Judge dismisses bank shareholder's objection to proxy system

The First Hall of the Civil Court yesterday dismissed an action in which a Bank of Valletta plc shareholder claimed that elections for bank directors during the annual general meeting were unjust and discriminatory.

In an application filed last year, Ivor John Zammit noted that the government and other persons held 25.23 per cent of the bank's shares while Banco di Sicilia held 14.55 per cent. The remaining 60.22 per cent of the shares were owned by others, including entities in which the government had an interest.

The government was entitled to appoint two directors to the bank's board and Banco di Sicilia had the right to appoint one director.

The board's chairman was nominated by a shareholder holding no fewer than 25 per cent of the issued share capital with voting rights. In fact, the chairman was appointed by the government which satisfied this criterion as it held 0.23 per cent over this threshold.

Shareholders other than the government and the Banco di Sicilia were entitled to elect six directors to the board, and each shareholder who held no fewer than 10 per cent of the shares was entitled to elect one director.

Voting for the directors took place each year and could be done in person or by proxy.

Mr Zammit produced in court a copy of a proxy form used in the last election and which indicated the board's chairman as proxy unless the shareholder who was going to be absent chose to appoint another person as proxy.

It therefore resulted, Mr Zammit argued, that those shareholding entities in which the government had an interest could propose the chairman (nominated by the government) as proxy. There was therefore a real possibility that the bank's business could be run in such a way as to oppress the shareholders.

Yesterday's judgment was delivered on a preliminary point raised by Bank of Valletta, namely that the action for the protection of a minority shareholder had to satisfy certain criteria when filed against a public company, such as the bank.

Mr Justice Geoffrey Valenzia declared that Mr Zammit had not based his case on a breach of the company's statute but on the application of the statute.

The court could not change the company's statute nor regulate the directors' elections without the involvement of the thousands of other shareholders who were not party to this suit.

In order for Mr Zammit's application to be successful, he would have to prove not only discrimination, prejudice or oppression, but that such occurred in the context of a public limited company.

The court noted that a shareholder could either vote in person for the election of a director or could make use of a proxy form. Such a form laid down that the shareholder could either appoint the chairman as his proxy or nominate another person.

This was a free choice in conformity with law, the court ruled, and did not imply that the chairman was controlling or manip-ulating the election.

The court found no inequity nor irregularity in the chairman being designated as proxy. Mr Zammit had not produced any evidence to prove manipulation on the part of the chairman. Nor had he proven that the method of carrying out the election was of prejudice towards him.

The court therefore dismissed Mr Zammit's application.