Auditor found in breach of takeover code
An auditor has been found guilty of breaching the Takeover code when he was advising a finance house on the acquisition of motor and machine part manufacturer Focus Dynamic.
A Takeover Panel investigation on Monday announced that Howard Marks FCA, an accountant with Surrey-based accountants Marks & Co failed to act reasonably and responsibly in advising his client Corporate Resolve in its bid for Focus Dynamic.
The finance house made a cash offer for the Wales-based company on 27 November 1998, which included a condition that Focus Dynamic make Pounds 4m available to pay a special dividend or other distribution to its shareholders. On 5 February, Corporate Resolve announced its offer had lapsed, and withdrew its loan note and share offer with immediate effect.
The probe, sparked by irregularities in the bid process, found Marks failed to take ‘all reasonable steps’ to assure himself that Focus Dynamics had access to Pounds 4m, and did not complete a thorough investigation to ensure Corporate Resolve had sufficient financing to purchase the company.
In addition investigators found Marks sent a letter confirming that First Capital Securities, the Swiss-based financier of Corporate Resolve, had sufficient cash to allow the deal to continue. But the letter was sent without seeing a detailed underwriting agreement or binding facility letter, and without assurances that First Capital could provide the required funds, according to the report.
‘In such circumstances it is necessary as a minimum to have an irrevocable and effective commitment from a party upon whom reliance can reasonably be placed,’ the Takeover Panel said in a statement, a requirement Marks had not met.
Upon further investigation, it was found that First Capital and discretionary clients of First Capital owned 96% of Corporate Resolve, a fact, Marks was obliged to reveal to Focus Dynamic in Corporate Resolve’s offer letter, but which he did not include.
Under the general principles of the Takeover code, shareholders must be given sufficient information and advice to enable them to reach a properly informed decision and must have sufficient time to do so.’
Marks disputes the findings and when contacted by AccountancyAge.com, said: ‘I reject the findings of the Takeover Panel’s investigation.’
Based on its report, the Executive now expects relevant bodies to take up inquiries as they see fit, having fulfilled its remit.
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