Notice of Shareholders' Meeting


 

TIDMZRX 
 
RNS Number : 0143G 
Zirax PLC 
22 January 2010 
 

 
Zirax plc 
("Zirax" or the "Company") 
 
 
NOTICE OF SHAREHOLDERS' MEETING AND POSTING OF CIRCULAR 
 
 
The Board of Zirax has today posted a circular ("Circular") to shareholders 
convening a General Meeting of the Company to be held at the offices of Clyde & 
Co LLP at 51 Eastcheap, London EC3M 1JP at 11.00 am (UK time) on 8 February 
2010. On 12 January 2010 the Directors received notice from Erith Group Limited 
("Erith") pursuant to section 303 of the Companies Act 2006 requesting a General 
Meeting. Erith, the holder of 102,531,250 Ordinary Shares representing 59.5 per 
cent. of the Company's issued share capital is the Company's largest 
shareholder. At this meeting, shareholders will be asked to consider the 
resolutions ("Resolutions") necessary for the cancellation of the admission of 
the Company's Ordinary Shares to trading on AIM ("Cancellation"), the 
re-registration of the Company as a private limited company with the name of 
Zirax Limited ("Re-registration") and the adoption of the new articles of 
association of the Company ("Adoption"). To be passed, the resolutions relating 
to the Cancellation, the Re-registration and the Adoption require 75 per cent. 
approval of votes cast at the General Meeting. 
 
 
If shareholders approve the Cancellation at the Shareholders' Meeting, it 
is anticipated that trading in the 
Ordinary Shares of Zirax on AIM will cease 
at the close of business on 22 February 2010. The proposed date for the 
Cancellation taking effect is 23 February 2010. 
 
 
The independent directors of the Company, being Sir Michael Oliver and David 
Wood ("Independent Directors"), 
have been advised that the directors of Erith 
believe that it is necessary for them to take control of the running of the 
Company, particularly of the Russian operations, and to manage the international 
expansion from Russia. Erith further believe that without the implementation of 
cost cutting measures, principally the cancellation of the admission of the 
Company's Ordinary Shares to trading on AIM, the Company's financial position is 
unlikely to improve materially. 
 
 
The Independent Directors and Fenlon Dunphy, CEO, recognise the arguments put 
forward by Erith but, given the loss of a market for the Ordinary Shares and the 
protections offered by The City Code on Takeovers and Mergers that would result 
from the Cancellation, they do not feel able to recommend the proposed 
Resolutions. Accordingly, in respect of his holding of 50,000 Ordinary Shares, 
Fenlon Dunphy intends to vote against the Resolutions. The Independent Directors 
are not shareholders. Mikhail Petrushin, executive director, in respect of his 
holding of 67,340 Ordinary Shares, intends to vote for the Resolutions. 
 
 
Erith is beneficially owned as to 50 per cent. by each of Eldor Azizov and 
Mikhail Baranov, one of the non-executive directors of the Company. Mikhail 
Baranov also has an interest in OOO Yugo-Vostok Promkapital, which holds a 
further 13,333,333 Ordinary Shares representing 7.7 per cent. of the Company's 
issued share capital. Both of Erith and OOO Yugo-Vostok Promkapital have 
indicated that they intend to vote in favour of the Resolutions. 
 
 
An extract of the Circular is set out below, and the Circular to shareholders is 
available in full, together with the proposed new articles, on the Company's 
website: www.zirax.com. All definitions used below have the same meaning as 
given to them in the Circular and the extract set out below should be read in 
conjunction with the Circular. 
 
 
 Enquiries: 
 
 
+--------------------------+--------------------------+-------------------------+ 
| Zirax                    | Fenlon Dunphy, CEO       |  T: +44 (0)20 7930 0777 | 
+--------------------------+--------------------------+-------------------------+ 
|                          |                          |                         | 
+--------------------------+--------------------------+-------------------------+ 
| Westhouse Securities     | Tim Metcalfe             |  T: +44 (0)20 7601 6100 | 
+--------------------------+--------------------------+-------------------------+ 
|                          | Martin Davison           |                         | 
+--------------------------+--------------------------+-------------------------+ 
|                          |                          |                         | 
+--------------------------+--------------------------+-------------------------+ 
| Cardew Group             | Tim Robertson            |  T: +44 (0)20 7930 0777 | 
+--------------------------+--------------------------+-------------------------+ 
|                          | David Roach              |                         | 
+--------------------------+--------------------------+-------------------------+ 
|                          | Daniela Cormano          |                         | 
+--------------------------+--------------------------+-------------------------+ 
 
