Public Censure of Enprise Group Limited
21 December 2023
PUBLIC CENSURE OF ENPRISE GROUP LIMITED
BY THE NZ MARKETS DISCIPLINARY TRIBUNAL FOR BREACH OF
NZX LISTING RULE 3.1.1
In a determination of the NZ Markets Disciplinary Tribunal (the Tribunal) dated
8 December 2023, the Tribunal found that Enprise Group Limited (ENS) breached NZX
Listing Rule (Rule) 3.1.1.
ENS released an announcement on 1 August 2022 advising that MYOB had purported
to reduce the margins its Kilimanjaro Consulting division received on existing sales of
MYOB Exo, the impact of that purported reduction of 42.86% would be approximately
$935,000 per annum and would significantly impact the services Kilimanjaro could
provide its MYOB Exo customers, and ENS rejected MYOB’s assertion that it could
unilaterally change the margins and intended to dispute it.
ENS accepted that the information in the announcement was Material Information.
The issue in this case centred on when ENS’s obligation to disclose the Material
Information arose – did it arise on 1 August 2022 when MYOB invoiced ENS at the
reduced margin as ENS argued, or did it arise earlier, in particular on 27 May 2022,
when MYOB notified ENS that it would be reducing the margins in accordance with their
existing agreement? The answer depended on whether, prior to 1 August 2022, ENS
had the benefit of the ‘safe harbour’ provided by Rule 3.1.2(a)(ii) – that is, did the
relevant information concern “an incomplete proposal or negotiation”.
The Tribunal did not accept that, following MYOB’s notice of the purported margin
reduction on 27 May 2022, there was an incomplete proposal or that the parties were
in negotiations with respect to that reduction for the purposes of Rule 3.1.2(a)(ii).
Rather, the Tribunal considered that ENS became Aware of the Material Information on
the evening of 27 May 2022, when MYOB emailed notice of changes to the agreement
and that each aspect of the Material Information released in the announcement was
known to ENS at that time.
The Tribunal acknowledged ENS’s view that MYOB’s 27 May 2022 notice was a
negotiating stance, based on its previous experience with MYOB, and its strongly held
view that MYOB did not have the power to unilaterally change the margins under their
agreement. The Tribunal noted, however, that it had seen no evidence to indicate that
ENS had considered the issue of disclosure as at 27 May 2022 and that, in any event,
the approach to disclosure is an objective one.
In determining penalty, the Tribunal had regard to the complex circumstances in this
case and the effect the Tribunal’s penalty may have on ENS’s ongoing commercial
viability.
The Tribunal ordered ENS to pay a financial penalty of $60,000, pay the costs of NZX
and the Tribunal (capped at $15,000, excluding GST), and be publicly censured in the
form of this announcement.
The full determination of the Tribunal in this matter is attached to this announcement.
---
1
IN NZ MARKETS DISCIPLINARY TRIBUNAL NZMDT 6/2023
UNDER NZ Markets Disciplinary Tribunal Rules
IN THE MATTER OF breach of NZX Listing Rules 3.1.1
BETWEEN NZX LIMITED
Acting by and through NZX Regulation
Limited (NZ RegCo)
AND ENPRISE GROUP LIMITED
(ENS)
___________________________________________________________
DETERMINATION OF NZ MARKETS DISCIPLINARY TRIBUNAL
8 DECEMBER 2023
____________________________________________________
Rachel Batters
Executive Counsel
NZ Markets Disciplinary Tribunal
Email: rachel.batters@nzmdt.com
2
1. This is a decision of a division of the NZ Markets Disciplinary Tribunal (the
Tribunal) comprising Hon Sir Terence Arnold KC, Kirsty Campbell and Alan
Isaac.
2. Capitalised terms that are not defined in this decision have the meanings given
to them in the NZX Listing Rules (the Rules) or the Tribunal Rules, as the case
may be.
3. Enprise Group Limited (ENS) is an Issuer and is bound by the Rules.
Procedural background
4. On 17 October 2023, NZ RegCo filed a statement of case (SOC) alleging ENS
had breached Rule 3.1.1, which deals with the disclosure of Material
Information.
5. On 18 October 2023, Chapman Tripp, acting on behalf of ENS, requested an
extension until 5:30pm on 15 November 2023 to submit a statement of
response. The extension was requested to give ENS and its counsel sufficient
time to consider the facts as presented by NZ RegCo, and to accommodate the
planned absence of its Chair from 27 October to 4 November 2023.
6. On 19 October 2023, the Tribunal granted ENS an extension until 15 November
2023 to provide its statement of response, noting that the request from ENS for
an additional 10 Business days was reasonable in the circumstances.
7. On 14 November 2023, ENS filed a statement of response in which it disputed
breaching Rule 3.1.1.
8. On 17 November 2023, NZ RegCo filed a rejoinder (Rejoinder).
9. On 26 November 2023, ENS filed a memorandum of counsel seeking either (i)
leave to submit an amended statement of response (a copy of which was
provided); or (ii) an oral hearing, given it considered that the Rejoinder
introduced new allegations.
10. On 30 November 2023, the Tribunal advised the parties that it accepted the
amended statement of response (SOR) in accordance with Tribunal Rule 6.4.1
and advised NZ RegCo that if it wished to respond to the SOR, it must do so by
5:30pm 5 December 2023. NZ RegCo advised the Tribunal later that day, that
it did not wish to respond to the SOR as amended.
Essential issue
11. The essential issue concerns when ENS’s obligation to disclose Material
Information arose – did it arise on 1 August 2022 when ENS in fact disclosed
the Material Information as ENS argues, or did it arise earlier, in particular on
27 May 2022, as NZ RegCo argues? The answer to this depends on whether,
prior to 1 August 2022, ENS had the benefit of the “safe harbour” provided by
Rule 3.1.2(a)(ii), i.e., that the relevant information concerned “an incomplete
proposal or negotiation”.
12. Both parties have filed detailed submissions on the facts. Accordingly, to
determine the matter, the Tribunal must set out the factual background in some
detail.
3
Factual background
13. ENS has two operating divisions: (1) Kilimanjaro Consulting (wholly owned by
ENS) (Kilimanjaro
1
); and (2) iSell Pty Limited (ENS holds 72.36%
2
). ENS also
has investments in Datagate Innovation Limited (ENS holds 32.96%
3
) and
Vadacom Holdings Limited (ENS holds 6.35%
4
).
14. Kilimanjaro is a solution provider for MYOB Enterprise software in Australia and
New Zealand. ENS describes Kilimanjaro as “MYOB’s number one partner in
Australia and New Zealand” and as “the leading trans-Tasman provider of
solutions based on the MYOB Advanced (Acumatica)
5
and MYOB Exo
6
software
platforms”. Kilimanjaro also sells and services companion products that
integrate with MYOB products.
7
15. MYOB is an Australian multinational corporation that provides tax, accounting
and other business services software. MYOB was listed on the ASX before being
acquired by private equity firm Kohlberg Kravis Roberts (KKR) in 2019. MYOB
has accredited non-exclusive “business partners” (such as Kilimanjaro) who
market, sell, implement, and support its products to end users.
ENS acquisition of Kilimanjaro Consulting Pty Ltd
16. At the time of its initial listing on the NZAX in December 2014
8
, ENS described
itself as the largest New Zealand MYOB Exo reseller and only trans-Tasman
MYOB Exo reseller (through its Enprise Solutions business unit)
9
.
17. On 4 September 2017, ENS advised the market that, as part of its strategy to
be the leading reseller of MYOB Exo and MYOB Advanced in New Zealand and
Australia, it had acquired 47.09% of Kilimanjaro Consulting Pty Ltd, the largest
MYOB Exo and MYOB Advanced reseller in Australia
10
. ENS also granted a put
option, subject to ENS shareholder approval, for the remaining 52.91%, which
could be exercised by the owners of Kilimanjaro Consulting Pty Ltd between 1
September 2019 and 30 August 2020
11
.
18. ENS shareholder approval of the put option was sought, and obtained, at a
special meeting held on 28 November 2017. The explanatory notes to the
Notice of Meeting stated that:
“The Board has identified a number of risk factors associated with the
Kilimanjaro business which may affect the Company’s future operating
performance and financial position and the value of the Company’s
1
For ease of reference in this determination, we refer to the Kilimanjaro Consulting division and
the ENS subsidiaries within that division as “Kilimanjaro”.
2
ENS market announcement 31 October 2023.
3
Page 2 of the ENS Annual Report for the year ended 30 June 2023.
4
Ibid.
5
MYOB Advanced is a version of the Acumatica Business Management Platform localised for
Australian and New Zealand businesses. MYOB Advanced is a 100% cloud-based system aimed
at more complex medium and large organisations and is a SaaS product (source: kilimanjaro-
consulting.com).
6
MYOB Exo is an on-premises system (with remote access capability), where end users, among
other payments, pay an initial licence fee and a recurring annual license fee (ALF) (source:
kilimanjaro-consulting.com).
7
ENS Annual Report for the year ended 30 June 2023.
8
ENS subsequently migrated to the NZX Main Board on 1 April 2019.
9
ENS Disclosure Document 1 December 2014. The Disclosure Document noted as a risk that
MYOB could revoke ENS’ ability to sell MYOB Exo, although it was unlikely given ENS was one of
the biggest resellers and MYOB would lose significant revenue.
10
Kilimanjaro Consulting Pty Ltd was founded by current ENS Executive Director Ronnie Baskind
in 2006.
11
ENS Market Announcement 4 September 2017.
4
shares post completion of the purchase of the Put Option Shares.
Those risks include:
- MYOB modifying the Partner Agreement with the Company: In the
event that the Put Option is exercised and the Company increases its
holding in Kilimanjaro, there is a risk that MYOB may seek to change
the commercial terms comprised in the Partnership Agreement to the
detriment of the Company. In particular, MYOB may seek to suppress
the profit margins that the Company (and Kilimanjaro) receives in
respect of the resale of MYOB products and services. Such an
occurrence could negatively impact the profitability of the Enprise
group of companies. The Company would seek to resist any such
variations to the Partnership Agreement as far as practicable in the
circumstances. The Board is in discussions with MYOB currently
regarding this issue with a view to formalising a position. The Board is
unable to provide any further comment on this issue at this stage until
such time as those discussions are concluded.”
12
19. The put option was exercised
13
and, effective 1 January 2020, ENS acquired
100% of Kilimanjaro Consulting Pty Ltd (with ENS issuing new shares in
consideration for the additional 52.91%)
14
.
Relationship with MYOB
20. MYOB documents its relationship with its accredited business partners, including
Kilimanjaro, in business partner agreements (BPAs).
21. The BPAs incorporate various rewards, commissions, and other rebates payable
to the business partners, which are specified in the business partner programs
(BPP). In respect of MYOB Exo, the BPPs include, among other things (such as
the Exo base margin and Exo growth margin), a margin for the business partner
based on a percentage of the annual licence fee for MYOB Exo paid by the
business partner’s end user (ALF margin).
22. Since the inception of the Kilimanjaro and MYOB relationship in 2006, the ALF
margin had stayed the same
15
. ENS says that in 2007 (after the first BPA
between MYOB and Kilimanjaro was signed in 2006), MYOB attempted to reduce
the ALF margin in a proposed BPA circulated to its business partners. MYOB
faced opposition to the variation and the proposed BPA was never signed.
16
23. During 2017 and 2018, new BPAs were discussed (as outlined in the Notice of
Meeting). ENS says that the discussions on the revised BPA between MYOB and
Kilimanjaro, along with the other business partners, were protracted and took at
least 12 months to complete. The negotiations culminated in the MYOB
Business Partner Agreement with Kilimanjaro dated 15 November 2018 (the
Agreement)
17
.
24. The Agreement had two relevant features:
a. that MYOB “may change any of the terms of this Agreement (including
the [BPP], the MYOB Software Price List and the Business Partner
12
ENS Notice of Special Meeting 3 November 2017.
13
On 6 January 2020, ENS announced that the put option had been exercised and it now owned
100% of Kilimanjaro Australia.
14
ENS Market Announcement 29 November 2019.
15
Paragraph 18 of the SOC.
16
Paragraph 8 of the SOR.
17
The copy of the Agreement provided to the Tribunal as Annexure 12 is not signed. ENS says
the Agreement was signed on 9 November 2018 (paragraph 9 of the SOR).
