MUBL.L Regulatory News (MUBL)

MBL Group plc / Epic: MUBL / Index: AIM

RNS ANNOUNCEMENT: The information communicated in this announcement contains inside information for the purposes of Article 7 of Regulation 596/2014.

For immediate release

14 August 2018

MBL Group PLC

("MBL" or the "Company" or the "Group")

CANCELLATION OF ADMISSION OFORDINARY SHARES TO TRADING ON AIM

and

NOTICE OF GENERAL MEETING

MBL Group plc (AIM: MUBL) announced that further to its announcement yesterday, it is today convening a meeting of Shareholders in order to consider the cancellation of the Company's admission to trading on AIM. Under the AIM Rules, a proposal to cancel the trading of the Company's securities on AIM is conditional on the requisite notice being given to the London Stock Exchange and on consent being granted in general meeting by Shareholders holding not less than 75 per cent. of the votes cast on the resolution proposed at such general meeting. The Company has also today given notice to AIM of the proposed Cancellation.

In addition, the Circular sets out why the Directors recommend that you vote in favour of the Resolution to be proposed at the General Meeting. Terms in this announcement have the same meaning as in the Circular.

Shareholders should note that conditional upon the Resolution being passed at the General Meeting, it is anticipated that the last day of trading of the Company's Ordinary Shares on AIM will be Thursday 13 September 2018, with cancellation of admission to trading on AIM becoming effective at 7.00 a.m. on Friday 14 September 2018.

Notice of the General Meeting to be held on 5 September 2018 at 12.00 p.m. at the offices of Thrings LLP, The Paragon, Counterslip, Avon, Bristol, BS1 6BX is set out at the end of the Circular, which will be posted to Shareholders today and made available on the Company's website, www.mblgroup.co.uk.

Background to, and reasons for, the Cancellation

MBL's Ordinary Shares have been admitted to trading on AIM for some time. Recent years have seen increased competition for the Group's products, a number of changes to the Board and disagreements with various shareholders over the direction of the business.

The current Board has decided to set out below the recent history of the Company. This is intended to assist the Company's Shareholders to consider the appropriateness of the proposed delisting from AIM with the prospect of pursuing a winding up and capital distribution to Shareholders.

The Company has suffered several issues over the past decade, which may have resulted in the unfortunate depletion of Company assets. The Company makes no assertion that any action of any one person, Shareholder or director has resulted in the depletion of Company assets. The events outlined below reflect the potential concerns of shareholders and directors and the actions undertaken by any party may have been founded or justified for reasons in their possession alone. This Board makes no judgement on the actions of previous boards or Shareholders although wishes to set out the history to highlight to the Shareholders the Board's belief that the proposed course of action is now most suitable.

The Company and its then subsidiaries suffered allegations that the conduct of directors was not satisfactory as far back as 2007. The allegations in 2007 regarded transactions related to companies associated with a shareholder. Those allegations considered whether the transactions were at arm's length. The current Board believes that nothing was proven at the time and it is not in possession of any information that would support these allegations.

In 2010, a Shareholder, who subsequently sold their shares, raised concerns over bonuses paid to directors. This Board is not in possession of any information that would support those concerns.

Allegations were made by a Shareholder and consultant to the Company following the termination of their consultancy agreements in 2011. Those allegations related to a number of different issues, but were subsequently retracted.

Also, in 2011, a Shareholder wrote to the then non-executive chairman stating their concern and disappointment over bonuses paid to that director and the other directors, particularly in light of the investment choices made by the Board.

In May 2014, David Anthony ("Tony") Johnson was appointed as a non-executive director. In June 2014, Peter Cowgill resigned as non-executive Chairman of the Company following a disagreement with the rest of the Board on the future strategy of the Company, to be replaced as Non-executive chairman by Tony Johnson. In 2015, Trevor Allan resigned as a director of the Company. Meanwhile, Tim Jackson-Smith was appointed as a non-executive director in 2016. Ten days after the appointment of Tim Jackson-Smith, Tony Johnson used his casting vote to appoint Christopher William ("Chris") Jones to the Board.

On 27 May 2016 a request was made by the Allan Family Trust, of which the current Chairman is a trustee, to convene a general meeting to vote on resolutions to remove Tony Johnson and Chris Jones as directors. On 3 June 2016 notice was given of the request to convene the general meeting. Following the request for the general meeting, certain Shareholders made allegations that certain persons and directors had wrongfully extracted funds from the Company, that a director knew of and failed to act on the extraction of funds and that the Allan Family Trust was not the holder of shares. Allegations of insider trading were also made. Whilst these allegations were made, previous Boards as well as this Board in conjunction with legal advisers have been unable to establish supporting evidence.

The Board during 2016 undertook investigations into the allegations and as such contracted several professionals including solicitors and accountants.

On 14 July 2016 the General Meeting proceeded and was adjourned in order to consider the validity of the Allan Family Trust ownership of shares. The General Meeting was postponed until 14 October 2016, which would be after the Company's 2016 Annual General Meeting.

