Smartlinx3 left in a le­gal limbo

Kapi-Mana News - - NEWS - By MICHAEL KOPP

City coun­cil-backed broad­band com­pany Smartlinx3, which is out of the run­ning for the Govern­ment’s ul­trafast broad­band ini­tia­tive, ap­pears to be in limbo af­ter the res­ig­na­tion last month of com­pany di­rec­tor Leo Austin, rep­re­sen­ta­tive of in­vestor Hutt Mana Char­i­ta­ble Trust (HMCT).

The com­pany, started by small in­vestors and backed by three city coun­cils and the Govern­ment to the tune of nearly $5 mil­lion over five years, now has only two di­rec­tors in­clud­ing found­ing chair­man Wayne Stemp.

Its con­sti­tu­tion re­quires three di­rec­tors.

A be­hind-the-scenes ar­gu­ment is rag­ing over the im­pli­ca­tions for the fu­ture of the com­pany, par­tic­u­larly its sta­tus un­der leg­is­la­tion gov­ern­ing coun­cils’ in­vest­ments in pri­vate com­pa­nies.

It is pos­si­ble SLX3 has, by de­fault, be­come a coun­cil­con­trolled or­gan­i­sa­tion (CCO). That would make it sub­ject to the Of­fi­cial In­for­ma­tion Act.

SLX3 and its pub­lic in­vestor bod­ies have been highly se­cre­tive dur­ing its six-year life, so there is no in­for­ma­tion about its in­stalled net­work, cus­tomers (other than the coun­cils them­selves, who say they have got their money’s worth), or any fi­nan­cial de­tails of how the pub­lic money in­vested has been spent.

Coun­cil of­fi­cers and politi­cians have claimed they may withhold al­most all in­for­ma­tion about SLX3 from the me­dia be­cause of the com­mer­cial sen­si­tiv­ity ex­emp­tion in the OIA.

Coun­cil­lors them­selves, no­tably Robert Shaw in Porirua and Max Shier­law in Lower Hutt, have com­plained that the com­pany – with the help of coun­cils – keeps its af­fairs se­cret even from elected rep­re­sen­ta­tives.

There are sub­com­mit­tees of coun­cils that deal with SLX3 whose meet­ings are al­ways con­ducted un­der Lo­cal Govern­ment and OIA pub­lic ex­clu­sion rules, and re­ports to full coun­cils are sketchy.

SLX3 has sev­eral times asked its pub­lic in­vestors for more money over the years, as well as ‘‘ letters of com­fort’’ for a loan fa­cil­ity of $500,000 from the now­wound up South Can­ter­bury Fi­nance.

That loan has been con­tin­ued by the SCF re­ceivers, but its re­pay­ment sta­tus is un­known.

By the mid­dle of this year SLX3 was so re­duced in in­come that it laid off all its staff and con­tracted its op­er­a­tions to the Welling­ton pi­o­neer broad­band com­pany Ci­tyLink.

Re­sults of two ad­di­tional share of­fers this year are un­known.

Mr Austin, ap­pointed only a year ago by HMCT, with $825,000 in­vest­ment in shares that are now worth much less than that, would not com­ment ‘‘ now’’ about his rea­son for re­sign­ing.

‘‘There are some mat­ters I think the share­hold­ers have to sort out in­clud­ing the mat­ter of whether it is a CCO.

‘‘I still be­lieve in the whole con­cept, and it has made some achieve­ments that are not too mod­est,’’ Mr Austin said.

SLX3 has had some­thing like a dozen di­rec­tors in six years, with many res­ig­na­tions.

One per­son with knowl­edge of the com­pany sug­gested that even its own di­rec­tors have had dif­fi­culty get­ting in­for­ma­tion about its af­fairs.

Ques­tions to Hutt City chief ex­ec­u­tive Tony Stallinger about the pos­si­bil­ity SLX3 was now a CCO brought a neg­a­tive re­sponse.

He said the com­pany couldn’t even func­tion be­cause of lack of a full board, so there was no way for the coun­cil’s rep­re­sen­ta­tive to ex­er­cise any con­trol. Mr Shier­law dis­agreed. ‘‘The mean­ing of a CCO is clear in the acts, and a com­pany with only one di­rec­tor is still a func­tion­ing com­pany in law.

‘‘The CCO rules clearly say a com­pany in this sit­u­a­tion by de­fault be­comes a CCO.’’

It is un­der­stood the coun­cil’s le­gal of­fi­cer also sug­gested it was a moot point, and that in any case coun­cils could ex­empt small op­er­a­tions from the CCO pro­vi­sions.

Mr Shier­law wants a le­gal clar­i­fi­ca­tion from the Au­dit Of­fice, and it is un­der­stood that is in the works.

HMCT chief ex­ec­u­tive Ian Hutchings said ‘‘we had taken all steps to ap­point a new joint di­rec­tor [with pri­vate share­hold­ers] if we can, even be­fore Mr Austin re­signed’’.

‘‘Talk of SLX3 be­com­ing a CCO by de­fault is a lot of non­sense.’’

How­ever, no new di­rec­tor has been found.

Mr Shier­law said he didn’t think HMCT would be able to find an­other di­rec­tor will­ing to serve.

He has given no­tice of a mo­tion for the next HCC fi­nance and au­dit com­mit­tee meet­ing (to be held to­day) to con­firm that SLX3 should be treated as a CCO.

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