5
Payments)” by providing 30 days’ prior notice of any change that was
likely to materially affect Kilimanjaro’s rights and obligations under the
Agreement (clause 24)
18
. XXX XXXX XXX XXXXX XXXXXX XXX
XXXXXXXX XXX XXXXX, XXXXXXX XXX XXXXX XXX XXX XXXX XXX
XXXXXXXXXX XXXX XXXXX XXX XXXX XXX XXX XXXX XXX XXXXXX XX
XXX XXXX XX XXXXXX XXXXXXXXXXXXXXXX, XXX XXX XXX XXXX
XXXXXXXX XXX XXXXXX XXXXX XX XXXX X XXXX XX X XXXXX XXXX
XXXXXXX XXX XXXXXX XXXX XXX XXXXX XXX XX XXX XXXX XX X XXX
XXX XXXX XXXX XX XXXXXXX XXXX XXXX
19
; and
b. that MYOB would not provide services or software directly to a business
partner’s end users. Clause 12 of the Agreement provided that, while
MYOB could communicate directly with a business partner’s end users
on matters such as billing, marketing, and promotions, “for the
avoidance of doubt, MYOB will not provide any Business Partner
Services to the Business Partner’s End Users”.
25. On 20 May 2021, MYOB notified Kilimanjaro that it was making changes to the
Agreement and the BPP in accordance with clause 24, which would come into
effect in 30 days, on 20 June 2021. Copies of the updated documents were
attached. In particular, MYOB advised:
a. clause 12 was amended to remove the restriction that MYOB could not
provide services to a business partner’s end users; and
b. clause 21 permitted the transfer of end users to MYOB in the event of a
change in control of the business partner.
MYOB said that these amendments were to facilitate a change in its business
model. Instead of MYOB only selling its products via its business partners,
MYOB would now also market directly to end users – “Through the
establishment of a direct organisation, MYOB will begin to sell, service and
support MYOB Advanced customers”. XXXXZ XXXXX XXXX XXXX XXXX XXXXX
XXXXX XXXX XX XXX XXXXXX XXX XXXXXX XXXX XXXXX XXX X XXXXX
XXXXXXXXX XXXX. XXXX XXXXXX XXX XXXX XX XX XXXXX X XX XX XX XXXX
XXXXX XXXXX XXXXX XXXX XXXXX XXXX XXXXXX XXXXXX XXXXX XXX XXX
XX XXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXX XXXXXX XX XXXX XXX
XXXX.
20
26. On 28 September 2021, ENS released its annual report for the year ended 30
June 2021 in which it noted that:
“MYOB Changes
MYOB, under KKR ownership, has undergone major changes in both
company structure and product focus...MYOB have changed their
strategy in the Enterprise space from a purely channel partner model,
to a combination of direct and channel. This is causing some
disruption, as MYOB announced the acquisition of two of their Channel
partners. The direct strategy is primarily aimed at defined segments,
and some specialised verticals. An engagement desk has been put in
place by MYOB to ensure fair competition and non-solicitation of our
clients or employees. MYOB has reiterated the importance of partners
in helping to achieve their mid-market growth ambitions and will
continue to invest in building their capability. The partner channel
remains a core pillar of their Go-to-Market strategy. Our Enterprise
18
Annexure 12 of the SOC.
19
Paragraph 10 and Annexure A of the SOR.
20
Annexure 14 of the SOC – email from MYOB to Kilimanjaro of 20 May 2021.
6
Division services the top end of the MYOB target market, which is
currently a segment that MYOB does not service via their direct
channel. Our investment in developing capabilities to service this
market positions us very well to remain a valuable channel partner for
MYOB.”
21
27. ENS says that Kilimanjaro’s position at that time was that MYOB was seeking to
act in breach of the Agreement, as clause 24 did not permit MYOB to unilaterally
make changes to the Agreement’s core provisions. Kilimanjaro, and most of the
other business partners, began a process of consultation and negotiation with
MYOB. During those ongoing discussions, on 17 January 2022, Kilimanjaro
wrote to MYOB to emphasise its position that MYOB did not have the right to
make unilateral changes to the Agreement. The letter stated that Kilimanjaro’s
position was that the purported changes by MYOB were of no effect and that the
Agreement, unamended, remained in effect. It also stated:
“Changes to very material clauses, such as to permit MYOB to compete
with Business Partners, as well as others which also will erode our
profitability and business model, are outside the scope of Clause 24.
XXX XXXXX XXXXXXXXX XX XXXXXXXX XXXXXX XXXXXXXXX XXX
XXXX, XXX XXXXXXXX XXX XXXXXXXXX XX XXX XXXXX XXX XXXXX
XXXX XX XXXX XXXX XXX XXXX XXX XXXXX XXXXX XXX XXXXX XXXX
XXXXX XXXX XXX XXXXXXX.
22
28. On 28 February 2022, ENS released is half year report for the six months ended
31 December 2021 in which it noted that:
“MYOB’s decision in May 2021 to compete in the sector with its other
channel partners like Kilimanjaro, saw MYOB acquire a number of
channel partners during the period to 31 December 2021. This has to
date had limited impact on Kilimanjaro and we continue to work
constructively with MYOB, particularly at the upper end of the
enterprise market for the MYOB Advanced ERP product...
Kilimanjaro Consulting is targeting the top end of MYOB products
target market, this is currently a market segment MYOB’s direct
channel does not service.”
23
The half year report also noted that ENS’s operating losses would see it breach
its BNZ banking covenants and that a formal waiver of the breach was being
sought from BNZ. ENS subsequently advised the market on 28 March 2022 that
BNZ had granted the waiver sort and had agreed not to take further action on
this occasion.
29. On 28 March 2022, representatives of Kilimanjaro met with MYOB “to
raise...concerns about its then understanding that MYOB was contemplating a
new strategy involving a direct sales model and a new margin scheme (for
which no details had been provided) that had been foreshadowed by MYOB staff
with Mr Baskind from about 9 May 2021”
24
.
30. On 31 March 2022, NZ RegCo issued a price enquiry noting that the price of
ENS shares had increased from $0.90, being the market closing price on 23
March 2022 to $1.20, being the price at 3:00 pm on 31 March 2022 (a total
increase of $0.30, or 33.3%). Given this increase, NZ RegCo sought
21
Page 4 of the ENS Annual Report for the year ended 30 June 2021.
22
Annexure B of the SOR – letter from Kilimanjaro to MYOB of 17 January 2022.
23
Page 2 of the ENS Half Year Report for the period ended 31 December 2021.
24
Annexure 16 of the SOC - page 31 Kilimanjaro Statement of Claim 1 May 2023.
7
confirmation from ENS that it continued to comply with its continuous disclosure
obligations under Rule 3.1.1. ENS confirmed that, as at 31 March 2022, it
continued to comply with Rule 3.1.1.
31. On the evening of 31 March 2022, MYOB notified Kilimanjaro of a further
change to the Agreement (clause 2) to take effect from 1 July 2022 - that at the
end of the initial term, either party may terminate the Agreement on 90 days’
written notice. This provision was to replace the provision which provided for
an automatic annual renewal of the Agreement. The email from MYOB noted
that the parties were “in the middle of a consultation process” in anticipation of
rolling out a new BPA and BPP
25
.
32. The material before the Tribunal indicates that MYOB’s business partners were
aware of the possibility of changes to the margin scheme in February 2022 and
had raised this with MYOB at a meeting at the end of February
26
. In any event,
by March/April 2022, Kilimanjaro was aware through discussions among
business partners that MYOB might seek to “cut” the ALF margins in the BPAs
27
.
33. Kilimanjaro’s Australian solicitors, Ash Street Partners (Ash St), sought advice
on its behalf from NSW Barrister, Mr V Misra, on whether there were limitations
on the scope of the amendments that MYOB could make to the Agreement
“despite the clear wording of clause 24” and whether MYOB could make the
unilateral changes to the Agreement it had notified to clause 2 (allowing
termination on notice), clause 12 (enabling MYOB to market directly to end
users) and clause 21 (in the event of a change in control of Kilimanjaro,
enabling the transfer of its customers to MYOB). Ash St’s brief also noted
Kilimanjaro’s concern that MYOB may attempt to change the margin it received
on sales to end users – “Presently they receive [%] from past sales, and the
concern is that MYOB may attempt to reduce that to [%] on those existing
sales”
28
.
34. Mr Misra provided advice on 13 May 2022 outlining the grounds for a potential
legal challenge to the amendments notified by MYOB. Mr Misra noted that the
merits of any challenge could not be properly assessed until a ‘breach’ had
occurred (i.e. MYOB sought to exercise its powers under the amended
provisions or did, in fact, decrease the margin) and there was evidence of a
resulting loss to Kilimanjaro. Importantly, the effect of the amendments to the
Agreement and whether MYOB would, in fact, decrease margins was still
unknown at that time. Mr Misra noted that further instructions were needed
before he could express a proper view, as it was a factually specific question to
be answered
29
. ENS says that this advice was one of many pieces of advice
received by Kilimanjaro during its dispute with MYOB over the purported
changes to the Agreement. XXX XXXXX XXXX XX XXX XX XXXX-X XXXX XXXX
XXXX XXX XXX XXXX XXX XXXX XX XXXXXX XXXXX XXX XXXXXXX XX XXX
XXXXX XX XXX XXXXX XX XXXXX. XXX XXXXX XXXX XX XXXX XXXX XXXXXX
XXX XXXXX
30
.
35. ENS provided excerpts of its Board meeting minutes to NZ RegCo from May
2022 to July 2022
31
. An excerpt of ENS’s board meeting minutes for 24 May
2022 records:
25
Annexure 17 of the SOC – email from MYOB to ENS of 31 March 2022.
26
Annexure K of the SOR.
27
Paragraph 18 of the SOR and Annexure K.
28
Annexure 18 of the SOC. The Tribunal notes that the briefing paper is not dated, but Mr
Misra’s opinion notes that he was provided with the brief by email on 15 April 2022.
29
Annexure 19 of the SOC.
30
Paragraph 19 of the SOR.
31
Annexure 40 of the SOC.
8
“RB [Ronnie Baskind] advised that he has been advised by MYOB that
a new BPA and BPP is expected to be sent to business partners on the
25
th
May. RB said he has not received any confirmation from MYOB as
to what it contains.
NP [Nick Paul, then ENS Non-Executive Director] asked for a summary
of the new BPA and BPP to be circulated. RB said he will circulate a
summary which needs to be done also for Ash St once he has received
it and reviewed the documents.
LP [Lindsay Phillips, ENS Non-Executive Director] said we need to
maintain our consistent approach that we formally reject the
agreement if we don’t like it.
Discussion was had about a lobby group being formed by the partners.
RB said the lobby group seems to be a replacement for the platinum
partner conferences. LP said we need to be in control of our own
destiny as a public company”.
32
36. On Friday, 27 May 2022, MYOB sent a letter by registered post to Kilimanjaro
headed “Confidential: Notice of changes to your Business Partner Agreement
with MYOB”
33
. There is some doubt about whether Kilimanjaro received the
letter, but in any event, its substance was repeated in two emails sent to ENS
shortly after 5pm the same day, as follows:
(1) Email of 5:12pm:
“Subject: New MYOB Advanced Business Partner Agreement
Dear Elliot, [Elliot Cooper ENS CEO]
Over the last few months, MYOB has been conducting a review of its
partner channel, with a focus on the strategic growth of its cloud
business [MYOB Advanced].
From 1 July [2022], MYOB Advanced services will no longer be covered
by the existing BPA and you will need to enter into this Advanced
Business Partner Agreement in order to sell and service MYOB
Advanced Products. This is accompanied by a new Business Partner
Program (Part A) which includes higher margins for MYOB Advanced
Products, new performance criteria and new awards for our best
partners. As a key strategic partner, we will have custom performance
criteria tailored for you which will prevail over the new sales criteria set
out in the BPP. This will be included in Schedule 2 of the BPA (which
will be emailed to you separately early next week)”.
ENS was instructed to review the new Advanced Business Partner
Agreement (Advanced BPA) and provided with a contact person to
direct any questions to or to request an execution copy. The email
noted that if the recipient was also a provider of MYOB Exo, it would
receive a separate email from MYOB regarding those services.
34
Schedule 2 to the Advanced BPA was subsequently provided to ENS on
the evening of Monday, 30 May 2022. MYOB noted that “While we
believe these changes are in the best interests of our continued
success, we appreciate that the process has been disruptive. We have
32
Annexure 40 of the SOC.
33
Annexure 20 of the SOC.
34
Annexure 21 of the SOC - email at 5:12pm, Friday 27 May 2022 to Mr Cooper from MYOB.
9
appreciated your honest feedback and involvement in the process, and
we look forward to helping you attain your sales and business goals”.
35
(2) Email of 5:13pm
“Subject: Notice of Amendments to Business Partner Agreement for
Exo Software
Dear Elliot,
MYOB has been conducting a review of its business partner program
aligned to our business strategy and growth aspirations. A number of
partners were approached and provided feedback and we thank them
for their participation.
As we have completed this consultation process, we have reversed the
90 day term on all Business Partner Agreements and returned to 12
month renewal terms to provide you with increased certainty. We have
also rolled out a new Business Partner Agreement (Part A) for the
whole of the Channel. In order to revise the BPP and amend the BPA,
we are making the following changes pursuant to clause 24(a) of the
BPA”.