 
LETTER FROM THE CHAIRMAN 
 
 
PROPOSED CANCELLATION OF ADMISSION TO TRADING ON AIM AND 
RE-REGISTRATION AS A PRIVATE LIMITED COMPANY 
 
 
1. Introduction 
 
 
At the time of the publication of the Company's trading statement in December 
2009 the Directors announced that as a result of disappointing orders from a key 
customer in Russia, a loss would result in the second half of the year and the 
Company would report an overall loss for the full year.  The Board's intention 
at that time was to proceed with its International expansion plans and 
explore commercial avenues in order to steer the Company towards a return to 
profitability. 
 
 
On 12 January 2010 (as it was disclosed in the announcement made on 13 January 
2010) the Directors received notice from Erith, the Company's largest 
shareholder, pursuant to section 303 of the Act requesting a general meeting to 
approve the following resolutions: 
 
 
  1.  the cancellation of the admission of the Ordinary Shares to trading on AIM; 
  2.  upon cancellation of the admission to trading, the Company's re-registration as 
  a private limited company with the name of Zirax Limited; and 
  3.  the adoption of new articles of association of the Company (which can be viewed 
  on the Company's website: www.zirax.com and are also available for inspection at 
  Clyde & Co, 51 Eastcheap, London EC3M 1JP during usual business hours on any 
  weekday until the date of the General Meeting). 
Since the announcement made on 13 January 2010, the Independent Directors have 
had the opportunity to meet with representatives of Erith to discuss the 
background to, and reasons for, the requisition. The purpose of this document is 
to explain the background to the proposed Cancellation and Re-registration. 
For the purposes of the Resolutions, Sir Michael Oliver and David Wood are 
considered to be independent. Mikhail Baranov is not considered to be 
independent by virtue of his shareholding in Erith. Mikhail Petrushin is not 
considered to be independent as he is expected to have a continuing role in the 
Company if the Resolutions are passed. Fenlon Dunphy is not considered to be 
independent for the purposes of the Resolutions as he has been invited by Erith 
to fulfil a short term consultancy role for the Company if the Resolutions are 
passed. 
At the end of this document, there is a Notice of General Meeting which has been 
convened at 11.00 a.m. (UK time) on 8 February 2010 at the offices of Clyde & 
Co, 51 Eastcheap, London EC3M 1JP. Shareholders not intending to attend the 
General Meeting should complete and return the  Form of Proxy in accordance with 
the instructions printed thereon. 
2. Background to the Cancellation and Re-registration 
The Independent Directors have been advised that Erith's directors believe that 
it is necessary for them to take control of the running of the Company, 
particularly of the Russian operations, and to manage the International 
expansion from Russia. Erith further believe that without the implementation of 
cost cutting measures, principally the cancellation of the admission on AIM, the 
Company's financial position is unlikely to improve materially. 
Erith is the holder of 102,531,250 Ordinary Shares representing 59.5 per cent. 
of the Company's entire issued share capital. Erith is beneficially owned as to 
50 per cent. by each of Eldor Azizov and Mikhail Baranov, one of the 
non-executive Directors of the Company. Mikhail Baranov also has an interest 
in OOO Yugo-Vostok Promkapital, which holds a further 13,333,333 Ordinary Shares 
representing 7.7 per cent of the Company's issued share capital. Both of Erith 
and OOO Yugo-Vostok Promkapital have indicated to the Board that they would vote 
in favour of the Resolutions. The Cancellation Resolution requires 75 per cent. 
approval of votes cast at the General Meeting. 
In requisitioning the General Meeting, Erith consider that the ongoing expense 
of maintaining the 
Admission is no longer sustainable in the light of the Company's current size 
and financial position. 
Despite the best efforts of the Directors it has been extremely difficult to 
grow revenues sufficiently to meet the costs of running the Company. As such the 
Company was loss making for 2009 and there can be no certainty as to when the 
Company will return to profitability. 
As previously announced, trading conditions have been difficult for the Company 
and in particular orders from significant customers have been down on previous 
years. This has hindered the Company's ability to carry out its expansion 
plans. 
The Company has limited cash resources and it is the view of Erith that the 
Admission is an area that the Company should look to conserve these resources. 
The Independent Directors have been advised by Erith, that they believe it is no 
longer sustainable for Zirax to maintain the Admission or to remain a public 
limited company. In reaching this conclusion, Erith have considered the 
following factors: 
    *  the necessity to increase the Company's costs savings; 
    *  the significant professional fees associated with the Admission (such as legal, 
    accounting, broking and nominated advisory costs and the fees of the London 
    Stock Exchange); 
    *  the costs of financial reporting obligations on a six-monthly basis; 
    *  the disproportionate length of time spent by senior management to ensure 
    compliance with the AIM Rules and other related regulatory requirements 
    (including corporate governance, reporting and disclosure obligations); 
    *  the difference between the implementation plan for the Group's future between 
    the Directors and Erith, coupled with the reliance on the trading relationship 
    between the Group and OAO Kaustik (an entity connected with Erith through common 
    ownership); 
    *  that one of the key benefits of the Admission has been to provide access for the 
    Company to capital and enable the Company to use the Ordinary Shares as 
    consideration in transactions which in the present economic climate is no longer 
    the case for a company with significant Russian ownership; and 
    *  there is limited trading volume in the Ordinary Shares. 
 