Following the General Meeting, the then Board continued to undertake investigations into allegations. Those investigations led to the procuring of witness statements that made allegations against past directors.

An AGM was held on 21 September 2016. At that AGM a Shareholder and the then Board challenged the ownership of shares by the Allan Family Trust. The result of discussions on that day was the postponement of the AGM. The Board and certain Shareholders agreed to meet to discuss each other's concerns. That meeting took place on 29 September 2016.

On 14 October 2016, the General Meeting proceeded. It was agreed that the Company undergo a strategic review and Tony Johnson step down as director.

On 4 November 2016, Lisa Clarke stepped down as a director.

On 5 December 2016 Chris Jones stepped down from the Board to be replaced by Peter Palframan.

The Board consisting of Peter Palframan and Tim Jackson-Smith continued with the strategic review and sales process, however despite being in receipt of offers, were unable to secure a disposal of either trading division.

Peter Palframan's appointment was not renewed at the AGM on 28 September 2017. As a result, the Company's AIM listing was temporarily suspended on 5 October 2017.

On 24 October 2017, I was appointed as a Director. On the same day, a Shareholder requested an investigation into the dilution of Company assets. The investigation was undertaken following the indication that the Shareholder would meet the cost of a forensic exercise. It was announced on 22 December 2017 that there were no findings of any wrongdoing and the Shareholder did not meet the costs of the exercise. On the same day, the Board announced a request from another Shareholder to investigate the dilution of the Company's assets over the past 24 months. The Board subsequently sought clarification from the Shareholder and the investigation has been ongoing.

On 21 December 2017, James Reynolds was appointed as a director. On 5 January 2018, Tim Jackson-Smith stood down as a director.

The Garden Homes Division was subsequently sold to Invalesco Limited on 15 March 2018 for £800,000 in cash.

On 15 June 2018, the Company announced that, having taken both legal and insolvency advice, administrators had been appointed to Windsong International Limited, which made up the Home Entertainment division.

With effect from the date of the appointment of administrators to Windsong International Limited, MBL Group Plc became a "Rule 15 Cash Shell" under Rule 15 of the AIM Rules. At the same time the Company confirmed its intention that, as it had now disposed of all the Group's trading businesses, it would seek to return cash to Shareholders and to provide for an orderly winding up of the Company. The Board announced that it believed that this process would be achieved in the most efficient and cost-effective manner as a private company as it would, inter alia, be able to save the additional running costs of being admitted to trading on AIM. Therefore, the Company gave notice to AIM, under AIM Rule 41, that it intended to seek cancellation of its admission to trading on AIM at the earliest opportunity.

Most recently, as explained further below, the Company announced that it has been fined £75,000 and been censured in relation to breaches of the AIM Rules for Companies whilst under the stewardship of a previous board.

The Company has little opportunity to make a return to Shareholders should it continue to face the costs such as those arising from further requests for investigations, litigious behaviour and the associated additional costs involved in investigating and defending these claims whilst maintaining its public company status. Having completed the sale of the Garden Homes division and put Windsong International Limited into administration, your Board believes that it has actioned the conclusions of the strategic review originally initiated by the Board in late 2016, and endorsed by Shareholders, so leaving the way open to return capital to Shareholders. As at 31 July 2018, the Company had a cash balance of approximately £800,000. In addition, it expects to receive the balance of the deferred consideration for the sale of the Garden and Home division, amounting to £375,000, on or before 31 August 2018, in accordance with the terms of the sale agreement. Out of this combined cash amount, the Company will have to pay the fine described below and ongoing costs of the Company until dissolution, prior to any distribution to Shareholders.

Your Board therefore strongly believes that the Company's recent history supports its conclusion that Cancellation followed promptly by a return of capital to Shareholders is in the best interests of Shareholders as a whole.

AIM Notice

On 13 August, the Company made the following RNS announcement:

"MBL Group plc (AIM: MUBL) notes that the London Stock Exchange has today published details of a censure of the Company and a fine of £125,000 for historic breaches of the AIM Rules in September 2017, discounted to £75,000 for early settlement of the proceedings.

The Exchange states in its announcement that, since the events that are the subject of this censure, the Company has a completely new board.

The Exchange Notice is available to view at:

http://www.londonstockexchange.com/companies-and-advisors/aim/advisers/aim-notices/aim-notices.htm "

Contingent Liability

Shortly before issuing this Circular, the Company received notice of a claim in relation to a historic matter which is potentially material. The Company is taking legal advice about the merits of the claim and will update Shareholders, as appropriate, in due course.