The email included a summary of the key changes which included (i)
from 1 July 2022 the ALF margin would be reduced by 42.86% and
apply to all ALF invoices; and (ii) while there was no change to the Exo
base margin or Exo growth margin, new sales after 1 October 2022
would need to be “pre-approved” by MYOB to be eligible for those
margins. MYOB advised that the amendments to the Agreement and
BPP would take effect on 1 July 2022
36
.
37. Although it was not stated in MYO’s communications of 27 May 2022, ENS says
that MYOB considered that the effect of the margin changes would amount to a
net $0 impact on business partners overall, given the increase in margins for
MYOB Advanced
37
.
38. On 22 June 2022, MYOB emailed Kilimanjaro. MYOB General Manager –
Enterprise states:
“I’d like to start by acknowledging our journey over the last 12 months
and the many changes that have come with creating a direct channel,
from acquiring some business partners, to the more recent
communication about Business Partner Agreement (BPA) and Business
Partner Programs (BPP) changes. I also understand that during this
time, you may have felt a level of uncertainty and disruption”.
MYOB outlined why it had shifted emphasis to its cloud-based product MYOB
Advanced. The email thanked MYOB “partners that have provided constructive
feedback over the last three weeks. We have listened and made additional
changes, and the choice forward is now yours”.
39. MYOB advised that if a business partner did not wish to sign the new Advanced
BPA, then the current Agreement would continue for another 12 months and did
not require signing. However, further changes, provided with the email, would
then apply to the existing Agreement and new BPP to reflect the new settings
for MYOB Advanced. If a business partner decided to enter the new Advanced
35
Annexure 23 of the SOC - email at 10:07pm, Monday 30 May 2022 to Mr Cooper from MYOB.
36
Annexure 22 of the SOC - email at 5:13pm, Friday 27 May 2022 to Mr Cooper from MYOB.
37
Paragraph 20 of the SOR.
10
BPA, additional changes to that agreement, provided with the email, would
apply. MYOB noted that the existing Agreement changes would be effective 1
July 2022, and the agreement would continue until a new Advanced BPA was
entered.
38
40. An excerpt of ENS’s board meeting minutes for 28 June 2022 records:
“RB updated the board on the BPA changes that have been proposed
by MYOB...
RB responded that regardless of our notification that we do not accept
the changes he expects that other multiple partners will also object /
lodge a dispute under the existing BPA based on his conversations with
them...
Discussion was had about the legal advice regarding the BPA and our
current contractual arrangement with MYOB including the advice RB
presented regarding the Franchise Act. LP stated that we as a board
have good reason to support and continue to act on our legal advice.”
39
41. In an email of 30 June 2022, MYOB advised that after receiving feedback that
business partners wanted more time before the changes to the Agreement and
BPP took effect on 1 July 2022, it had elected to delay the effect of the
variations until Monday, 1 August 2022 and that “On that date, all changes set
out in the [Agreement] and [BPP], as communicated to you, will take effect”.
The email does not state that the delay is “to allow consultation with MYOB’s
Business Partners” as suggested by ENS
40
.
42. ENS says that in July 2022, MYOB presented Kilimanjaro with a revised
proposed BPA in which the “proposed Exo margin reduction remained”
41
.
43. In a letter to MYOB dated 19 July 2022, Kilimanjaro states:
“I refer to the changes proposed by MYOB to Kilimanjaro’s [BPA] and
[BPP] that have been discussed at length since 2021.
As we have not been able to resolve these issues, Kilimanjaro intends
to issue a clause 40A Notice pursuant to the Competition and
Consumer (Industry Codes-Franchising) Regulation 2014, pursuant to
section 51AE of the Competition and Consumer Act 2010. This will
commence the Code complaint handling procedure set out in Part 4 of
the Regulation.
Kilimanjaro’s relationship with MYOB is one of franchisee/franchisor.
As a result, each party has rights and obligations under the Regulation,
including obligations to the competition regulator.
I appreciate that initiating the complaint handling process may have
far-reaching consequences for MYOB. Nevertheless, the proposed
changes will have a significant impact on Kilimanjaro and therefore its
board has an obligation to act in the company’s best interests.
38
Annexure 25 of the SOC – email of 22 June 2022 to Mr Baskind from MYOB.
39
Annexure 40 of the SOC.
40
Paragraph 23.3 of the SOR.
41
Paragraph 22.4 of the SOR. A copy of this revised proposed BPA was not provided to the
Tribunal.
11
I would welcome further discussion on MYOB’s proposal in the
immediate future, which may obviate the need to commence the Code
complaint handling procedure”
42
.
44. The 19 July 2022 letter accompanies an email sent to MYOB on 20 July 2022 by
Kilimanjaro which states:
“It is with some reservation that I must send this letter to you. I feel
that I have made every effort to convey to MYOB my dissatisfaction
with the proposed Business Partner Agreement, but this has fallen on
deaf ears. As your largest partner, I would have hoped that there
would have been some consideration given to my unhappiness.
My conversation with [MYOB’s Partner Channel Lead] on Thursday 14
th
July was most unsatisfactory, and his only suggestion was that I
should raise a dispute if I am unhappy.
After taking extensive legal advice over the past months, I realise that
the implications of raising this dispute are far-reaching. I have
therefore avoided taking this step.
I am now in a position that I must follow my legal advice”.
43
45. On 25 July 2022, MYOB rejected Kilimanjaro’s assertion that the relationship
between MYOB and Kilimanjaro was that of a franchisor/franchisee
44
.
46. ENS says at the time, Kilimanjaro understood that “MYOB was in ongoing
negotiations with most of its Business Partners over its purposed margin
changes. The issue was not isolated to Kilimanjaro alone”
45
. An excerpt of ENS’
board meeting minutes for 27 July 2022 records:
“XX XXXX XXXX XXXX XXX X XX XXXX XX XXXX XXX XX XX XXXXXXX
XXXXXXX XXX XXX XXX XX XXXXX XXXX XXXX XXX X XX XXXXX XXX
XXXX XXXXX XXX XXXX. XX XXXX XXX XXX X XXXXX XXXXXX XXXXX
XXXXXX XXXX XXX XXXXXXX [XXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXX XXX XXXXXXX XXXXXXXX
46
.
The end of this excerpt has the statement “The board discussed and concluded
that with the above pressure from the large partners MYOB would continue to
hold off taking the action they did on 1 August 2022”. Given the reference to 1
August 2022, this statement appears to have been added after the minutes for
the 27 July 2022 meeting were recorded.
47. ENS advised NZ RegCo during its investigation that “The board did not believe
MYOB would execute the proposals in the face of the legal opposition from the
large MYOB Enterprise Partners, given MYOB had already postponed enacting
any changes. This was discussed in depth at every board meeting”
47
.
42
Annexure 27 of the SOC.
43
Annexure 28 of the SOC.
44
Annexure C of the SOR.
45
Paragraph 25 of the SOR.
46
Annexure 40 of the SOC. XXX XXX XXXXX XXXXX XXXX X XXXXX XXXXXXXXXX XXXX
XXXXXXXX XXXXX XXX XXX XXXX XXXXX XXXXXXXX – XXXXXXXXXXX. XXXXXXXXXXXXXXX
XXX XXX XXXX XX XXX XXXXX.
47
Annexure 40 of the SOC – email from ENS to NZ RegCo of 31 March 2023.
12
Announcement on 1 August 2022
48. At 3:24pm on 1 August 2022, ENS released an announcement (the
Announcement) to the market advising that:
“Enprise disputes MYOB retrospectively decreasing margins
AUCKLAND, 1 August 2022 – [ENS] advises that MYOB have
purported to reduce margins. ENS initiates dispute resolution
process
Kilimanjaro Consulting support the largest MYOB Exo install base of
any partner in Australia or New Zealand.
MYOB have purported to retrospectively reduce the margins that
Kilimanjaro Consulting receives on existing sales of MYOB Exo
software. The impact of the purported reduction of 42.86% would be
approximately $935,000 per annum. This would significantly impact
the support services that Kilimanjaro Consulting is able to deliver to
their MYOB Exo software customers.
The board rejects the assertion by MYOB that they are able to
unilaterally alter these margins. Enprise has advised MYOB of its
intention to formally dispute this purported decrease in fees”.
48
49. ENS says that on 1 August 2022, MYOB “took a concrete action to implement its
proposed change” to the ALF margin by invoicing Kilimanjaro at the reduced
margin. ENS notes that it was the first occasion that MYOB had presented
Kilimanjaro with an invoice at the reduced margin, rather than engaging in
correspondence and discussions about the purported changes
49
.
Alleged breach of Rule 3.1.1
50. NZ RegCo alleges that ENS became Aware of the Material Information in the
Announcement no later than 27 May 2022 and breached its obligations under
Rule 3.1.1 by not releasing that information to the market until 1 August 2022,
44 Business Days later.
51. ENS does not accept it breached Rule 3.1.1. Rather, ENS says that Kilimanjaro
was in an ongoing commercial negotiation informed by prior experience, with
other business partners also taking a similar approach
50
. ENS considers that its
disclosure obligation in relation to MYOB’s purported changes to the Agreement
first arose on 1 August 2022, when it was invoiced at the reduced ALF margin
51
.
Disclosure of Material Information
52. Rule 3.1.1
52
requires Issuers who become Aware of any Material Information:
a. to promptly and without delay release the Material Information through
MAP; and
48
Annexure 29 of the SOC.
49
Paragraph 27 of the SOR.
50
Paragraph 5 of the SOR.
51
Paragraph 41 of the SOR.
52
At the time NZ RegCo alleges ENS breached Rule 3.1.1, the Rules dated 10 December 2020
applied. The Rules were subsequently amended on 17 June 2022 and 1 April 2023. Rules 3.1.1
and 3.1.2 remained the same.
13
b. not to disclose any Material Information to the public, any other stock
exchange, or any other party without first releasing the Material
Information through MAP.
53. “Material Information” is information which:
a. a reasonable person would expect, if it were generally available to the
market, to have a material effect on the price of quoted financial
products of the Issuer; and
b. relates to particular financial products, a particular Issuer, or particular
Issuers rather than to financial products generally or Issuers
generally.
53
54. An Issuer becomes “Aware” of Material Information if, and as soon as, a
Director or a Senior Manager of the Issuer has, or ought reasonably to have,
come into possession of the information while performing their duties.
54
55. There are several exceptions to the requirement to release Material Information
under Rule 3.1.1. These exceptions are known as the “safe harbour” provisions.
Under Rule 3.1.2, Rule 3.1.1 does not apply when:
a. one or more of the following applies:
(i) release of the information would be a breach of law,
(ii) the information concerns an incomplete proposal or negotiation,
(iii) the information contains matters of supposition or is
insufficiently definite to warrant disclosure,
(iv) the information is generated for internal management purposes,
or
(v) the information is a trade secret,
b. the information is confidential and its confidentiality is maintained, and
c. a reasonable person would not expect the information to be disclosed.
56. To rely on an exception, an Issuer must be able to demonstrate that all three
limbs apply – (1) the information must be confidential, and (2) of the type that
a reasonable person would not expect to be disclosed, and (3) one of the factors
in a. above must apply.
Incomplete proposal or negotiation
57. The Rules do not elaborate on the intended meaning of “an incomplete proposal
or negotiation" for the purposes of Rule 3.1.2(a)(ii).
58. The NZX Continuous Disclosure Guidance Note (Guidance Note) provides that:
“Rule 3.1.2(ii) enables companies to withhold information about
incomplete proposals or negotiations. In NZX’s view, a proposal or
negotiation can generally be considered complete when both parties
sign an agreement to implement or give effect to the transaction. This
will also be the case in relation to signed conditional agreements,
53
Section 231(1) of the FMC Act.
54
Section 6 of the FMC Act.
14
which are unlikely to be “incomplete proposals” for the purposes of the
exceptions within the rules.
9
Issuers should also note that a proposal
or negotiation can be complete for the purposes of this section before
it becomes legally binding and even if it is conditional.
10
9
An agreement entered into for the purpose of facilitating the
negotiation of a transaction would generally not be expected to be
disclosed (unless the existence of that option or arrangement was
Material Information in its own right) and can be distinguished from an
agreement which gives effect to a transaction.
10
In a public censure of Rakon Limited by the NZ Markets Disciplinary
Tribunal (“tribunal”) released on 5 March 2014, the tribunal
determined that “a proposal or negotiation can be complete for the
purposes of rule 3.1(a)(iii)(B) before it becomes legally binding” and
that, generally the appropriate point at which a proposal ceases to be
an incomplete proposal or negotiation is “when both parties sign an
agreement....”