3. Strategy following the Cancellation 
The initial strategy will be to implement the cost cutting exercise lead by the 
savings obtained through cancellation of the Admission. Erith intend to carry 
out a full review of existing customer and supplier arrangements, looking at all 
contractual commitments and application to future plans. Following this, they 
will consider any further appropriate changes to the strategy of the Company. 
If the Resolutions are passed, Erith will be the controlling shareholder in a 
private company. Erith have told the Independent Directors that Erith intends to 
keep the Shareholders informed of the Company's financial and trading 
performance through periodic updates on the company's website: www.zirax.com and 
that the Board will continue to include at least one non-executive Director (to 
be identified and appointed). 
4. Cancellation 
Pursuant to Rule 41 of the AIM Rules, the Directors have notified the London 
Stock Exchange of the date of the proposed Cancellation. The Cancellation is 
conditional upon the approval of not less than 75 per cent. of the votes cast by 
Shareholders (whether present in person or by Form of Proxy) at the General 
Meeting. Accordingly, the Resolution numbered 1 set out in the Notice of General 
Meeting seeks Shareholders' approval to the Cancellation. The Cancellation 
Resolution is not conditional on the passing of any of the other Resolutions. 
Subject to the Cancellation Resolution having been passed at the General 
Meeting, it is anticipated that trading in the Ordinary Shares on AIM will cease 
at close of business on 22 February 2010. The proposed date for the Cancellation 
taking effect is 23 February 2010. 
5. Consequences of the Cancellation 
If the Cancellation becomes effective, Westhouse Securities Limited will cease 
to be nominated adviser and broker to the Company and the Company will no longer 
be required to comply with the AIM Rules. 
Immediately following the Cancellation, there will be no market facility for 
dealing in the Ordinary 
Shares and no price will be publicly quoted and the Ordinary Shares will cease 
to be registered with CREST. 
As the Company does not anticipate moving to an alternative trading platform for 
its Ordinary Shares the loss of the AIM trading platform means that Shareholders 
will not readily be able to buy or sell Ordinary Shares. They will be able to 
buy or sell Ordinary Shares "off market" although this will be more difficult 
than trading "on market". The Directors do not consider it likely that third 
parties will buy or sell Ordinary Shares. 
There is no obligation on Erith or the Company to make an offer to Shareholders 
to purchase their 
Ordinary Shares. Neither the Company nor Erith is currently in a position to 
purchase Ordinary Shares held by minority shareholders. However, Erith is aware 
of the position of minority shareholders and is exploring options to accommodate 
those shareholders who wish to sell their Ordinary Shares to it. Erith intends 
to communicate with Shareholders within three months from the Cancellation, if 
approved. 
If the Cancellation becomes effective, Sir Michael Oliver, Fenlon Dunphy and 
David Wood will resign as directors. Erith have invited Fenlon Dunphy to 
continue to work for the Company for a limited time as a consultant on terms to 
