How Did Askari Metals Accidentally Issue Shares to a Related Party?

Background to the Rights Issue and Oversubscription

Askari Metals Limited (ASX – AS2), a Southern African-focused exploration company, recently conducted a non-renounceable entitlement offer to raise approximately $1.5 million to fund exploration at its Nejo Project in Ethiopia. The offer was oversubscribed, with valid applications exceeding the targeted raise, including additional applications for entitlements from eligible shareholders.

Alongside this, the company secured further commitments through a strategic funding announcement in December 2025, which included participation from newly appointed director Martin Holland and current director Tim Morrison. This related party participation was explicitly stated to be subject to shareholder approval.

The Inadvertent Breach and ASX Query

In late December 2025, Askari Metals disclosed an inadvertent breach of ASX Listing Rule 10.11 after securities were issued to an entity associated with Mr Holland without prior shareholder approval. The breach arose because the securities were mistakenly included in the oversubscription allotment under the rights issue and issued using the company’s 15% placement capacity under Listing Rule 7.1.

The ASX issued a formal query seeking detailed explanations about the breach, the circumstances of the allotment error, the role of the lead manager CPS Capital Group, and the company’s governance processes for related party transactions.

Askari Metals’ Response and Governance Measures

Askari Metals responded promptly, acknowledging the error as a genuine inadvertent oversight caused by multiple allotments and external inputs from the lead manager and share registry. The company clarified that Mr Holland did not submit an application under the entitlement offer and was not an eligible shareholder for the rights issue, confirming the securities issuance was mistakenly processed.

The company emphasised that it has robust governance policies in place to manage related party participation, including requiring shareholder approval before any related party securities are issued. This incident marks the first such oversight in the company’s history.

Responsibility for the allotment was attributed to the Executive Director and Company Secretary, who were unaware that the allotment register included Mr Holland’s related entity. The company is now engaging with the ASX to determine appropriate remedial steps and plans to convene a shareholder meeting to seek approval for the related party participation.

Implications and Next Steps

While the breach is regulatory in nature, Askari Metals confirms it remains compliant with continuous disclosure obligations and ASX Listing Rules. The company’s transparent communication and swift engagement with the ASX reflect a commitment to governance and investor confidence.

Investors will be watching closely for the outcomes of the forthcoming shareholder meeting and any further ASX guidance or sanctions. The incident underscores the complexities of managing capital raisings involving related parties and the importance of meticulous oversight in allotment processes.