QVT Fund, an approximately 7.15 per cent shareholder of Galatasaray Sportif, says it sought to include in Sportif’s 3 May general assembly meeting agenda measures intended to provide for an open and transparent disclosure of the improper loans and other actions of Sportif’s board of directors.
These included violations of Sportif’s articles of association, directives from the Capital Markets Board and Turkish law.
Accordingly, QVT also proposed a number of remedies to rectify the harm caused to Sportif and its shareholders by such actions and to force Sportif to address what QVT believes to be woefully inadequate corporate governance by the board.
The board, however, blocked consideration of these proposals at the meeting.
QVT’s proposals included the following:
• Sportif’s board should explain the purpose of and disclose the terms of the loan agreement that made available USD70m to Futbol, Sportif’s majority shareholder, using certain Sportif assets as collateral, with funds apparently being used to fund the tender offer by Futbol, in violation of Sportif’s articles of association;
• Sportif should seek the immediate repayment of all outstanding loans to Futbol and other related parties, totalling approximately TRY362m (approximately USD239.5m), as directed by the CMB, and explain why Sportif loaned an additional USD20m to Futbol on 25 March, despite Futbol’s previously-stated inability to repay its loans, in clear violation of the board’s fiduciary duties;
• Sportif’s majority shareholder, Futbol, should abstain from voting on the proposed agenda items at the meeting due to an obvious conflict of interest arising from the fact that Sportif’s board is appointed by Futbol, and that six of the seven directors of Sportif are also directors of Futbol; and
• Sportif should file a lawsuit against its board and Futbol for having deliberately failed to protect the interests of Sportif and its minority shareholders, for causing the issuance of unsecured loans to related parties without maturity dates in full knowledge of the recipient’s inability to pay, for failing to comply with the articles of association, and for failing to comply with the CMB’s principle decision, dated 28 March 2008.
“We continue to be deeply disturbed by the outrageous actions of Sportif’s board and Futbol, who appear to run Sportif as if it were a private company that exists solely for their own benefit, ignoring all responsibilities as fiduciaries for the public shareholders,” says Dan Gold, chief executive officer of QVT Financial.
“QVT believes that for too long, the board has allowed Futbol to abuse its majority power at the expense of proper corporate governance. The result is that the profits earned by Sportif are inappropriately lent and thereafter squandered on unjustifiable expenses, rather than being distributed as dividends to the public shareholders as promised. Now, it appears that Sportif’s board has acted to conceal its inappropriate actions from shareholders by ignoring a reasonable demand for information about its activities.”
