A media investigation into social media video marketing company Big Un and its operating and financial practices has revealed areas of failed governance, misconduct and non-disclosure.
The company, which was listed on the ASX in December 2014, delivers subscription based video products and services to small and medium enterprises and has operations across Australia, New Zealand, UK, US, Hong Kong, Singapore and Vancouver.
An investigation by the Australian Financial Review in February and March revealed a list of alleged breaches of duty of care, including fake share offerings to employees and delayed salary payments as well as a lack of disclosure around director interests and the backgrounds of senior executives, including CEO Richard Evertz’s criminal past. Other allegations related to secretive finance arrangements, inflated revenue projections and cash flows, faked web activity, and discounted and forged share offerings.
The ASX began its own investigation and issued a trading halt against Big Un on 19 February, then two days later announced the company’s securities were suspended pending further enquiries by the exchange and ASIC.
On 8 March, Big Un’s chair Hugh Massie resigned and the firm appointed US investment banker Nicholas Jordan as new non-executive chair. It also appointed UK-based financier William Knowles as an independent, non-executive director.
After announcing it had parted ways with its auditor and the resignation of company secretaries David Conley and Elissa Lippiatt, the company appointed a replacement, Francis Farmakidis.
The ASX identified similar failures in governance in other young listed companies, including logistics software company GetSwift and data cloud platform Buddy Platform. GetSwift had its shares suspended after allegations that it had failed to inform the market of lost contracts it had previously announced to the exchange. Buddy Platform was also suspended due to alleged disclosure breaches and questionable revenue projections.
The ASX announced a tightening of listing rules around customer contracts and new director disclosure obligations in its March Compliance Update.
In the update, the ASX said “there have been a number of incidents where the disclosures by listed entities about their contractual arrangements with customers have fallen short of the required standards” including “misrepresenting customer contracts as being “material” or with other superlatives when plainly they are not” and “announcing what appears to be a material customer contract without disclosing that it is subject to a trial period”.
As part of the new disclosure guidelines, all current and proposed directors in back-door listings are required to “provide evidence of good fame and character”, including existing directors who have been elected by shareholders to the board. This new rule would either result in a disclosure of the results of the checks or in some cases the rejection of the listing, the ASX said.
In response to the ASX and following the changes to its board and executive, a Big Un statement said the company is “committed to building a best practice corporate governance framework and compliance with new ASX guidelines”.
Big Un’s new chair Nicholas Jordan said, “As we expand in the US and the UK we are also ready to bolster our corporate governance structure in order to meet the governance and financial reporting requirements for a rapidly growing and maturing company. We will re-engage with the ASX and will look to build on our recent experiences and emerge as one of the exchange’s best managed companies.”
The new guidelines will mean more scrutiny for the boards and executives of listed companies and put more onus on boards to reveal the detail of customer contracts, and director and executive histories.