RNS Part 25 May 2020 09:03
The Loan, made by UE Lendco to UEP, was made in advance of UEP commencing fundraising activities so that UEP could gift the proceeds of the Loan to the Harris Federation in time for the refurbishment of a nursery school in south-east London, and fund ongoing running costs to provide for meals, developmental and education needs for children in a disadvantaged area. Social impact considerations are an important part of the Company's strategy and whilst in 2019 it was determined by the Board that the Company was not in a position to make a substantial gift donation to the project, and accordingly a loan was made instead.
UEP was formed in March 2019 and registered as a charity in September 2019, to support the Company's charitable endeavours. On the basis of charity law advice received at the time of its formation, UEP is not a subsidiary of the Company and instead is owned and controlled by the CEO, Randeesh Sandhu, and his wife Daljit Sandhu who acts as COO. Both Mr Sandhu and Mrs Sandhu are directors of UE Lendco and UE Amco. As it is a charitable company, neither Mr or Mrs Sandhu have any economic interest in UEP. There is a board of four directors of UEP, two of whom are not directors of the Company or its subsidiaries.
In conjunction with the preparation of the Company's audited financial statements for the year ended 31 December 2019 which is currently on-going, the Loan was brought to the attention of Liberum Capital Limited ("Liberum"), the Company's nominated adviser, for the first time by an independent director. UEP is a related party of the Company for the purposes of the AIM Rules for Companies and the Loan is a related party transaction for the purposes of Rule 13 of the AIM Rules for Companies. Liberum was not consulted at the time that the Loan was entered into as required by AIM Rule 13. Liberum is unable to advise that the Loan is fair and reasonable insofar as the shareholders are concerned.
As UEP is a connected person of Mr and Mrs Sandhu for the purposes of the Companies Act 2006, shareholder approval should also have been obtained prior to the Loan being made because it is a loan to a person connected with directors of the Company or its subsidiaries under section 200 of the Companies Act 2006. The Company is not currently expecting to take any immediate action to remedy this matter.
The board of directors has decided that an inquiry into the circumstances concerning the making of the Loan should be conducted by an independent third party.
The Loan Agreement provides that the Loan will be repaid out of charitable donations received by UEP. As UEP is a newly formed charity with limited charitable donations to date, Mr and Mrs Sandhu informally agreed at the outset personally to underwrite the balance of the Loan not funded from charitable donations to UEP and voluntary contributions from other employees of the Company, to ensure that the Loan is repaid in full, and this remains the case.
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