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Control of voting rights in Designer Textiles (N.Z

Gould Holdings Limited, the Rutherford family and Designer Textiles (N.Z.) Limited

The Takeovers Panel met on 3 March 2003 to consider two issues relating to the control of voting rights in Designer Textiles (N.Z.) Limited (DTL).

Late in 2002 several members of the Rutherford family of Canterbury subscribed for shares in Gould Holdings Limited (GHL). GHL owns 24.69% of DTL. Members of the Rutherford family already held shares in their own name in DTL at the time of the subscription. More shares of DTL were bought by members of the Rutherford family after the subscription, resulting in those family members holding some 8.8% of the voting rights of DTL.

The first issue considered by the Panel was whether the Rutherford family members, by subscribing for shares in GHL, had joined Christchurch businessman Mr George Gould in the control of the 24.69% shares of DTL held by GHL. The Panel found that this was not the case and that no breach of the Code had occurred. On the second issue the Panel found that Mr Gould and GHL and those members of the Rutherford family who had subscribed for shares in GHL are associated for the purposes of the holding or controlling of shares in DTL. The Panel found that this association had crystallised on 11 September 2002 when the family members agreed to take shares in GHL.

The consequence of this finding is that the purchases of DTL shares by Rutherford family members which took place after 11 September 2002 (being some 753,000 shares in all, or 2.1% of the total voting rights in DTL) were made in breach of the Code. This is because the holdings of DTL shares by the Rutherford family and by GHL have to be aggregated for the purposes of rule 6(1) of the Code.

Given that the meeting involved determination of aspects of the Code that the Panel had not formally addressed before, the Panel considers that the most appropriate remedy for these breaches of the Code is for the relevant shares to be sold within an appropriate period, and that the voting rights attached to the shares not be exercised in the meantime.

The Rutherford family is being asked to provide undertakings to the Panel to this effect.

A copy of the Panel’s determination is available on the Panel’s website at www.takeovers.govt.nz.

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