Performance milestones and ASX rules

Forbes Kirby recently had success in a Supreme Court of Western Australia matter in which it acted for a group of performance share holders who sought orders for the conversion of their respective performance shares.

The company opposed conversion on the basis that the performance share holders had left their positions within the company prior to the achievement of the performance milestones. It was argued by the company that the performance share holders (by virtue of their resignation) had not contributed to the achievement of the performance milestones and were therefore not entitled to conversion of their performance shares.

In his decision, Master Sanderson considered the the term ‘performance’ in the context of ASX Listing Rules Guidance Note 19.

In ruling in favour of our clients the Master found that the requisite ‘performance’ for the performance shares to be triggered was that the relevant milestone had been hit. In this case the relevant milestone was the achievement of a certain share price.

The Master rejected the argument of an implied term that the holder of the performance shares had to have contributed, through their contribution to the company, to the achievement of the share price.

In concluding, the Master stated that the case:

“does illustrate the need for the ASX to further consider their guidance in relation to performance shares “.

The decision [2020] WASC 393 is pending appeal.

If you require advice regarding your rights as a shareholder, or your rights generally relating to a company, please contact us.