Waterco Limited has disclosed a historical breach of ASX Listing Rule 10.1 involving lease agreements with a related party, prompting plans to seek retrospective shareholder approval at its 2025 AGM.
- Historical breach of ASX Listing Rule 10.1 due to related party leases
- Leases with Mint Holdings exceed 5% of Waterco's equity without prior approval
- Independent market assessments and non-interested director approvals were obtained at the time
- Waterco to seek shareholder approval at 2025 AGM to remedy breach
- Company commits to enhanced compliance and governance controls
Background on the Breach
Waterco Limited, a prominent manufacturer and distributor in the swimming pool and water treatment sector, has revealed an inadvertent breach of ASX Listing Rule 10.1. The breach relates to lease agreements entered into in 2021 with Mint Holdings Pty Ltd, a related party controlled by a current Waterco director. These leases cover two properties, one in Meadowbrook, Queensland, and another in Knoxfield, Victoria.
At the time, Waterco took steps to ensure the leases were commercially sound, commissioning independent market rental assessments and securing approvals from non-interested directors. The arrangements were also transparently disclosed in annual reports as related party transactions, adhering to corporate governance and accounting standards.
Nature and Implications of the Breach
Despite these measures, it has come to light that when renewal options under the leases are factored in, the aggregate value of each lease exceeded 5% of Waterco’s equity as of December 2020. This threshold triggers the requirement under Listing Rule 10.1 for prior shareholder approval, which was not sought. Waterco acknowledges this oversight as unintentional but significant, given the regulatory framework designed to ensure transparency and protect shareholder interests.
Remediation and Governance Response
In response, Waterco has engaged constructively with the ASX and proposed a remediation plan that includes seeking retrospective shareholder approval at its 2025 Annual General Meeting, expected in October. This approval will cover the original lease entries, past payments, and continuation of the leases. Additionally, Waterco will commission an independent expert report to provide an objective valuation and assessment of the leases, as required under Listing Rule 10.5.10.
Meanwhile, the ASX has instructed Waterco to suspend any further payments under the leases until shareholder approval is obtained. This interim measure underscores the seriousness with which the ASX views compliance with related party transaction rules.
Looking Ahead, Strengthening Compliance
Waterco has reaffirmed its commitment to high standards of corporate governance and regulatory compliance. The company is undertaking a comprehensive review of its internal compliance framework to bolster controls around related party transactions and ensure full adherence to ASX Listing Rules going forward. This proactive stance aims to restore market confidence and prevent recurrence of similar issues.
As Waterco navigates this remediation process, investors and market watchers will be keenly observing the outcome of the upcoming shareholder vote and the effectiveness of the company’s governance enhancements.
Bottom Line?
Waterco’s forthcoming AGM will be a critical test of shareholder confidence and governance rigor.
Questions in the middle?
- Will shareholders approve the retrospective lease arrangements at the 2025 AGM?
- How will Waterco’s enhanced compliance measures impact future related party transactions?
- Could this breach affect Waterco’s reputation or relationships with investors and regulators?