55
Incomplete information or upcoming events
59. The Guidance Note also addresses evolving situations, where information may
develop over time:
“In some situations, an issuer may receive information about an event
over time. The issuer may not be able to make a determination
regarding the materiality of the information based on the initial or
piecemeal information alone. In such cases, no disclosure obligation
will be triggered. However, if an issuer requires further information in
order to determine whether or not initial information is material
information, the issuer must take reasonable steps to seek the
additional information as soon as possible...
If an issuer determines (or is reasonably able to determine) that it
holds material information based upon initial or incomplete information
alone, that information must be disclosed promptly and without delay
to the market, regardless of the fact that there may be additional
information to follow. They cannot simply wait until they receive all
information concerning a material event before a disclosure obligation
will arise.
There may also be situations where an issuer becomes aware that a
material event is going to occur but the event has not yet actually
occurred. An issuer will be required to disclose the event promptly and
without delay upon becoming aware that the event will occur instead of
waiting until the event has occurred.”
56
Submissions from NZ RegCo
60. NZ RegCo submits that ENS breached Rule 3.1.1 because the Announcement
contained Material Information and was not released promptly and without
delay.
61. NZ RegCo submits that given the potential financial impact of the reduction in
the ALF margin that Kilimanjaro would receive (which ENS estimated at
55
Section 5.1, Page 20 of the Guidance Note.
56
Section 3.3, Page 11 of the Guidance Note.
15
$935,000 in the Announcement) the information in the Announcement
constituted Material Information.
62. NZ RegCo considers that ENS should have treated its communications of 27 May
2022 from MYOB as Material Information and promptly released an
announcement to the market at that point. The fact that ENS contested MYOB’s
contractual ability to reduce the ALF margin, among other things, did not mean
that the information about MYOB’s actions was not material. NZ RegCo says
that ENS cannot rely on subsequent communications from MYOB to substantiate
the claim that it was engaged in “negotiations” with MYOB. NZ RegCo submits
that there was no suggestion that the changes notified on 27 May 2022 were
optional, or open to further negotiation. Given the materiality of the changes,
particularly the reduced ALF margin, the 27 May 2022 correspondence from
MYOB triggered ENS’ obligation to announce the purported changes to the
Agreement promptly and without delay. Accordingly, NZ RegCo alleges that
ENS breached Rule 3.1.1 by not releasing the information to the market until 1
August 2022, 44 Business Days later.
63. NZ RegCo refers to the Guidance Note commentary on incomplete information
and submits that the correct approach was for ENS to treat MYOB’s notice of 27
May 2022 as Material Information and promptly release an announcement at
that point. Such an announcement could have described MYOB’s
communication varying the Agreement, and its potential financial implications,
while also advising the market that ENS considered MYOB’s purported variation
to be invalid and that ENS would be contesting it.
Submissions from ENS
64. ENS submits that it did not breach Rule 3.1.1. It accepts that the
Announcement contained Material Information but says that its obligation to
disclose did not arise until 1 August 2022, when MYOB invoiced it at the
reduced AFL margin.
65. ENS says that prior to 1 August 2022, its engagement with MYOB over MYOB’s
purported ALF margin reduction and MYOB Advanced margin increases, and in
particular, MYOB’s 27 May 2022 notice, did not trigger a disclosure obligation.
MYOB’s 27 May 2022 notice that it would unilaterally reduce the ALF margin and
increase the MYOB Advanced margin, represented another instance of MYOB’s
“common commercial tactics”, when, in ENS’s view, based on legal advice,
MYOB was not legally permitted to change the margins under the Agreement.
ENS submits that while the 27 May 2022 notice purported to make changes to
the Agreement, it did not involve MYOB taking “tangible and concrete steps” to
enforce the margin changes in breach of the Agreement. The 27 May 2022
notice therefore represented the “beginning” of negotiations about the proposal
to reduce the ALF margin and increase the MYOB Advanced margins.
66. ENS says that, until 1 August 2022, it had anticipated that MYOB, under
pressure from its business partners, would abandon its idea and either revert to
the status quo or propose an alternative arrangement. XXX XXXXX XXXX XXXX
XXX XXXXXX XXXX XXXX XXX XXXXXX XXXXXX, XXX XXXXX XX XXXX, XXXXXX
XXXX XXX XXXXXXX XX XXXXX XXX XXXXX, XXX XX XXX XXXX, XXXX XXX XXX
XXXXXX XX XXXXX XXXXXX XXXXX XX XXX XXXXX XXX XXX XXX XXXXX XXXX
XXXXXX XXXXX XX XXXX XXXX.
67. ENS says that it was only when MYOB took “tangible and concrete steps” on 1
August 2022 to enforce the new arrangements by invoicing Kilimanjaro at the
reduced margin that its disclosure obligation arose. ENS says it acted promptly
to release the Announcement at that time.
16
68. ENS considers that the Guidance Note on incomplete information cited by NZ
RegCo, where an Issuer receives information about an event over time, is not
relevant. Rather, MYOB and ENS were in an incomplete negotiation regarding
MYOB’s purported variation to the Agreement and new Advanced BPA.
NZ RegCo’s submissions in response
69. NZ RegCo submits in its Rejoinder that the exception in Rule 3.1.2(a)(ii)
(incomplete proposal or negotiation) does not apply. NZ RegCo argues that
MYOB sought to exercise a unilateral power under the Agreement to vary
payments made to Kilimanjaro. Kilimanjaro disputed MYOB’s ability to take this
action. NZ RegCo says that this was not an “incomplete proposal or
negotiation”, but instead an action by one party which was disputed by another
and that the proposed changes were sufficiently definite and complete to
prevent the grounds in Rule 3.1.2(a) applying.
70. NZ RegCo notes that if the Tribunal were to accept ENS’s submission that Rule
3.1.2 applied to MYOB’s communications on 27 May 2022, then there is a
separate question as to why a disclosure obligation arose on 1 August 2022 (a
“convenient date” for ENS’s purposes being the date of the Announcement),
when MYOB issued an invoice at the reduced ALF margin. NZ RegCo says that
ENS has not explained why the issue of an invoice to Kilimanjaro would be seen
as a departure from MYOB’s negotiating tactics. NZ RegCo submits that the
invoicing could be characterised as a continuation of the same pattern of
engagement between MYOB and Kilimanjaro, and consistent with MYOB
implementing its actions notified on 27 May 2022.
71. In response to NZ RegCo’s submission, ENS argues that its position that its
continuous disclosure obligation arose on 1 August 2022 was not merely a
“convenient date”, but rather, the very date on which MYOB took positive steps
that ENS considered to be in breach of the Agreement and triggered ENS’s
disclosure obligations.
Tribunal Determination
72. To determine whether ENS breached Rule 3.1.1 the Tribunal must consider
whether the information was “material”, when ENS became “aware” of that
information and at what point in time the obligation to disclose arose.
73. “Materiality” is not in dispute – both parties agree that the information in the
Announcement was “Material Information” for the purpose of Rule 3.1.1. The
second and third matters are inextricably linked because the obligation to
disclose arises when the issuer is Aware of the Material Information. Addressing
these two matters requires consideration of ENS’s submission that until 1
August 2022, there was “an incomplete proposal or negotiation” within the
meaning of the Rule 3.1.2(a)(ii) exception to the disclosure obligation in Rule
3.1.1. Given its importance to the analysis, the Tribunal will start with a
consideration of ENS’s submission that the Rule 3.1.2(a)(ii) exception applied.
57
Did the ‘incomplete proposal or negotiation’ exception apply?
74. It is important to make two points at the outset. The first is that the Material
Information in the Announcement was that: (i) MYOB had purported to reduce
the margins Kilimanjaro received on existing sales of MYOB Exo; (ii) the impact
of that purported reduction of 42.86% would be approximately $935,000 per
annum and would significantly impact the services Kilimanjaro could provide its
57
For the sake of completeness we note that ENS appears to suggest that the exception in Rule
3.1.2(a)(iii) also applied (i.e., the information at issue contained matters of supposition and was
insufficiently definite to warrant disclosure). It will be apparent from what we say below, we do
not agree.
17
MYOB Exo customers; and (iii) ENS rejected MYOB’s assertion that it could
unilaterally change the margin and intended to dispute it.
75. The second is that the margins on the MYOB Advanced product were not the
focus of the Material Information released in the Announcement, although they
were important to Kilimanjaro, given they might offset any loss incurred from a
reduced ALF margin. The Tribunal notes that on the evening of 27 May 2022,
MYOB sent ENS, by separate email, a new Advanced BPA for MYOB Advanced
which ENS appears to have not previously seen. Schedule 2, which contained
Kilimanjaro’s customised sales criteria for MYOB Advanced, was not supplied
until 30 May 2022
58
. Matters related to this new Advanced BPA for the MYOB
Advanced product were at an initial stage and are not the subject of the alleged
breach of Rule 3.1.1.
76. The exception in Rule 3.1.2(a)(ii) on which ENS relies that “the information
concerns an incomplete proposal or negotiation” - is intended to ensure that
parties are not forced to disclose information to the market at a time when it
may prejudice ongoing negotiations before an agreement is struck. The
exception ceases to apply once the proposal or negotiation is complete, which is
generally considered to be when both parties sign an agreement to implement
or give effect to a transaction or arrangement
59
. The Tribunal considers that the
exception may also apply in circumstances where there is an existing
agreement between parties, but both parties are negotiating a variation to that
agreement, or a new agreement, which requires both parties’ consent to
implement.
77. ENS says that the exception in Rule 3.1.2(a)(ii) applied in this case because the
information concerned an incomplete proposal from MYOB and there was an
ongoing negotiation between ENS and MYOB
60
.
78. With regards to ENS’s submission of an “incomplete proposal from MYOB”, ENS
knew that MYOB had given notice of changes to the parties’ contractual
arrangements in May 2021 and that there had been on-going discussions about
those proposed changes. ENS was concerned at least as early as March 2022
that MYOB was contemplating a “new margin scheme” and had expressed that
concern to its lawyers by April 2022. Counsel’s advice of 13 May 2022
addressed this matter, albeit in a preliminary way. ENS’s concern crystallised
on the evening of 27 May 2022, when MYOB advised that it would, among other
things, be reducing the ALF margin by 42.86%. Regardless of whether ENS
considered MYOB had the power to make that change under the Agreement,
ENS was now Aware that MYOB was purporting, in exercise of its contractual
powers, to reduce the ALF margin to a level that would have a significant impact
on Kilimanjaro, as stated in the Announcement. It was no longer an
“incomplete proposal” in terms of the Material Information.
79. As to the “negotiation” exception, ENS must have accepted that the negotiation
exception no longer applied as at 1 August 2022 because it made the
Announcement, thus acknowledging that it had an obligation to disclose then.
ENS made the Announcement even though it did not accept that MYOB was
contractually entitled to do what it was purporting to do. The Tribunal does not
58
ENS says at paragraph 21 of the SOR that “The 27 May 2022 notification omitted the key
proposed new Schedule 2 to the EXO BPA, which was only provided later” [emphasis added].
This appears to be incorrect as Schedule 2 is referenced in MYOB’s email of 5:12pm as forming
part of a new BPP for MYOB Advanced. When Schedule 2 is sent to ENS on 30 May 2022, the
email notes “Further to our email on Friday outlining the new Advanced Business Partner
Agreement, please see attached Schedule 2 (Special Conditions) to the Advanced BPA which is
specifically crafted for your business. This will form part of the Advanced BPA” (Annexure 23 of
the SOC). In any event, the ALF margin reduction was included in MYOB’s 27 May 2022 notice.
59
As noted in NZMDT 1/2014 NZX Limited v Rakon Limited.
60
Paragraph 52.1 of the SOR.
18
accept that the sending of the invoice materially changed matters from a
disclosure perspective, as we now explain.
80. ENS says that its expectation was that MYOB, under pressure from its business
partners, would abandon reducing the ALF margin and either revert to the
status quo or propose an alternative arrangement based on its previous
experience. XXX XXXXX XXX XXX XX XXX XXXX XXXXX XXXXXX XXXXX
XXXXXX XX XXXX XXXXXXX XXXXXXXX XXXXX XXX XXXX XX XXX XXX XXXXX
XX XXXX XXX XXXX XXXX XXX XXXX XX XXX XXX XX XX XXX XXX XXXX XXX
margin in the face of very strong opposition from Kilimanjaro and the other
business partners. While the Tribunal acknowledges that XXX XXX XXXX
XXXXXXXX XXXXX XXXX XXXXX XXXXX XX XX XXX XXXX XXX XXXXX X XXXXXX
XXXXX XX XXXXX XXXXXXXX, there appears to have been a significant change
in MYOB’s strategy following its acquisition by KKR, as submitted by ENS and
highlighted in its annual report for the year ended 30 June 2021 (see paragraph
26 above), and MYOB’s acquisition of several of its business partners in 2021
and early 2022.
