Working with a dominant Chairman: appointed to the board of an oil and gas exploration company to bolster governance

JERSEY COMPANY ESTABLISHED AS A VEHICLE FOR THE BENEFICIAL OWNER TO EXPLOIT AN OIL AND GAS EXPLORATION PERMIT, REGULATOR’S RISK-BASED EXAMINATION OF THE ADMINISTRATOR’S RESOURCES LED TO REQUIREMENT THAT RELEVANT GOVERNANCE EXPERIENCE BE ADDED TO THE BOARD OF ITS CLIENT COMPANY (AND TO RESTRICTIONS BEING PLACED ON THE ADMINISTRATOR’S PERMIT)

My involvement

The Jersey company was owned by the chairman and established by him to exploit an oil and gas exploration permit he had negotiated covering an area in the territorial waters off the coast of a North African state. The Jersey Financial Services Commission, as regulator of the administration services provider in Jersey (TrustCo) carried out an inspection of TrustCo’s activities and determined inter alia to (i) restrict TrustCo’s licence to non-trading entities (asset holding only) and (ii) encourage TrustCo to secure the appointment of an independent director to the board of this client company to balance the dominant views of the Chairman-owner.

In pursuance of the first determination, an initial part of my role was to introduce the company to a successor administration services provider in Jersey, better resourced and not shackled by the same restrictions. I then managed the transition of services. 

Ongoing, the expectations of my role required me to apply independent thought and decision-making to board decisions, monitor full and timely reporting to the board by the Chairman, and supplement the board’s expertise with my own distinct expertise from my background as a practicing lawyer. The role required a delicate balance to maintain the regard and co-operation of a dominant beneficial owner used to making the decisions himself, which I aimed to achieve by demonstrating added value from my input leading to more robust outcomes for the company.

The company then moved towards its goal by deciding to raise capital via a placing coupled with application for a listing on AIM, and appointed its broker for the fund raising, also to serve as Nominated Advisor for AIM purposes.

My significant involvement included contributing to preparation of the AIM admission document, before the company changed direction late in the day and negotiated a take-over by a listed Irish exploration company. My role then shifted to the completion of the take-over arrangements.

Outcome

The company developed successfully in its aim to add value to its exploration asset before exiting in order to realise the gain for the beneficial owner. The exit was achieved by way of a sale of the issued share capital to a listed Irish exploration company on terms achieving the beneficial owner’s goal via a share-for-share exchange, giving him a liquid holding realisable over time, along with a remunerated ongoing role in the enlarged business in relation to the company’s exploration permit. My role had run its course successfully and I stepped down from the board on completion of the sale.