Town chief executive Derek Bowden has explained the thinking behind a number of the resolutions being voted on at next Wednesday's AGM and has pledged that any individual will be prevented from owning more than 15% of the club. The resolutions will put the club in a position where a second share issue could be launched quickly should the board decide one was required.
Most of the resolutions to be voted on next Wednesday are relatively straightforward, calling for the re-election of existing directors, the approval of the annual report and accounts and the re-appointment of the auditors.
However, Resolutions 11 and 12 are somewhat incomprehensible to those without a background in company law and were not explained to shareholders in plain English in the AGM information provided to shareholders by the club.
In short, Resolution 11 relates to the loan notes already issued by the club to wealthier fans, who have carried on putting money into the club in the months since the share issue. The loan notes are like a savings bond (repayable after many years) but, if this resolution is passed, they can be converted into shares instead of being repaid.
Resolution 12 gives the board exclusive authority to continue to convert future loan notes or issue new shares up to a total of almost £10,000,000. It removes the normal rights of shareholders to have the ability to invest further sums in priority to new investors (known as pre-emption rights).
Usually, any new shares issued have to be offered to existing shareholders first before they can be offered to anyone else so that the value of their holding is not diluted (reduced in value).
Members of the Ipswich Town Independent Supporters' Trust with a grounding in company law worked out that a possible implication of Resolution 12 was that the board would be able to sell the club without putting the matter to shareholders. A more detailed plain English explanation of Resolutions 11 and 12 appears on the Trust website.
Although the Trust didn't expect the board to attempt to sell the club, there was interest in why the board required powers which would allow it to do so.
The Trust contacted club chief executive Derek Bowden to confirm that their understanding was correct and to seek clarification regarding the board's intentions in drafting these resolutions.
Bowden said: "I understand your concerns and therefore reassure you that the purpose of these resolutions is to enable us to convert existing loan notes into shares and thus reduce the debt burden on the club, together with the flexibility to cover any future conversion based on the issue of any new loan notes, as well as enabling the directors to mount a share issue, if tactically required, with a 15% discretionary ceiling on ownership.
"We would also ensure that no one could purchase loan stock which when converted would result in them holding more than 15% of the share capital."
"Fundamentally, the resolutions will give the directors the flexibility to issue more loan notes up to a fixed ceiling of £3m in total and enable us to convert loan notes already in existence into shares if requested by the loan note holders.
"They will also provide flexibility for the directors to issue more shares to the tune of approximately £6m if a further share issue were to take place. The real purpose of these resolutions is to enable us to move quickly on a share issue if necessary or desirable rather than having to rely on a rights issue to existing shareholders or go through the protracted process of an EGM."
Resolution 13 at the AGM is the Trust's proposal that a board position be introduced for an elected supporter representative. More details on this can be found on the Trust website.