81. In the lead-up to MYOB’s notice of 27 May 2022, there was a lengthy
consultation process which appears to have begun in May 2021 when MYOB
gave notice of proposed changes to the agreements. There was clearly some
uncertainty for Kilimanjaro, and the other business partners, given Kilimanjaro’s
meeting with MYOB on 28 March 2022 and its subsequent request for legal
advice in April 2022. At this stage, ENS considered that MYOB’s strategy had
changed and there was speculation among the business partners that MYOB
intended to “cut” the MYOB Exo margins. MYOB, for its part, had noted in its
email to business partners on 31 March 2022 that it was in a “consultation
process in anticipation” of rolling out new BPAs and BPPs. Kilimanjaro
acknowledged in its letter of 19 July 2022 to MYOB that MYOB’s changes to the
Agreement and Business Partner Programme had “been discussed at length
since 2021”.
82. When MYOB’s notice of the amendments to the Agreement did arrive on the
evening of 27 May 2022, it was not presented as a draft for discussion, but
rather changes that would take effect on 1 July 2022. MYOB advised that its
consultation process was now complete and that these would be the
arrangements going forward. MYOB’s email does not support ENS’s submission
that it “represented the beginning of negotiations”. Rather, the email initiates
the start of the notice period, following which the changes would take effect.
83. While communication between the parties continued after MYOB’s 27 May 2022
notification, this communication does not evidence a negotiation of the nature
contemplated under Rule 3.1.2(a)(ii). MYOB’s email on 30 June 2022 stated
that they were delaying the effective date for the notified amendments to 1
August 2022 (and not 1 July 2022), following feedback from business partners
that they wanted more time before the changes took effect, and that on 1
August 2022 all changes to the Agreement as communicated would take effect.
MYOB did not state that the delay was “to allow consultation” as suggested by
ENS
61
. Kilimanjaro raised its unhappiness with the changes to MYOB but
considered that its concerns had “fallen on deaf ears”
62
. In a letter dated 19
July 2022, Kilimanjaro advised MYOB that as they have not been able to resolve
these issues, Kilimanjaro intended to initiate a complaint under Australian
franchising law. ENS’s submission that negotiations are on-going at this point
are not supported by the documents which have been provided to the Tribunal.
61
Paragraph 23.3 of the SOR.
62
Annexure 28 of the SOC - Kilimanjaro email to MYOB of 20 July 2022.
19
84. ENS notes that prior to 1 August 2022, MYOB had not invoiced Kilimanjaro in
relation to the proposed margin changes and “there had been no prior indication
that MYOB would, in fact, take unilateral steps to implement the reduced
margins”. Again, this is not supported by the documents which have been
provided to the Tribunal. In particular, the email of 30 June 2022 was clear –
the changes were to take effect on 1 August 2022. The Tribunal notes that ENS
would not have been invoiced prior to 1 August 2022, because the changes did
not take effect until 1 August 2022.
85. ENS submits that its disclosure obligation arose on 1 August 2022 when MYOB
took the tangible step of invoicing Kilimanjaro at the reduced margin. In its
opinion, based on legal advice, MYOB’s conduct on 1 August 2022 amounted to
a breach of the Agreement. The Tribunal notes that while MYOB’s issue of the
invoice at the reduced margin may have triggered ENS’s ability to begin
proceedings for a breach of contract (noting ENS’s legal advice in May 2022 that
a breach and evidence of loss was needed before MYOB’s actions could be
challenged), that does not mean ENS’s disclosure obligations under the Rules
did not arise sooner. It is not clear to the Tribunal why ENS considered that, at
this point, the “negotiation” was complete, and the safe harbour no longer
applied. The Announcement said that MYOB had purported to reduce the MYOB
Exo margin and that ENS intended to dispute this – all matters known on 27
May 2022.
86. ENS argues that events following the Announcement support its view that,
between late-May 2022 and 1 August 2022, MYOB’s position on implementing
changes to the margins was open to further negotiation and consultation. The
Tribunal notes that while this appears to be the case with regards to the MYOB
Advanced product, that is not the focus of the Material Information in this case.
In any event, the Tribunal is not persuaded that the communication between
MYOB and Kilimanjaro after 1 August 2022 does provide evidence of MYOB’s
intention to negotiate the MYOB Exo margins given MYOB’s email of 21
September 2022
63
. That email makes it clear that MYOB’s notification in May
that the ALF margin would be reducing had not changed and that MYOB had
reinforced this with its business partners. There was discussion about other
matters, but they did not comprise part of the Material Information.
Tribunal finds that ENS breached Rule 3.1.1
87. The Tribunal does not accept that, following MYOB’s notice of a reduction in the
ALF margin under the Agreement on 27 May 2022, there was an incomplete
proposal or that the parties were in negotiations with respect to that reduction
for the purposes of Rule 3.1.2(a)(ii). The Tribunal does not consider that the
parties were in an on-going negotiation between 27 May 2022 and 1 August
2022 of the type contemplated by Rule 3.1.2(a)(ii), which is intended to prevent
prejudice to negotiations before an agreement has been struck.
88. Rather, the Tribunal considers that ENS became Aware of the Material
Information on the evening of 27 May 2022, when MYOB emailed notice of
changes to the Agreement to ENS’s CEO and Executive Director. In that notice,
MYOB purported to reduce the ALF margin by 42.86%. At that time,
Kilimanjaro’s “long-held position” was that MYOB did not have the right to
unilaterally change the Agreement
64
and ENS’s board had discussed just three
days earlier that it would maintain its consistent approach to reject the
agreement if it did not like it
65
. Accordingly, each aspect of the Material
Information released in the Announcement was known to ENS on the evening of
63
Annexure G of the SOR.
64
Annexures A, B and E of the SOR.
65
ENS’s minutes of its board meeting on 24 May 2022 - Annexure 40 of the SOC.
20
27 May 2022, although the Tribunal accepts that some time would have been
needed to allow ENS to calculate the financial impact of the margin reduction.
89. The Tribunal notes that the Announcement did not say that MYOB had taken
tangible steps to enforce the margin reduction. The Announcement said that
MYOB had purported to reduce the margins that Kilimanjaro received on MYOB
Exo, which ENS intended to dispute.
90. It appears from the material before the Tribunal that ENS feels strongly that its
obligation to disclose did not arise until MYOB issued an invoice on 1 August
2022 at the reduced ALF margin, because it believed that this amounted to a
breach of the Agreement. ENS submits that it carefully considered its ongoing
correspondence and discussions with MYOB about the purported ALF margin
reduction in the context of its continuous disclosure obligations. While that may
have been the case, the Tribunal has seen no evidence that ENS did, in fact,
turn its mind to whether MYOB’s 27 May 2022 notice required disclosure under
the Rules. There is no evidence of the Board’s consideration of its continuous
disclosure obligations in the meeting minutes provided to NZ RegCo, which
makes it difficult to assess any decision made about non-disclosure. In any
event, as the Rules and Guidance Note on Continuous Disclosure make clear,
the approach to disclosure is an objective one.
91. For these reasons, the Tribunal finds that ENS breached Rule 3.1.1 by not
releasing the Material Information contained in the Announcement promptly and
without delay. Given that the Tribunal considers ENS’s disclosure obligation
arose on the evening of Friday 27 May 2022, after market close, to comply with
Rule 3.1.1 ENS should have released the Announcement before market open on
Monday 30 May 2022.
Tribunal approach to penalty
92. The Tribunal must consider the appropriate penalty for ENS’s breach of Rule
3.1.1.
93. Under the Tribunal Rules, the Tribunal can impose a fine of up to $500,000 for
a breach of the Rules
66
.
94. Section 9 of the Tribunal Procedures (the Procedures), which came into force on
17 October 2022, provides guidance to the Tribunal on assessing the
appropriate financial penalty for a breach of the Rules. The Tribunal’s
determination in NZMDT 1/2023 NZX v Hallenstein Glasson Holdings Limited
(the HLG decision), outlines the Tribunal’s approach to the Procedures.
95. As noted in the HLG decision, the Procedures are not determinative. The
Tribunal will ultimately exercise its discretion to determine the appropriate
penalty when considering the overall circumstances of the matter.
96. The Procedures set out a two-step process for the Tribunal to follow:
Step 1 – identify a starting point penalty by assessing the factors relevant to
the breach and the impact or potential impact of the breach; and
Step 2 – adjust that starting point penalty to reflect all the aggravating and
mitigating factors relevant to the respondent.
66
Tribunal Rules 9.1.2(e) and 9.2.2(f).
21
Step 1: Factors relating to the breach
97. The Procedures set out three starting point penalty bands, within which the
Tribunal will identify a starting point penalty:
Penalty Band Range of Financial Penalty
Penalty Band 1 – Minor Breaches $0 to $40,000
Penalty Band 2 – Moderate Breaches $30,000 to $250,000
Penalty Band 3 – Serious Breaches $200,000 to $500,000
98. Procedure 9.2.1 states that the appropriate penalty band for a breach of the
Rules will be determined based on an overall assessment of the seriousness of
the breach in each case.
99. Procedure 9.2.2 sets out factors which fall within each penalty band which the
Tribunal may consider when assessing the most appropriate penalty band and
the starting point penalty within that band
67
. These factors all relate to the
obligation breached and the impact or potential impact of the breach. As noted
in Procedure 9.2.2, it is unlikely that all the factors within one penalty band will
be present in a particular matter. In most cases, a matter will likely have a
combination of factors from two or more penalty bands. It is also possible for a
matter to fall within a penalty band where only one factor exists. Accordingly,
the Tribunal will use its discretion to weigh up all the factors present to ensure
that they are appropriately balanced.
100. The Procedures differ significantly from the previous Tribunal Procedures dated
29 February 2016 (2016 Procedures). One of these differences is that under
the 2016 Procedures, Penalty Band 3 included the factor “The breach relates to
a fundamental obligation”. Previously, breaches of a “fundamental obligation”,
such as a breach of an Issuer’s continuous disclosure obligations, generally fell
within Penalty Band 3. The “fundamental obligation” factor has been removed
from the current Procedures. This means that a breach of a fundamental
obligation may not necessarily fall within Penalty Band 3. The Tribunal must
consider all the factors relevant to the breach when assessing the most
appropriate penalty band. This broadens the Tribunal’s focus from considering
the nature of the Rule breached to considering the overall seriousness of the
breach and its impact or potential impact on investors and the market.
Step 2: Factors relating to the respondent
101. Once the Tribunal has determined the appropriate penalty band and the starting
point penalty, it must then determine the final penalty by adjusting the starting
point penalty to reflect all the aggravating and mitigating factors relevant to the
respondent (Procedure 9.2.3). Procedures 9.2.5 and 9.2.6 set out a non-
exhaustive list of factors which are likely to lower or increase (or reduce the
ability to lower) the starting point penalty
68
.
67
See Appendix 1 for a copy of the table of factors which fall within each penalty range.
68
See Appendix 2 for a copy of the non-exhaustive list of factors which are likely to lower or
increase the starting point penalty.
22
Additional facts relevant to penalty
102. Both parties have made detailed submissions on the appropriate penalty in the
event the Tribunal finds that ENS breached Rule 3.1.1, including with regard to
the effect of ENS’s delayed disclosure on subsequent events (in particular,
BNZ’s decision to waive ENS’s banking covenants and ENS’s capital raising in
late 2022) and whether the assessed penalty may affect ENS’s on-going
commercial viability. Accordingly, the Tribunal sets out the following additional
facts relevant to its assessment of penalty.
103. On 29 August 2022, ENS released its preliminary results for the year ended 30
June 2022. ENS noted that:
“Kilimanjaro Consulting had recurring revenue of $3.9 million (up
17%) and contracted revenue of $3.3 million (up 25%) out of a total
revenue of $17.6 million (up 16%).
The changes MYOB are purporting to undertake in respect of the MYOB
Exo licensing will be challenging if MYOB is successful in implementing
these changes. These changes are being disputed by Kilimanjaro (refer
to announcement on 1 August 2022).”
ENS also noted that the breach of its BNZ banking covenants would continue,
and the board intended to seek a further waiver.
104. On 29 September 2022, ENS advised the market that BNZ had provided a
waiver of the 30 June 2022 banking interest cover and leverage covenant, and
a modification to the group’s banking covenants until 30 June 2023.
105. ENS released its annual report for the year ended 30 June 2022 on 7 October
2022, after advising the market on 29 September 2022 that its release would
be delayed. In its Directors’ Report ENS noted that while Kilimanjaro had
exceeded the revenue growth expectations (achieving 16% for the financial
year), significant challenges with MYOB’s direct entry into its market and more
businesses competing for scarce resources had put pressure on its margins.
ENS noted that Kilimanjaro’s future strategic direction would be largely dictated
by the final resolution it reached in its dispute with MYOB, as announced on 1
August 2022.
