17. August 2011 09:52
Nexbis Limited (Nexbis) has paid a $33,000 penalty after ASIC issued an infringement notice for an alleged failure to inform the market about an acquisition for US$30 million of all the rights in an agreement to supply the Nexcode security suite to the General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China (AQSIQ) for the China National Gas Tank Project (the Project) in the period 26 August 2010 to 9.07am (EST) on 7 September 2010.
Nexbis is a provider of telecommunications products and services listed on the Australian Securities Exchange (ASX).
On 27 July 2011, ASIC issued the infringement notice because ASIC believes that Nexbis contravened the continuous disclosure obligation in section 674(2) of the Corporations Act 2001 by failing to notify the ASX on 26 August 2010 of the acquisition for US$30 million by its subsidiary of all the rights in an agreement to supply the Nexcode security suite to AQSIQ for the Project.
ASIC found that by 26 August 2010, Nexbis knew that:
- on 6 May 2010, its subsidiary had entered into an assignment deed under which CITP Holdings (Hong Kong) Limited (CITP) assigned to the subsidiary all its interest in an agreement to supply the Nexcode security suite to AQSIQ for the Project, for US$30 million;
- by 27 May 2010, Nexbis had paid US$27,500,000 (A$34,481,000) of the US$30 million payable to CITP under the assignment deed;
- on 28 July 2010, government approval had been given for the conversion of a joint venture China domestic company into a Sino-Foreign joint venture, to roll out the Project; and
- on 26 August 2010, approval had been received from the Foreign Exchange Bureau of China for the opening of a foreign currency bank account by the joint venture,
Nexbis did not announce the Information until 9.07am on 7 September 2010.
ASIC found that if the Information was generally available, it could have a material effect on the price or value of Nexbis’ securities because:
- Nexbis had made regular statements about the significance of and revenue from the Project since it was first announced on 17 November 2008.
- The purchase of the intangible assets under the assignment deed was material to Nexbis.
- Throughout 2010, the Project was one of three live projects for Nexbis and therefore, was important to the business of Nexbis.
- In the financial year ending 30 June 2010, Nexbis had a normalised cash loss of A$10,500,000, a net loss after tax A$49,600,000 and its revenue had fallen by 96% from the previous financial year to A$2,438,000.
- Nexbis’ market capitalisation as at 31 December 2010 was $83,827,453.92.
Nexbis has elected to comply with the infringement notice. The Corporations Act states that compliance with the infringement notice is not an admission of guilt or liability, and Nexbis is not regarded as having contravened section 674(2) of the Corporations Act. The penalty of $33,000 is stipulated by the Corporations Act for disclosing entities with a market capitalisation at the relevant time of less than $100 million.
Further information about ASIC’s administration of infringement notices is available from the ASIC website under ‘Continuous disclosure’.