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Legal Opinion On Vertex Directors’ Actions

Legal Opinion On Vertex Directors’ Actions

A legal opinion commissioned by Vertex Group Holdings has confirmed the company’s view that the directors acted properly and made appropriate decisions during the preparation of a prospectus and during the period up to the allotment of shares last year.

The report by leading Auckland QC Julian Miles disagrees with findings by the Securities Commission that investment risks for two of the company’s six business units were not adequately described in the prospectus, and that prospective financial information for those business units should not have been described as “forecasts”.

In his report Mr Miles concludes that there is no basis to believe the prospectus contained any misleading statements or omissions.

The company was correct in describing prospective financial information in the prospectus for each of the six Vertex business units as “forecasts” rather than “projections”. The “forecasts” were legitimately and appropriately made, and included a prudent discounting of demand predictions supplied by certain customers.

The overall description of the risks arising from possible loss of customer business was adequate and appropriate.

The directors had insisted on a rigorous due diligence procedure which was accepted by the Commission as being appropriate.

The directors were entitled to be guided by the expert advice of their brokers and their financial and legal advisors, all of who were either members of the Due Diligence Committee or observers to the committee. Within the rigorous question and answer process of the due diligence process none of these advisors considered the risks and classification of prospective financial information had not been sufficiently emphasised in the prospectus. more

Specific reports were received from these advisors which were included in the prospectus process.

The directors not only believed the prospectus was accurate, but they had reasonable grounds to back that belief, having carried out a thorough and rigorous due diligence exercise.

The Miles report comments that the Commission itself found no evidence that the directors believed there was anything misleading in the prospectus, either at the time of issue or allotment of the securities, and concludes that there is no legitimate basis for any action against the Company or directors.

The Vertex Board says the Miles report, commissioned as part of an overall review of the Commission’s findings, adds welcome clarity to the situation, helping the Company to now focus firmly on the future and build value for the shareholders.

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