106. MYOB’s notified reduction in the ALF margin was not reflected in ENS’s financial
statements for the year ended 30 June 2022 (2022 financial statements) but
was covered extensively in the notes to the accounts. Note 1 – Basis of
Preparation clause (i) states:
“Going concern assumption
At 30 June 2022, the Group had incurred a loss of $2.193m and had
net working capital deficiency of $3.371m. In addition, the Group was
operating outside of its banking covenants. The Group had prepared a
budget for the 2023 year that indicated a significant improvement in
performance of the Kilimanjaro division, which was expected to have
enabled the Group to comply with its banking covenants for the year to
30 June 2023.
Whilst the division’s year to date results are tracking behind the
original 2023 budget, cost savings have been identified to mitigate the
impact. However, the Group’s Kilimanjaro division received notification
from its key software supplier (MYOB) of a substantial adjustment to
margins on MYOB Exo software transactions. The Group is disputing
this as detailed in note 26. The potential impact of this is significant to
23
the Division and Group’s level of future profitability. There is therefore
significant uncertainty in relation to the achievability of the group’s
current forecasts.
The Group requires significant improvement in profitability and cash
flow generation within the Kilimanjaro division, despite the (disputed)
reduction in MYOB Exo margin, to be able to operate in compliance
with modified banking covenants (note 26). This cashflow generation is
also required for capital investment within the group’s other
investments, including iSell Pty Limited. These conditions create
significant doubt as to the ability of the Group to operate as a going
concern.
In order to mitigate the risks presented for the Group, Kilimanjaro
management along with the Enprise board, are currently revisiting the
strategic plan of this division including diversification and a range of
cost reduction measures. To satisfy the future capital investment and
liquidity requirements of the Enprise Group, the board is intending a
capital raise with in the next 12 months. Based on the success of
previous capital raising the board is confident in its ability to raise
capital in the future.
The directors consider there is a reasonable expectation the Group will
have sufficient funds, in conjunction with the intended capital raise, to
enable it to continue to trade for the foreseeable future and be able to
continue to meet its liabilities as they fall due. Taking this into account,
it is the considered view of the directors that the Group remains a
going concern.
However:
• the heightened degree of uncertainty around the level of future
revenues and profitability, should the Kilimanjaro division’s dispute
with MYOB not result in the restoration of previous levels of margin
from the MYOB Exo product; and
• the need to successfully complete a capital raise along with
strategic and cost reduction initiatives within the Kilimanjaro
division,
indicate the existence of a material uncertainty that may cast
significant doubt on the Group’s ability to continue as a going concern,
and therefore the Group may be unable to realise its assets and
discharge its liabilities in the normal course of operations.”
69
107. The 2022 financial statements recorded the total carrying value of goodwill
allocated to Kilimanjaro as $6.6m. Note 17 stated that Kilimanjaro was tested
for impairment on a value in use basis, based on the 2023 financial year budget
which excluded any impact of the reduction in the ALF margin (as outlined in
note 26 – see below) and applied certain key assumptions. Note 17 also stated
that an “allowance has not been made within the FY2023 forecast for the
disputed reduction of the MYOB Exo margin as detailed in note 26. If the MYOB
Exo margin reduction was factored in, leaving all other variables held constant,
this would lead to an impairment of $2,318,000 at 30 June 2022 of the
Kilimanjaro Australia cash generating unit. The uncertainty around outcome of
the dispute and/or the implementation of any potential mitigation strategies
creates significant uncertainty as to the future levels of profitability within the
cash generating unit”
70
.
69
Page 13 of the ENS Annual Report for the year ended 30 June 2022.
70
Page 29 of the ENS Annual Report for the year ended 30 June 2022.
24
108. Note 26 to the 2022 financial statements stated:
(a) Waiver of banking covenants
Enprise was in breach of their BNZ Loan covenants at year end.
BNZ has provided a waiver of the 30 June 2022 banking interest
cover and leverage covenant, and a modification to the group’s
banking covenants on 23 September 2022. These remove the
leverage ratio testing requirement, and temporarily waive the
interest cover ratio requirements until 30 June 2023.
(b) Dispute with MYOB
MYOB invoicing to the Kilimanjaro Consulting division from 1
August 2022 has been received charging significantly more than
the contractually agreed margins which Kilimanjaro Consulting has
previously received in both Australia and New Zealand on existing
customers using MYOB Exo Software. The impact of the reduction
of 42.86% would be approximately $935,000 per annum on future
revenue and would significantly impact the profitability of this
division. Enprise (via Kilimanjaro) advised MYOB on 30 August
2022 that it formally disputes this decrease in margin as in it’s
opinion this goes against the current business partner agreement
and will continue to challenge the margin change. Kilimanjaro
management along with the Enprise board are currently revisiting
the strategic plan of this division in light of this impact.”
71
109. ENS’s then auditor, RSM Hayes Audit (RSM), issued a qualified audit report
noting that it did not express an opinion on the 2022 financial statements
because of the significance of the matters regarding the use of the going
concern assumption and the carrying value of Kilimanjaro and deferred tax
assets. RSM noted that due to the significant level of uncertainty associated
with forecasting the group’s future cashflows as detailed in note 1(i) and given
the uncertainty of the outcome of any future capital raising being sufficient to
provide funding for the group’s capital investment and liquidity requirements, it
was unable to obtain sufficient appropriate audit evidence to form an opinion on
whether the use of the going concern assumption was appropriate. RSM also
noted that, as disclosed at note 17, significant uncertainties existed in relation
to the assumptions made regarding the carrying value of Kilimanjaro and the
level of future taxable profits expected to be available in relation to the group’s
deferred tax assets. RSM noted that it considered the impact of these matters
to be material and pervasive to the consolidated financial statements of the
group.
110. On 25 October 2022, ENS announced that it intended to raise up to $1.37million
in capital via a pro-rata 1 for 10 renounceable rights issue to eligible
shareholders (Rights Issue). ENS released an Offer Document on 1 November
2022 in which it noted that it was raising equity to, among other things,
continue the growth of Kilimanjaro, provide for diversification and fund the legal
defense of its position with MYOB. The Offer Document also included the
following information:
“Additional Disclosures
On 1 August 2022, Enprise disclosed to the NZX that MYOB have
purported to retrospectively reduce the margins that Kilimanjaro
71
Page 36 of the ENS annual report for the year ended 30 June 2022.
25
Consulting receives on existing sales of MYOB Exo software. The
impact of the purported reduction of 42.86% would be approximately
$935,000 per annum. This would significantly impact the support
services that Kilimanjaro Consulting is able to deliver to their MYOB
Exo software customers. The board rejects the assertion by MYOB that
they are able to unilaterally alter these margins. Enprise has advised
MYOB of its intention to formally dispute this purported decrease in
fees.
Also refer to note 26(b) on page 36 of Enprise’s Annual Report 2022,
which is available at www.nzx.com under the ticker code “ENS”.”
72
111. On 16 December 2022, ENS advised the market that:
“...Kilimanjaro has filed legal proceedings in the Federal Court of
Australia against MYOB.
On 1 August 2022 [ENS] advised NZX that its subsidiary [Kilimanjaro
Consulting] had disputed retrospective reduction in margins that
Kilimanjaro Consulting receives on existing sales of MYOB Exo
software.
Kilimanjaro has since sought to resolve the dispute by negotiation,
without success.
Accordingly, Kilimanjaro,...has now filed legal proceedings in the
Federal Court of Australia against MYOB Australia Pty Ltd (MYOB)
seeking relief to maintain the benefit of the bargain they entered into
with MYOB.
As noted in the announcement of 1 August, the impact of the
purported reduction of 42.86% is approximately NZ$935,000 per
annum.”
112. On 1 March 2023, ENS released its half year report for the period ended 31
December 2022, in which ENS disclosed that its board had reviewed the
goodwill of Kilimanjaro and due to the ongoing dispute with MYOB, MYOB
indicating further MYOB Exo margin reductions in future periods and the current
forecast, the board had elected to write down the goodwill value by $2.363
million.
113. ENS released its financial statements for the year ended 30 June 2023 on 2
October 2023. ENS’s 2023 financial statements record at note 1(i):
“Going concern assumption
At 30 June 2023, the Group had incurred a loss of $10.752m and had
net working capital deficiency of $3.904m. In addition, the Group was
in breach of its banking covenants. The Group had prepared a budget
for the 2024 year that indicated a significant improvement in
performance of the Kilimanjaro division, which is expected to enable
the Group to comply with its banking covenants for the year to 30 June
2024. However as of the date of this report, it has not yet obtained an
72
Page 11 of the ENS Rights Issue Offer Document 1 November 2022.
26
agreement from BNZ to extend its existing facilities beyond their
current expiry date of 31 October 2023.
The Group requires significant improvement in profitability and cash
flow generation within the Kilimanjaro division, to be able to comply
with its banking covenants. This cashflow generation is also required
for capital investment within the Group's other investments, including
iSell Pty Limited. These conditions create significant doubt as to the
ability of the Group to operate as a going concern.
In order to mitigate the risks presented to the Group, Kilimanjaro
management along with the Enprise board, are currently revisiting the
strategic plan of this division including diversification and a range of
cost reduction measures. To satisfy the future capital investment and
liquidity requirements of the Enprise Group, the board completed a
capital raise in September 2023 (note 25). The board is confident that
the capital raised along with the budgeted improved financial
performance of Kilimanjaro will be sufficient for the Group’s
foreseeable cashflow requirements.
The directors consider that there is a reasonable expectation the Group
will have sufficient funds, in conjunction with the intended capital
raise, to enable it to continue to trade for the foreseeable future and
be able to continue to meet its liabilities as they fall due. Taking this
into account, it is the considered view of the directors that the Group
remains a going concern.
However:
- the heightened degree of uncertainty around the level of future
revenues and profitability, and
- the need to maintain or replace the debt facilities with BNZ together
with strategic and cost reduction initiatives within the Kilimanjaro
division, indicates the existence of a material uncertainty that may cast
significant doubt on the Group’s ability to continue as a going concern,
and therefore the Group may be unable to realise its assets and
discharge its liabilities in the normal course of operations.”
73
114. ENS’s new auditor, UHY Haines Norton, issued a qualified audit report, noting:
“Due to the significant level of uncertainty associated with forecasting
the Group’s future cashflows and in determining the likely outcome of
the ongoing negotiations with the Bank Of New Zealand to extend the
existing debt facilities expiring at the end of October 2023, or to obtain
suitable replacement financing as detailed in note 1(i), I was unable to
obtain sufficient appropriate audit evidence to enable me to form an
opinion as to whether the use of the going concern assumption is
appropriate. Consequently, I was unable to determine whether any
adjustments were necessary in respect of the consolidated statement
of financial position of the Group as at 30 June 2023, the consolidated
statement of comprehensive income or consolidated statement of
changes in equity.
115. Kilimanjaro has now resolved its dispute with MYOB, as announced to the
market on 28 September 2023 and 2 October 2023. ENS advised that
Kilimanjaro has entered into new BPAs with MYOB and that, while the new BPAs
73
Pages 13-14 of the ENS annual report for the year ended 30 June 2023.
27
do not reinstate the MYOB Exo margins, ENS expects that the terms of the new
BPAs and the growth in sales of the MYOB Advanced product will be sufficient to
offset the forecasted lost revenue of about $935,000 announced on 1 August
2022.
NZ RegCo and ENS submissions on penalty
116. In short, NZ RegCo submits that the appropriate penalty band for ENS’s breach
is Penalty Band 2 and that the appropriate starting point penalty is $200,000.
NZ RegCo submits that the limited observed impact of the Announcement
indicates that the breach was not of the most serious nature, but that this is
outweighed by the extended duration of the breach and a penalty towards the
higher end of the range for Penalty Band 2 is warranted.
117. NZ RegCo submits that having regard to the mitigating and aggravating factors
in this case, the greatest weight should be given to ENS’s uncertain financial
situation, and the starting point penalty should be substantially reduced to final
penalty of $125,000.
118. ENS submits that, in the event that the Tribunal does not accept ENS’s
submission that it did not breach Rule 3.1.1, the $125,000 penalty proposed by
NZ RegCo is disproportionate to the seriousness of ENS’s conduct. ENS
considers that the breach falls at the lower end of Penalty Band 2 given that
ENS did not consider that its continuous disclosure obligation had been
triggered in late May 2022, informed by its longstanding interactions with MYOB
and an understanding of MYOB’s difficult negotiation tactics. ENS submits that
the appropriate starting point penalty is $80,000.
119. ENS does not consider that there are any aggravating factors in this case and
that more weight should be afforded to the mitigating factors, in particular
ENS’s ongoing commercial viability. ENS submits that the appropriate overall
penalty, in the event that a breach is found, is $40,000.
Step 1: Tribunal assessment of the starting point penalty
Penalty Band factors
120. The Tribunal has considered the applicable penalty band factors relevant to
ENS’s breach and outlines its assessment of these below.
