LONDON (Alliance News) - The largest shareholder in JKX Oil and Gas PLC has received a favourable ruling against the company from the Supreme Court of the UK over a dispute dating back to 2013.
Eclairs Group Ltd is the largest shareholder in JKX Oil and Gas with a 27.5% stake in the company, according to JKX's website.
Back in May 2013, Eclairs Group was trying to drum up support from fellow shareholders to try and oust Chief Executive Paul Davies, who still holds that role at JKX, by issuing an open letter urging shareholders to vote against his re-election at the annual general meeting which was held in June 2013.
Eclairs had concerns about he company's performance, which it claims has deteriorated over the last few years, leading it to try and shake up the board.
Eclairs also wanted shareholders to reject other resolutions at the AGM, including the director's remuneration report which outlines the salaries and bonuses of directors and the resolution that would allow JKX Oil to make market purchases of its own shares.
However, JKX Oil fought back by on the day of the AGM by exercising powers under Article 42 of its articles, allowing JKX to suspend the right of Eclairs vote on the resolutions - meaning the votes cast by Eclairs were not counted.
JKX claimed the information provided at that time by Eclairs concerning its stake in the company was "false or materially inaccurate" in support of its argument that it could suspend any votes cast by Eclairs.
Two-and-a-half years later, the Supreme Court of the UK has now ruled that Eclairs can appeal against JKX's use of Article 42 to suspend the votes cast by Eclairs at AGMs - which has now caused a stir.
That means the votes cast by Eclairs must be taken into account and seen as valid. Since that AGM in 2013, JKX has not considered any votes cast by Eclairs at its meetings - blocking the shareholder from attempting to influence the company.
As a result, all of the votes cast by Eclairs at AGMs since 2013 must be taken into account.
At JKX's most recent AGM held in June 2015, Eclairs once again voted against the resolutions allowing the company to make market purchases of its own shares and to approve the company's remuneration report.
Originally, those two resolutions were passed but now that JKX must recognise the votes cast by Eclairs the two resolutions were rejected by shareholders.
Eclairs did not confirm whether it voted against the re-election of Chief Executive Davies at the latest AGM. Regardless, even when taking Eclairs votes into account, it would not have been enough to eject him from the board.
JKX Oil and Gas, in its own statement, confirmed the ruling that allows Eclairs to appeal against the company's use of the article to block its votes but did not provide much guidance on what will happen as a result.
The company seemed slightly surprised about the ruling against the company after it said the High Court, which heard the case before it was moved up to the Supreme Court, originally found that the information provided by Eclairs was "false or materially inaccurate" and that the JKX board had "acted in good faith" which was working in the best interests of shareholders, it said.
The company said Friday it will now "consider the implications" of the judgement, adding it would "continue to take all appropriate steps to protect and promote JKX's best interests."
Michael Bakunenko, director of Eclairs, said: "We are pleased with the Supreme Court judgement. It is crucial that votes by Eclairs Group Ltd, JKX's largest shareholder, are accounted for appropriately... [and] our view remains that the directors' remuneration report should be tied to the company's performance which unfortunately continues to deteriorate."
"As stated before, our sole intention is to recover the value in JKX which has been lost over the last few years," he added.
JKX shares were down 1.1% to 27.2101 pence on Friday.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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