FROU Frou biscuit makers yesterday lodged a legal objection to a proposed resolution by shareholders who want the listed company to adopt the Corporate Governance Code (CGC).
The move came days after the chairman of the Institute of Directors, Evdokimos Xenofontos, wrote a letter to the Cyprus Stock Exchange (CSE) and the Securities and Exchange Commission (SEC), stressing the need for all listed companies to adopt the CGC.
The aim of the CGC is to strengthen the monitoring role of the Board of Directors, to protect small shareholders, to adopt greater transparency and to provide timely information, as well as to safeguard the independence of the Board of Directors in its decision-making.
Companies should state in the first part of the report whether the principles of the Code are being implemented, and should confirm in the second part of the report that it complies with the principles of the code and, in the event that it does not, should give explanations as to why not.
Xenofontos cites Frou Frou as the perfect example of why listed companies should adopt the CGC and that is why the minority shareholders decided to put forward a resolution to this effect on Thursday when the company holds its AGM.
He said that before being listed on the CSE, Frou Frou was a family owned company with the majority stake being held by Executive Chairman Alkis Hadjikyriakos, some 52 per cent, his sister Nora Dikaiou, Executive Vice Chairman with some 20 per cent, and the remainder which are held by ordinary shareholders.
According to a statement to the CSE, Dikaiou said her brother threw her out of the company over her insistence to adopt the CGC.
“Mr Hadjikyriakos discharged Executive Vice Chairwoman, Mrs Dikaiou, second major shareholder due to her insistence to adopt the Corporate Governance Code,” said the statement.
“He did not allow to the Vice Chairwoman to inspect the Company’s books and refused to provide information and analyses on the Company’s financial statements.”
It also alleged there were cases of distortion of the minutes of the BoD meetings dated 31.1.207 and 6.4.2007.
The other Frou Frou shareholders also said they could not determine the exact amount of shares Hadjijyriacos held, since he “refuses to provide information on the purchase of shares on his behalf via Trusts Jupiter, Galaxy, Capital Growth, Harrison Equity, Pegasos Holding and JCS Equity.”
“The Trusts do not show that he is the beneficiary, but he treats the company as if it is his own personal property. He takes decisions on issues of great importance, including investments of millions of pounds without a prior examination by the Board of Directors, which is informed in retrospect,” the statement added.
However, Dikaiou’s statement to the CSE proposing the resolution be put to the AGM has been stopped in its tracks.
A Frou Frou statement to the CSE yesterday said that following legal advice, the company had established that a resolution could only be put forward at the meeting if six weeks’ notice was given.
Dikaiou put forward the resolution only on May 15. “In your case, the request and the Report were submitted behind time,” said the statement. “Therefore, the resolution cannot be submitted to the AGM to take place on June 7, 2007.”
Xenofontos is calling on the CSE and SEC to demand that listed companies comply with the CGC.
“I suggested best way was to force the CSE and SEC to do something about it,” he told the Cyprus Mail.
“The code was made to protect minority shareholders. Either they comply with each provision or explain why they have not and what steps are being taken to rectify it. He [Hadjikyriacos] said it was bureaucratic and expensive. This is not an explanation. Either they adopt the code or make an offer to the other shareholders. What they [the CSE and SEC] have done in fact is given a blessing to the actions of the chairman.”
Xenofontos told both bodies that the classification of the companies that do not adopt the Code in lesser markets rather than the main did not serve the interests of the investing public and the small shareholders.
“It is in the interests of the major shareholders not to comply with the code if the Authorities allow it”, he said. “With this practice, the CSE and the SEC give an alibi to the major shareholders who do not wish to adopt the code. This serves the major shareholders, most of whom do not want to understand that they decided to list their company in the CSE and must follow the rules of the stock market.”