be agreed. Mikhail Petrushin will resign as a director of the Company but will 
continue to work for the Company as an employee. Mikhail Baranov will assume an 
executive role in the Company. Erith will be the controlling shareholder. If the 
Cancellation becomes effective, the Company's place of central management and 
control will be Russia. 
6. Re-registering as a private company 
In order for the Company to effect the Re-registration and to make certain 
consequential changes to the Articles, Shareholders will be asked to pass the 
Resolutions numbered 2 and 3 set out in the Notice of General Meeting. The 
Resolution approving the Re-registration is conditional upon the Cancellation 
Resolution being passed and the Cancellation taking effect. 
If the Resolution approving the Re-registration is passed and the 
Re-registration becomes effective, the Articles will need to be updated to 
reflect the fact that the Company is no longer a public company and to remove 
certain provisions which will no longer be relevant. The main provisions which 
will be removed are those relating to shares which are currently held in 
uncertificated form through CREST. Certain consequential amendments will also 
need to be made to remove definitions which will no longer be used and to update 
the numbering of the Articles. Accordingly, Resolution numbered 3 in the Notice 
of General Meeting also seeks the Shareholders' approval to amend the Articles. 
Copies of the proposed new Articles showing the proposed amendments can be 
viewed on the Company's website: www.zirax.com and are also available for 
inspection at Clyde & Co, 51 Eastcheap, London EC3M 1JP during usual business 
hours on any weekday until the date of the General Meeting. 
If the Resolution approving the Re-registration is passed then, following the 
satisfaction of the 
conditions, the Company will file the requisite documents with the Registrar of 
Companies together with the relevant fee for re-registration. The 
Re-registration will become effective upon the Registrar of Companies issuing a 
certificate of incorporation on re-registration once he is satisfied that no 
valid application can be made to cancel the Resolution approving the 
Re-registration. 
Upon Re-registration of the Company certain provisions of the Act will cease to 
apply. These include amongst others: 
    *  The Company will no longer have to hold annual general meetings and there is no 
    obligation to lay the accounts before its members. 
    *  The Company will have nine months to file its annual accounts following the end 
    of the financial year. 
    *  The Company may pass written resolutions. 
    *  The restrictions on financial assistance will no longer apply. 
    *  The Company will have no prescribed minimum share capital. 
    *  The Company may reduce its share capital by special resolution without the 
    consent of the court. 
    *  The Company may issue shares for non-cash consideration and such consideration 
    will not have to be independently valued. 
    *  The Disclosure Rules and Transparency Rules will no longer apply, therefore 
    there will be no requirement to notify the Company of a change in voting rights 
    held by members. 
    *  The auditors of the Company will be deemed to be re-appointed without annual 
    shareholders' approval. 
 