Applicable Penalty Band 1 factors
a) No loss caused by delayed Announcement;
b) Delayed Announcement had no/minor impact on investors or the market;
121. NZ RegCo says that “no tangible harm has been identified as a result of the
breach”, but submits that this factor has limited weight given that the delayed
release of Material Information generally has the potential to adversely impact
on market integrity. ENS submits that, in addition to the breach not causing
any loss, its conduct had no impact on investors or the market, noting NZ
RegCo’s acknowledgement that ENS is a relatively low liquidity Issuer and that
ENS’s share price movement following the Announcement’s release was very
moderate.
122. The Tribunal notes that when assessing whether the breach caused any loss or
had an impact on investors and/or the market, the Tribunal must consider
whether harm arose from the Announcement’s delayed release, not whether
harm arose from the Material Information itself (which was clearly significant to
ENS’s business). The Tribunal also notes that while the delayed release of
28
Material Information may generally have the potential to cause harm, it must
consider the circumstances of the particular matter at hand.
123. The price movement in ENS shares on the day of the Announcement was
negligible, with the price remaining stable until the release of ENS’s preliminary
results on 29 August 2022. While NZ RegCo identified an increase in trading
volumes following the release of the Announcement, these volumes were
relatively small (a daily average in the first week of August 2022 of 12,000
shares traded). The Tribunal notes that while ENS is generally a lightly traded
Issuer, it is possible that the lack of movement in the share price following the
Announcement reflected the market’s existing knowledge of the risks
associated with Kilimanjaro’s business and earlier announcements of MYOB’s
change in business strategy (to compete with their business partners through a
direct channel) and its acquisition of several business partners.
124. The Tribunal considers that no evidence has been presented that the delayed
Announcement caused any loss or had an impact on investors or the market.
c) No financial benefit and/or commercial advantage from delayed
Announcement;
125. NZ RegCo submits the breach provided a minor to moderate financial benefit
and/or commercial advantage to ENS with regard to (i) its engagement with
BNZ on a waiver of its banking covenants; and (ii) the financial information
available at the time of the Rights Issue. NZ RegCo argues that if ENS had
announced the Material Information on 27 May 2022 (i.e. before its financial
year end on 30 June 2022), “this would likely have escalated the impetus for,
and timing of, the process for ENS to quantify” its impairment of Kilimanjaro.
NZ RegCo notes that it was not until ENS released its half year report on 1
March 2023, that it disclosed its board had elected to write down the goodwill
value of Kilimanjaro by $2.363m. NZ RegCo says that had the impairment
been finalised and clearly disclosed in the 2022 financial statements, this would
have provided more definitive information to BNZ and to prospective investors
considering the Rights Issue.
126. ENS submits that its conduct did not result in any financial benefit or
commercial advantage to ENS. ENS notes that the delayed annual report for
the period ended 30 June 2022 and qualified audit report were due to the
significant uncertainty in ascertaining how the MYOB dispute might be resolved
at that time. ENS considers that it adopted a conservative position in its 2022
financial statements, given that it was in an ongoing dispute with MYOB
74
. With
regards to BNZ, ENS says that it commenced formal discussions on the waiver
from its banking covenants on 9 September 2022, after the Announcement was
released. ENS says that “BNZ has confirmed to ENS it does not consider there
to be any issues with the timing and circumstances in which ENS commenced
discussions on and obtained a waiver”
75
.
127. The Tribunal is not in a position to opine on whether the 2022 financial
statements should have included the impairment of Kilimanjaro’s goodwill value
if the Announcement had been released on or about 27 May 2022
76
. Despite
the impairment not being included in the 2022 financial statements, ENS’s 2022
annual report included significant warnings with respect to the impact of a
74
Paragraph 36.1 of the SOR.
75
Paragraph 32.2 of the SOR.
76
The Tribunal notes that the FMA conducted an enquiry into ENS’s 2022 financial statements,
and in particular, information relating to the recoverable amount of Kilimanjaro and recognised
deferred tax assets. The FMA issued ENS a public warning for failing to keep proper accounting
records on 11 August 2023, noting that ENS did not provide it with sufficient evidence to
support disclosures and assumptions made in preparing the 2022 financial statements – see
here.
29
reduced ALF margin, including that the “material uncertainty” cast significant
doubt on the group’s ability to continue as a going concern and a qualified audit
report, and note 17 included advice on what the impairment value would have
been if it had been included (see paragraphs 105 to 109 above).
128. With regards to the BNZ bank waiver, ENS was already operating under a
waiver issued in March 2022 in respect of earlier breaches of its banking
covenants. ENS advised NZ RegCo during its investigation that its banking
covenants were measured on a rolling 12-month basis every 6 months and that
it was in regular communication with its BNZ manager
77
. The Announcement
was released before the waiver was considered and granted by BNZ and ENS
submits that BNZ has confirmed that it does not consider there to be any issues
with the timing and circumstances in which ENS obtained the waiver. Based on
this submission from ENS
78
, the Tribunal does not consider that the delayed
Announcement gave ENS a commercial advantage in its dealings with BNZ as
suggested by NZ RegCo.
129. With regards to the Rights Issue, the Tribunal notes that the dispute with
MYOB, and the potential impact of the reduced ALF margin, were highlighted in
the Offer Document (see paragraph 110 above). While the, at that stage
potential, impairment was not specifically highlighted in the Offer Document,
ENS’s 2022 financial statements contained significant cautionary remarks
(including at notes 1(i), 17 and 26) such that we consider that shareholders of
ENS who subscribed to the Rights Issue would likely have been aware of the
significant uncertainty at that time and cognisant of the inherent on-going risks
of Kilimanjaro’s business.
130. For these reasons, the Tribunal is not satisfied that the breach provided a minor
to moderate financial benefit and/or commercial advantage to ENS as
submitted by NZ RegCo.
Applicable Penalty Band 2 factors
d) Delayed Announcement had potential to cause moderate impact on
investors and the market;
131. RegCo submits that a breach of the continuous disclosure requirements has the
potential to cause significant harm to investors and/or the market given the
possibility of substantial trading, both in terms of volume and price changes,
during a period of information asymmetry. NZ RegCo acknowledges that ENS is
historically a relatively low liquidity Issuer, which lessens the potential impact of
the delayed Announcement. However, it considers that given the nature of the
harm Rule 3.1.1 is designed to prevent, combined with the length of the breach,
the breach had the potential to cause a significant impact. ENS considers that
any potential for harm to occur was low given ENS’s trading volumes during
that period and notes that any breach did not continue for an extended time
(discussed further below).
132. As noted in the HLG decision, the key to whether there is potential harm is to
look at the nature of the harm that the relevant Rule is seeking to prevent and
to assess the potential for that harm to occur at the time of the breach. Rule
3.1.1 aims to ensure that the market is fully informed of Material Information in
a timely manner so that investors can make informed investment decisions.
133. The Tribunal notes that ENS had previously advised the market of the potential
risks associated with Kilimanjaro’s business, including the risk MYOB could seek
to change the commercial terms in the BPAs, and in particular, seek to reduce
77
Annexure 41 of the SOC.
78
ENS did not provide the Tribunal with a copy of this confirmation from BNZ.
30
profit margins (see paragraph 18 above). ENS had also notified the market of
the major change in MYOB’s strategy, following its acquisition by KKR, “to
compete in the sector” with its business partners (such as Kilimanjaro) and
MYOB’s acquisition of several business partners. Given that this information
had been released to the market well before 27 May 2022, the Tribunal
considers that the market had some knowledge of the potential risks facing
ENS, and in particular, Kilimanjaro.
134. As noted by NZ RegCo, the potential for harm to investors is significant if there
is information asymmetry in the market. In this case, trading did not occur
during a period of information asymmetry
79
.
135. For these reasons, along with ENS’s low liquidity, the Tribunal considers that
there was a moderate, as opposed to significant, potential for harm arising from
the delayed Announcement.
Applicable Penalty Band 3 factors
e) Serious compliance breach;
136. As noted in the HLG decision, determining whether a breach is a minor,
moderate or serious administrative, operational or compliance breach is not an
assessment of the overall severity of the breach and conduct of the respondent
(that happens when the Tribunal considers all the relevant factors). Rather, it
is an assessment of the seriousness of the administrative, operational or
compliance failure having regard to the nature of the Rule breached.
137. NZ RegCo submits that a breach of Rule 3.1.1 should be categorised as a
serious compliance breach given that continuous disclosure is essential for
maintaining the integrity of the market. ENS acknowledges the importance of
continuous disclosure for the integrity of the market, but submits that, given
Kilimanjaro’s continued discussions with MYOB before the Announcement, the
breach is, at most, a moderate administrative, operational and/or compliance
breach.
138. The requirement under Rule 3.1.1 to immediately disclose Material Information
to the market is a fundamental obligation placed on Issuers under the
Rules. The Rules are intended to ensure that New Zealand’s listed capital
markets are efficient, transparent and fair. Any failure to promptly release
Material Information has the potential to have an adverse effect on the NZX
Markets. Given the importance of continuous disclosure to market integrity, the
Tribunal considers that the breach of Rule 3.1.1 is a serious compliance breach.
f) Continued for an extended period;
139. Each penalty band includes, as a factor, whether the breach was promptly
addressed (Penalty Band 1), occurred for a short period of time (Penalty Band
2) or continued for an extended period of time (Penalty Band 3).
140. NZ RegCo submits that ENS’s breach, which lasted approximately nine weeks,
continued for an extended period. ENS submits that the duration of any breach
was, at most, moderate.
141. The Tribunal noted in its determination in NZMDT 2/2023 NZX v 2 Cheap Cars
Group Limited (the 2CC decision), that when assessing the duration of a
breach, the Tribunal will have regard to the nature of the breach as some Rules
79
Information asymmetry occurs when a person is privy to Material Information not generally
available to the market (e.g. Material Information is given to an analyst before it is released to
the market).
31
are more time sensitive than others. For example, a breach which has resulted
in the suspension of trading in an Issuer’s securities for 10 Business Days could
be considered a breach which continued for an extended period given halts in
trading can negatively impact investor confidence and severely disrupt the
market (particularly for an Issuer with a highly liquid stock). Conversely, the
provision of an administrative notice (for example a notice of the redemption of
treasury stock) 10 Business Days after it was due may be considered a breach
of short duration.
142. The Tribunal’s most recent decisions on continuous disclosure breaches provide
some guidance for assessing the duration of ENS’s breach:
a. In NZMDT 7/2021 NZX v QEX Logistics Limited (QEX), the Tribunal
considered that QEX’s breaches continued for an extended period given
its failure to disclosure for approximately two months, among other
things, that the Ministry of Primary Industries had brought charges
against the company and its Director;
b. In NZMDT 6/2021 NZX v Geneva Finance Limited (GFL), the Tribunal
considered GFL’s nine Business Day delay in releasing updated earnings
guidance was “lengthy”. Similarly, in NZMDT 5/2021 NZX v QEX, the
Tribunal considered a five Business Day delay between QEX becoming
Aware and advising the market that inventory of a value which, if not
recovered, would have a material adverse impact on its financial
performance, had been removed from its secured China Customs
bonded warehouse was “lengthy”; and
c. In NZMDT 1/2021 NZX v NZME Limited (NZM), the Tribunal found
NZM’s approximately three-hour delay in announcing the resignation of
its Chair just before its ASM was a breach of limited duration.
143. The Tribunal considers that when having regard to the nature of the breach in
this case, and the obligation to disclose Material Information promptly and
without delay, the approximately nine-week delay in releasing the
Announcement was extended and falls within Penalty Band 3.
Starting point penalty
144. After weighing up all the factors outlined above and assessing the overall
seriousness of the breach, the Tribunal considers that the breach falls within
Penalty Band 2.
145. As for determining the starting point penalty within Penalty Band 2, the
Tribunal considers that this matter falls within the mid-range of Penalty Band 2.
While a breach of Rule 3.1.1 is a serious compliance breach, in this case there
was no evidence of loss or market impact as a result of the delayed
Announcement and the Tribunal considers that the breach had the potential to
cause a moderate impact on investors and the market.
146. The Tribunal considers that the appropriate starting point penalty is $120,000.
Step 2: Tribunal assessment of factors relating to ENS
147. To determine the final level of penalty, the Tribunal must adjust the starting
point penalty of $120,000 to reflect the aggravating and mitigating factors
relevant to ENS.
148. Before setting out its assessment of the mitigating and aggravating factors
relevant to this case, the Tribunal makes some initial observations.
32
149. NZ RegCo submits that the breach was caused by ENS’s negligence or
inattentiveness to its continuous disclosure obligations, which should be treated
as an aggravating factor. NZ RegCo argues that rather than considering
whether MYOB’s notification on 27 May 2022 had potential continuous disclosure
implications, ENS appeared to focus solely on its assessment of the ability to
dispute MYOB’s notified amendments to the Agreement.
