Smartlinx3 left in a legal limbo
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.