7. The City Code on Takeovers and Mergers (the "Code") 
The Code currently applies to Zirax. The Code does not apply to private 
companies (other than in 
certain limited circumstances) and would not apply to any offer made to Zirax 
shareholders to acquire their Zirax shares made subsequent to the re-registering 
of the Company as a private company. 
Zirax shareholders should note that, if the resolution to re-register the 
Company as a private company becomes effective, they will not receive the 
protections afforded by the Code in the event that there is a subsequent offer 
to acquire their Zirax shares. 
Brief details of the Takeover Panel (the "Panel"), the Code and the protections 
given by the Code are described below. Before giving your consent to the 
re-registration of the Company as a private company, you may want to take 
independent professional advice from an appropriate independent financial 
adviser. 
The Code is issued and administered by the Panel. Zirax is a company to which 
the Code applies and its shareholders are accordingly entitled to the 
protections afforded by the Code. 
The Code and the Panel operate principally to ensure that shareholders are 
treated fairly and are not denied an opportunity to decide on the merits of a 
takeover and that shareholders of the same class are afforded equivalent 
treatment by an offeror. The Code also provides an orderly framework within 
which takeovers are conducted. In addition, it is designed to promote, in 
conjunction with other regulatory regimes, the integrity of the financial 
markets. 
The General Principles and Rules of the Code 
The Code is based upon a number of General Principles which are essentially 
statements of standards of commercial behaviour. For your information these 
General Principles are set out in Part 1 of Appendix A. The General Principles 
apply to all transactions with which the Code is concerned. They are expressed 
in broad general terms and the Code does not define the precise extent of, or 
the limitations on, their application. They are applied by the Panel in 
accordance with their spirit to achieve their underlying purpose. 
 In addition to the General principles, the Code contains a series of Rules, of 
which some are effectively expansions of the General Principles and examples of 
their application and others are provisions governing specific aspects of 
takeover procedure. Although most of the Rules are expressed in more detailed 
language than the General Principles, they are not framed in technical language 
and, like the General Principles, are to be interpreted to achieve their 
underlying purpose. Therefore, their spirit must be observed as well as their 
letter. The Panel may derogate or grant a waiver to a person from the 
application of a Rule in certain circumstances. 
Giving up the protection of the Code 
A summary of key points regarding the application of the Code to takeovers 
generally is set out in Part 2 of Appendix A.  You are encouraged to read this 
information carefully as it outlines certain important protections which you 
will be giving up if you agree to the re-registration of the Company as 
a private company. Your attention is drawn in particular to the fact that any 
future offer made by Erith, or another party, will, following Cancellation, not 
be subject to the Code. However, at this time, the Directors can confirm that 
they are not aware of any such offer and there is no guarantee that Shareholders 
will receive such an offer in the future. 
General Meeting 
At the end of this document, there is a notice convening a General Meeting of 
the Company to be held at Clyde & Co, 51 Eastcheap, London EC3M 1JP at 11.00 
a.m. (UK time) on Monday 8 February 2010. At this meeting, the Resolutions will 
be proposed as special resolutions. 
To be effective, the Resolutions require the approval of not less than 75 per 
cent. of the votes cast by Shareholders (whether present in person or by proxy) 
at the General Meeting. 
If the Cancellation Resolution is passed at the General Meeting, it is 
anticipated that the Cancellation will become effective from 23 February 2010. 
Action to be taken 
Shareholders listed on the Company's register on 6.00 p.m. (UK time) on 4 
February 2010 shall be entitled to participate at the General Meeting and vote 
there in person or by a proxy. 
Enclosed with this document is a Form of Proxy. Whether or not you propose to 
attend the General Meeting personally, you are urged to complete and return the 
Form of Proxy in accordance with the instructions printed thereon as soon as 
possible. To be valid, completed Forms of Proxy must be received by the 
Company's registrars Computershare Investor Services PLC, The Pavilions, 
Bridgwater Road, Bristol BS99 6ZY. Completion of a Form of Proxy will not 
preclude you from attending and voting at the General Meeting in person should 
you wish to do so. 
Recommendation 
The Independent Directors and Fenlon Dunphy recognise the arguments put forward 
by Erith but given the loss of a market for the Ordinary Shares and the 
protections offered by the Code that would result from the Cancellation, they do 
not feel able to recommend the proposed Resolutions. 
Accordingly, in respect of his 50,000 Ordinary Shares, Fenlon Dunphy intends to 
vote against the Resolutions. The Independent Directors are not Shareholders. 
Mikhail Petrushin in respect of his 67,340 Ordinary Shares, intends to vote for 
the Resolutions. Erith is the holder of 102,531,250 Ordinary Shares representing 
59.5 per cent. of the Company's entire issued share capital. Erith is 
beneficially owned as to 50 per cent. by each of Eldor Azizov and Mikhail 
Baranov, one of the non-executive Directors of the Company. Mikhail Baranov also 
has an interest in OOO Yugo-Vostok Promkapital, which holds a further 13,333,333 
Ordinary Shares representing 7.7 per cent of the Company's issued share capital. 
Both of Erith and OOO Yugo-Vostok Promkapital have indicated that they intend to 
vote in favour of the Resolutions. 
The Cancellation Resolution requires 75 per cent. approval of votes cast at the 
General Meeting. 
Yours faithfully 
Sir Michael Oliver 
Non-executive Chairman 
                      This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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