Cancellation

Effects of Cancellation

The principal effects of Cancellation will be that:

· there will be no public market or trading facility on any recognised investment exchange for the Ordinary Shares and, consequently, there can be no guarantee that a Shareholder will be able to purchase or sell any Ordinary Shares. The underlying liquidity in the Ordinary Shares is currently low and, in the opinion of the Directors, is likely to remain that way for the foreseeable future whether or not the Cancellation proceeds. Hence, the opportunity for Shareholders to realise their investment in the Company will be more limited;

· it is possible that following publication of this document, the liquidity and marketability of the Ordinary Shares may be significantly reduced and the value of such shares may be adversely affected as a consequence;

· the regulatory and financial reporting regime applicable to companies whose shares are admitted to trading on AIM will no longer apply. The Company will, therefore, achieve cost savings as a result of no longer being subject to the provisions of this regime;

· Shareholders will no longer be afforded the protections given by the AIM Rules, such as the requirement to be notified of certain events, including substantial transactions, financing transactions, related party transactions and fundamental changes in the Group's business, including certain acquisitions and disposals;

· the Company will cease to have an independent financial and nominated adviser and broker;

· as an unlisted company, the Company will be subject to less stringent accounting disclosure requirements;

· the Cancellation may have either positive or negative taxation consequences for Shareholders. Shareholders who are in any doubt about their tax position should consult their own professional independent adviser immediately; and

· following the tenth anniversary of the Cancellation (and if the Company is re-registered as a private company) the provisions of the Takeover Code will cease to apply with respect to the Company.

Provided the Company's place of central management and control continues to be in the United Kingdom, the Company will, however, remain subject to the Takeover Code until such tenth anniversary and Shareholders will benefit from those provisions including in the case of an offer for all of the Shares of the Company whereby all Shareholders will need to be treated equally. Shareholders will also continue to benefit from the relevant provisions of the Act.

Process for Cancellation

Under the AIM Rules, the Cancellation can only be effected by the Company after the passing of a resolution approved by at least 75 per cent. of the votes cast by Shareholders (present in person or by proxy) in a general meeting, and the expiration of a period of 20 Business Days from the date on which notice of the Cancellation is given, which is deemed to have been given in the announcement made by the Company on 14 August 2018. In addition, a period of at least five Business Days following approval of the Cancellation is required before the cancellation of admission of the Ordinary Shares to trading on AIM will be effective. The Company, through its nominated adviser, SPARK Advisory Partners, has notified the London Stock Exchange of the proposed Cancellation.

Should Shareholders approve the Cancellation, the Board will look to return capital to Shareholders, in the most cost-effective manner, further details of which are given below.

Ordinary Share dealing following Cancellation

The Board recognises that the Cancellation will make it more difficult for Shareholders to buy and sell Ordinary Shares should they wish to do so. Following the Cancellation, although the Ordinary Shares will remain transferable they will no longer be tradable on AIM.

Return of capital to Shareholders

Having reviewed the possible routes to return capital to the Company's Shareholders, it is your Board's intention to propose a resolution to its Shareholders that the Company should enter into a Member's Voluntary Liquidation, which it is anticipated will result in a first payment to Shareholders by November 2018, and winding up and dissolution (including a final payment to Shareholders) in the first half of 2019. These timings are not exact and may not be within the Board's control, the Company will keep Shareholders appraised of progress as appropriate.

Taxation

The Proposal may have tax consequences for Shareholders, who are advised to consult their own professional tax advisers if in any doubt about their tax position.

General Meeting and action to be taken

As set out in the Circular, the Resolution will be proposed at the General Meeting. The Cancellation is conditional upon the approval of Shareholders holding not less than 75 per cent. of the votes cast (whether in person or by proxy) at the General Meeting. The meeting will be held at held on 5 September 2018 at 12.00 p.m. at the offices of Thrings LLP, The Paragon, Counterslip, Avon, Bristol, BS1 6BX.

Importance of the vote and recommendation by the Directors

The Directors believe that Cancellation is the next logical step in the Company's strategic plan, set out in December 2016, and will help to preserve the remaining shareholder value following the disposal of the Group's trading businesses. The Board also believes that the proposed return of capital to Shareholders would best be achieved following the Cancellation, as the Company will no longer be further depleting its cash reserves by retaining the costs of admission to trading on AIM. Shareholders should be aware that, if the Resolution is not approved at the General Meeting, the Cancellation will not occur and the Company's Shares will remain admitted to trading on AIM and the Company would need to continue to incur all the costs and the associated regulatory burden of being an AIM company which will significantly reduce the Company's cash reserves.

Shareholders should also be aware that, since the appointment of administrators to Windsong on 15 June 2018, the Company is regarded as a Rule 15 Cash shell under the AIM Rules; therefore should the Company not find an acquisition which would constitute a reverse takeover, under AIM Rule 14, within six months of 15 June 2018, then trading in the Company's Ordinary Shares would be suspended and would be cancelled after a further six months if a reverse takeover was not found and approved by Shareholders.

The Board therefore unanimously recommends Shareholders to vote in favour of the Resolution at the forthcoming General Meeting.

For further information visit www.mblgroup.co.uk 

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