150. ENS submits that its board exercised judgement and considered its continuous
disclosure obligations. ENS’s argues that this was a situation where, drawing on
its previous experience with MYOB, it consciously determined that it did not
need to make a disclosure while it was engaged in a negotiation process on a
potential BPA change that was yet to commence.
151. The Tribunal acknowledges that this was a complex and evolving situation. The
Tribunal does not consider that ENS’s breach was negligent, but rather reflects
the fact that in a developing situation, it can be difficult to determine when the
obligation to disclose is triggered. Nor does the Tribunal consider that ENS’s
breach was intentional given that it did release the Announcement, albeit later
than the date the Tribunal has assessed it should have been released.
152. ENS says that it carefully considered its ongoing correspondence and
discussions with MYOB on the purported ALF margin reduction in the context of
its continuous disclosure obligations. ENS says it had a genuinely held and
reasonable view that it was in an incomplete negotiation. However, the Tribunal
notes that the minimal board documentation provided during the relevant time
does not support the contention that ENS’s Board carefully considered its
continuous disclosure obligations. The Tribunal notes that Issuers should record
in their board meeting minutes the reasons for a decision to disclose or not
disclose information when this issue is considered
80
. Clear and transparent
records can demonstrate that a board had effective compliance procedures in
place and that its conclusions were reasonable in the circumstances known to it
at the relevant time.
Mitigating factors
(1) Cooperated with investigation;
153. NZ RegCo submits that, although ENS was prepared to engage in NZ RegCo’s
investigation, its responses were “often cursory and in summary form”, which
necessitated multiple iterations of questions and repeated requests for the same
documents. NZ RegCo considers that ENS did not fully engage with the
importance of the investigation or its lines of questioning. NZ RegCo argues
that ENS’s lack of engagement is an aggravating factor.
154. ENS says it did cooperate with NZ RegCo, but that its engagement reflects a
small business operating under pressure and using its best endeavours to
respond fully and openly.
155. The Tribunal notes that the factual circumstances in this matter are complex.
NZ RegCo was also making inquiries on a separate issue, which may have
complicated matters. The Tribunal has seen no evidence that ENS sought to
deliberately withhold information or that it was intentionally obstructive
(although not all of the correspondence between NZ RegCo and ENS was
provided to the Tribunal). In these circumstances, the Tribunal considers that
ENS cooperated, but this is not a significantly mitigating factor given the
80
See Appendix 4, clause 8 of the Guidance Note.
33
apparent difficulty NZ RegCo had in obtaining the information necessary for its
investigation
81
.
(2) Intention to improve practices;
156. ENS advises that it is “commencing a process to review all procedures and
compliance with its regulations”
82
.
157. The Tribunal notes that this intention appears vague and urges ENS to give this
priority, particularly in light of the FMA’s warning on record keeping (see
footnote 76 above).
158. All Issuers should have robust procedures in place to enable boards to consider
and carefully determine their continuous disclosure obligations and to record
those decisions.
(3) One-off breach of the continuous disclosure obligations;
159. NZ RegCo says that it is satisfied that ENS’s breach was a one-off event and is
not aware of any other continuous disclosure breaches by ENS.
(4) Adverse effect on ENS’s ongoing commercial viability
160. Under Procedure 9.2.5(i) the Tribunal may consider, as a factor likely to lower
the starting point penalty, the “starting point penalty having an adverse effect
on the ongoing commercial viability of the Respondent”. This is a new
mitigating factor introduced when the Procedures came into force on 17 October
2022.
161. This mitigating factor does not relate to the size of an Issuer. As noted in the
appeal of the 2CC decision, all Issuers are required to comply with the Rules,
regardless of size, and an Issuer’s size is not, of itself, a mitigating or
aggravating factor. Rather, this mitigating factor relates to the financial
position of an Issuer and whether the proposed starting point penalty would
adversely effect its ongoing commercial viability. As NZ RegCo submits, a
relatively high threshold is required before this factor will apply given that the
penalties imposed by the Tribunal are intended to be punitive.
162. While the resolution of its dispute with MYOB is a positive development, there
remains uncertainty around the level of ENS’s future revenue and profitability.
Given this, and in light of ENS’s 2023 financial statements and qualified audit
report, the Tribunal considers that the adverse effect of the starting point
penalty ($120,000) on ENS’s ongoing commercial viability is a significant
mitigating factor in this case.
Aggravating factors
(1) Compliance history;
163. Previous Rule breaches are relevant when assessing an Issuer’s compliance
history. NZ RegCo advises that ENS has been subject to three investigations for
late annual reports, one of which was referred to the Tribunal in 2019. In
NZMDT 7/2019 NZX Limited v Enprise Group Limited, the Tribunal found that
ENS breached the Rules by filing its 2019 annual report 14 Business Days late.
ENS was fined $35,000 and publicly censured. However, given NZ RegCo’s
advice that ENS does not appear to have previously breached its continuous
81
Annexure 42 of the SOC.
82
Paragraph 66.2 of the SOR.
34
disclosure obligations, the Tribunal does not consider ENS’s late annual reports
to be particularly aggravating in this case.
Penalty
164. The Tribunal considers that having regard to the factors noted above, a
significant reduction from the starting point penalty is warranted. The Tribunal
imposes a final penalty of $60,000. In determining the final penalty, the
Tribunal has given particular weight to ENS’s overall conduct in circumstances
where it had a genuine belief that it was in an incomplete negotiation in what
were complex circumstances, and to ENS’s ongoing commercial viability.
165. The Tribunal notes that using the penalty imposed in this case as a comparison
to other breaches of the continuous disclosure requirements will be difficult
given the significant reduction in penalty due to ENS’s ongoing commercial
viability. Accordingly, the penalty imposed in this matter is unlikely to act as a
deterrent for other Issuers in accordance with Procedure 9.1.4.
Comment on previous Tribunal decisions
166. This is the first breach of Rule 3.1.1 considered by the Tribunal since the
Procedures came into force. The Tribunal considers that its previous decisions
involving breaches of the continuous disclosure requirements are of limited
value as a comparison for assessing the penalty in this case given the
amendments to the penalty setting provisions in the Procedures. The Tribunal
also notes that having regard to an adverse effect on the ongoing commercial
viability of the respondent is a new mitigating feature, introduced in the
Procedures. Given the importance of this factor in determining the overall
penalty for ENS, the penalties imposed in prior decisions are not directly
comparable.
Public censure
167. NZ RegCo submits that a public censure of ENS is appropriate because the
breach falls within Penalty Band 2 and none of the factors cited in Procedure
9.3.3 (when the name of a respondent is not likely to be published) are
satisfied. ENS accepts that, if the Tribunal does find a breach of Rule 3.1.1, in
accordance with the Procedures, a censure would be required.
168. The Tribunal has considered the guidance set out in Tribunal Procedure 9.3. In
particular, that the name of a respondent is likely to be published when:
a. the impact of the breach has caused the public to be harmed and/or
has damaged public confidence in the sector or the breach had the
potential to cause harm to the public or the potential to damage public
confidence in the sector; and/or
b. the respondent has been involved in repeated breaches and shown
disregard for the Rules; and/or
c. the respondent committed a breach that falls within Penalty Band 2 or
Penalty Band 3 of Procedure 9.
169. The Tribunal considers that it is appropriate in this case to publicly censure ENS
given that a breach of the continuous disclosure requirements has the potential
to cause harm to the public and to damage public confidence in the market, and
the breach falls within Penalty Band 2.
170. The Tribunal notes that its public censure of ENS will be released together with
a copy of this determination in full.
35
Costs
171. NZ RegCo has sought an order that ENS pay the costs of NZX in bringing this
proceeding and the costs of the Tribunal in considering this matter. ENS has
not made any submissions on costs.
172. Generally, where a respondent is found to have breached the Rules the Tribunal
will award the actual costs of NZX and the Tribunal against that party. Given
the Tribunal has found ENS in breach of the Rules, the Tribunal considers that it
is appropriate to make a costs award against ENS. However, in recognition of
the complexity of the factual situation, ENS’s ongoing commercial viability and
the educative value to the market of this decision, the Tribunal caps the award
at $15,000 (excluding GST, if any).
Orders
173. The Tribunal orders that ENS:
a. be publicly censured in the form of the announcement attached to this
determination (which will include a full copy of this determination);
b. pay $60,000 to the NZX Discipline Fund; and
c. pay the costs incurred by NZX and the Tribunal in considering this
matter, up to a maximum amount of $15,000 (excluding GST, if any).
DATED 8 DECEMBER 2023
Hon Sir Terence Arnold KC
36
Appendix 1
Penalty Band Factors
Penalty Band 1 Minor
Breaches
• The breach is a minor administrative, operational
and/or compliance breach.
• The breach has not caused any loss.
• The breach has not had an impact on or has only
had a minor impact on investors, clients, and/or the
market.
• The breach was promptly addressed.
• The breach did not result in a financial benefit
and/or commercial advantage to the Respondent.
Penalty Band 2 Moderate
Breaches
• The breach is a moderate administrative,
operational and/or compliance breach.
• The breach has caused a moderate impact on
investors, clients, and/ or the market.
• The breach had the potential to cause a moderate
impact on investors, clients, and/or the market.
• The breach occurred for a short period of time.
• The breach resulted in a minor to moderate financial
benefit and/or commercial advantage to the
Respondent.
Penalty Band 3 Serious
Breaches
• The breach is a serious administrative, operational
and/or compliance breach.
• The breach has caused significant impact on
investors, clients and/ or the market.
• The breach had the potential to cause significant
impact on investors, clients and/or the market.
• The breach continued for an extended period of
time.
• The breach continued to occur once discovered.
• The breach resulted in a significant financial benefit
and/or commercial advantage to the Respondent.
• The Respondent committed the breach to obtain a
financial benefit and/or a commercial advantage.
37
Appendix 2
9.2.5
The following non-exhaustive factors relating to the Respondent may be
considered by the Tribunal as factors that are likely to lower the starting point
penalty:
(a) The Respondent admitted the breach at an early stage, and/or self-reported
the breach;
(b) The Respondent cooperated fully and openly with NZX or CHO (as the case
may be) with any investigation surrounding the breach and provided all
material facts;
(c) The Respondent has implemented or has undertaken to implement or enhance
processes, systems, or procedures to prevent similar future breaches;
(d) The breach occurred even though effective compliance / administrative /
operational processes were in place;
(e) The Respondent provided prompt redress for any harm caused as a result of
the breach;
(f) The breach is a one-off event and does not form part of a pattern of behaviour
or conduct;
(g) The Respondent has a good compliance history;
(h) where applicable, the Respondent obtained independent legal, accounting or
professional advice that the conduct did not constitute a breach and
reasonably relied upon that independent advice; and
(i) the starting point penalty having an adverse effect on the ongoing commercial
viability of the Respondent.
9.2.6
The following non-exhaustive factors relating to the Respondent may be
considered by the Tribunal as factors that are likely to increase the starting point
penalty or reduce the ability to lower it:
(a) The breach was caused intentionally by the Respondent, or through the
Respondent’s recklessness;
(b) The Respondent hindered NZX or CHO (as the case may be) with any
investigation surrounding the breach and did not provide all material facts;
(c) The Respondent should reasonably have been aware that the breach could
occur and did not implement or undertake to implement or enhance
processes, systems or procedures to prevent similar future breaches;
(d) The Respondent was aware that its compliance / administrative / operational
processes were not adequate or ineffective and failed to rectify them;
(e) The Respondent failed or delayed in providing redress for any harm caused as
a result of the breach;
(f) The breach is a recurring breach, or forms part of a pattern of behaviour or
conduct;
(g) The Respondent has a poor compliance history; and
(h) Where applicable, the Respondent either failed to seek independent legal,
accounting or professional advice or acted contrary to legal, accounting or
professional advice obtained that the conduct did constitute a breach.
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
Other issuers discussed similar conditions around this time
Matched by meaning across NZX announcement text, not keywords — based on our semantic index of announcement bodies.
- CDI — CDL Investments New Zealand Limited: Public Censure of CDL Investments New Zealand Limited2023-11-15
“16 November 2023 PUBLIC CENSURE OF CDL INVESTMENTS NEW ZEALAND LIMITED BY THE NZ MARKETS DISCIPLINARY TRIBUNAL FOR BREACHES OF NZX LISTING RULE 2.13.2(b) AND RULES 3.8.1(b) AND (d) In a determination of the NZ Markets Disciplinary Tribunal (the Tribunal) dated 3 November…”
- 2CC — 2 Cheap Cars Group Limited: Public Censure of 2 Cheap Cars Group Limited2023-10-03
“18 “public” (a reference to media commentary); and (3) that 2CC was “on notice” of the Independent Director requirements given the events of 2022. 111. 2CC submits that any decision made by the Tribunal on this matter should be published and there is no reason to delay pub…”