BVI Offshore Business: Grey Area

Shareholders of the Australian-based exploration company Midwinter Resources have called a meeting which will take place next month and during which former company’s chairman Jonathan O’Callaghan - now the non-executive director - will be probably ousted from the board. This decision of shareholders who collectively hold more than 25 per cent of the votes became the result of a conflict between Mr O’Callaghan and other directors over company’s plans to acquire a Russian coal mine.

In October 2009, Midwinter entered a memorandum of understanding with the purpose to acquire majority interest in a large coal project in Russia. However, after having reviewed the project and the structure of the proposed transaction, the company decided not to proceed with the opportunity. Immediately upon this, Midwinter received notice from the British Virgin Islands company Skala Ltd that it intended to make a proportional takeover offer at 12 cents per share. Skala’s associated company Redmet Ltd was to be the vendor of the Russian project, and Mr. O’Callaghan had disclosed to the board that he had material interest in this company.

The directors of the Australian company have concluded that the offer of the BVI-registered Skala Ltd is highly conditional and uncertain. They also noted that Midwinter has a strong cash position which equates to a cash backing of 16.5 cents per share. The board resumed that the BVI company made an attempt to gain control of Midwinter and later to cause it to continue with the transaction and to acquire the Russian coal project.