its 2020 annual meeting of shareholders on 15 October 2020 (
2020 Annual
Shareholders Meeting
) through amendments of the LIC Constitution (
Constitution
).
5. The Proposed Governance Changes that are relevant to this waiver are as follows:
a.
Reducing the number of Regions
: There are currently four Regions from which
directors are elected: Northern, Midland, Central and Southern as defined in the
current Constitution. LIC shareholders are only able to nominate and vote for Directors
that represent their region. LIC proposes to consolidate the existing regions so as to
reduce the number of regions from four to two (North Island and South Island) with
three Elected Directors representing each Region;
b.
Reducing Elected Director terms and aligning election timing with annual
meeting:
Currently, LIC Elected Directors are elected (through a paper based
election process, i.e. outside a shareholders’ meeting) for four year terms starting
from 1 June (the start of the dairy farming season) of the year in which they are
appointed. LIC proposes to align the timing for election of Elected Directors with each
year’s annual general meetings (in October), and to shorten the term of director
appointments to comply with the rotation requirements under Rule 2.7.1, i.e. the term
will not exceed three years or third annual shareholder meeting following election,
whichever is longer; and
c.
More appointed directors:
Currently, LIC’s board may appoint up to three board
appointed directors out of the 10 directors (
Appointed Directors
). LIC proposes to
allow up to four Appointed Directors under its Constitution, subject to the subsequent
ratification of that appointment by shareholders. To achieve this, one of the current
Elected Directors will stand down if the Proposed Governance Changes are
approved.


6. All LIC shareholders will be able to consider and vote on Proposed Governance Changes at
the 2020 Annual Shareholders Meeting. The Proposed Governance Changes will require
approval by special resolution, meaning it will require support from at least 75% of votes cast
on the resolution. If the Proposed Governance Changes are not approved by shareholders,
then the existing governance arrangements will remain in place and this waiver will not be
required.

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Proposed implementation of changes to Elected Directors
7. If the Proposed Governance Changes are approved, LIC needs to transition its existing
Elected Directors to the new governance regime.
8. LIC has considered the possible implementation processes to streamline the changes
required for the Proposed Governance Changes. LIC believes that the proposed timing and
form of changes ensures LIC shareholders retain the power to review and determine whether
they consider the Proposed Governance Changes to be in their best interests.
9. LIC believes that a one-off amendment to Elected Directors’ terms would be the most
effective way of implementing the changes required. The changes will be implemented as
follows:
a. One of the Elected Directors representing North Island (David Jensen) will step down
with effect from the date of the annual meeting (if the Proposed Governance Changes
are approved). This will reduce the total number of Elected Directors from seven to
six.
b. The existing terms of tenure of the Elected Directors will be extended by
approximately five months (with the exception of one director (Gray Baldwin), whose
term will be shortened by approximately 20 months to expire in October 2022). This
will help align the expiry of existing Elected Directors’ terms with the new annual
meeting election dates.
c. In the next round of elections, one of the South Island directors (elected at the 2021
annual meeting) and one of the North Island directors (elected at the 2022 annual
meeting) will be elected for an approximately two-year term (instead of an
approximately three-year term). This will be done on a one-off basis to help ensure
that, going forward, LIC will have one North Island seat and one South Island seat up
for election each year.
d. In October 2022, one of the North Island seats will be disestablished. At the same
time, a new South Island seat will be established. This will effect the transition to
three Elected Directors from each Region.
To illustrate the transition, the next election dates details are set out below.
NEW REGION NEXT ELECTION DATE
FOLLOWING
ELECTION DATE
SOUTH ISLAND

South Island Annual meeting 2021
Annual meeting 2023
(following a two-year
term)*
South Island Annual meeting 2021 Annual meeting 2024
South Island (new seat) Annual meeting 2022 Annual meeting 2025

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NEW REGION NEXT ELECTION DATE
FOLLOWING
ELECTION DATE
NORTH ISLAND

North Island (to be
disestablished)
N/A (Seat disestablished at the
annual meeting 2022)
N/A
North Island Annual meeting 2022
Annual meeting 2024
(following a two-year
term)*
North Island Annual meeting 2022 Annual meeting 2025
North Island Annual meeting 2023 Annual meeting 2026

*
In relation to the annual meetings in 2021 and 2022 only, two candidates will be elected in respect of the same
region at the same annual meeting but will be appointed for different terms. One of the candidates will be elected
for a shorter two-year term, while the other candidate will be elected for a standard three-year term. The Board
will determine who of the successful candidates will be appointed for which term based on the Board’s needs at
the relevant time
.
10. Every Elected Director elected (or re-elected) after their respective proposed re-election
dates set out in the table above, will be in compliance with Rule 2.7.1 (i.e., no longer reliant
on this waiver).
Application for waiver from NZX Listing Rule 2.7.1
11. LIC has applied for a waiver, which modifies LIC’s existing Rule 2.7.1 waiver, to allow the
proposed amendments to the Elected Directors’ terms as set out above in paragraph 9.
12. LIC seeks to rely on this waiver to Listing Rule 2.7.1 only to the extent necessary to permit
the transitional arrangements described above to implement the new governance structure.
Amendment to the NZX decision dated 1 July 2019
13. Subject to the Proposed Governance Changes being approved, LIC is also seeking to amend
the 1 July 2019 Waiver decision because LIC will no longer be reliant on all of the waivers
and rulings granted in that decision.
14. LIC submits that there have been no other relevant material changes in LIC’s structure or
circumstances since the 1 July 2019 decision.

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Appendix Two

Rule 2.7.1 Rotation of Directors
2.7.1 A Director of an Issuer must not hold office (without re-election) past the third
annual meeting following the Director’s appointment or 3 years, whichever is
longer. However, a Director appointed by the Board must not hold office
(without re-election) past the next annual meeting following the Director’s
appointment.