New Zealand Coastal Seafoods breaches ASX rule in Gold Saint supply deal, terminates agreement

New Zealand Coastal Seafoods Limited (ASX: NZS) has found itself in hot water after breaching the ASX Listing Rule 10.1 with its supply agreement with Gold Saint International Resources Group Pty Ltd. The agreement, worth more than 5% of the company’s equity, involved selling premium New Zealand Ling fish to the Chinese market but failed to meet the required shareholder approvals. The breach triggered regulatory scrutiny, forcing the company to terminate the agreement with Gold Saint International Resources Group Pty Ltd, which is controlled by Guoyu Li.

The controversial supply agreement involved key players like Australian Financial Resources Group Pty Ltd, a significant shareholder in the company. Guoyu Li, who holds 90% of Gold Saint, is also the sole shareholder and director of Australian Financial Resources Group. These overlapping interests put the agreement under ASX Listing Rule 10.1, which mandates specific disclosures and shareholder approvals when transactions involve more than 5% of a company’s equity. However, New Zealand Coastal Seafoods Limited did not seek or obtain the necessary approvals, leaving the company in violation of ASX regulations.

In response, New Zealand Coastal Seafoods Limited has taken steps to rectify the situation. The company announced that it has terminated the agreement and will not refund Gold Saint for any previous payments. Furthermore, the company has strengthened its internal processes to prevent future breaches. Two new directors, Ivan Wu and Melinda Orrock, both with compliance expertise, have been appointed to ensure tighter controls and better adherence to regulatory requirements.

ASX listing rule breach causes stir

The Gold Saint Supply Agreement first came to light in an announcement on 28 August 2024, in which New Zealand Coastal Seafoods Limited revealed the deal and its potential implications. However, the Australian Securities Exchange (ASX) later flagged the agreement as non-compliant with the Listing Rule 10.1 due to the high value involved and the intricate connections between Gold Saint, Guoyu Li, and Australian Financial Resources Group. The ASX raised concerns that the transaction failed to adhere to corporate governance practices, putting the company at risk of sanctions.

New Zealand Coastal Seafoods Limited’s breach is particularly concerning as it highlights deeper issues in corporate governance and oversight within the company. The company’s board has since been reminded to ensure that all conflicts of interest are transparently disclosed. The appointment of Wu and Orrock is intended to bring additional expertise to avoid further regulatory issues.

Expert opinion: Compliance overhaul needed

Industry experts believe that New Zealand Coastal Seafoods Limited must take this incident as a serious wake-up call to overhaul its compliance and governance processes. The breach of ASX rules is not just a one-off mistake but a reflection of larger systemic issues within the company. By failing to comply with fundamental governance rules, the company has exposed itself to legal risks and reputational damage. A more robust corporate governance framework, including regular audits of transactions and stricter internal controls, will be critical for the company moving forward.

The future success of New Zealand Coastal Seafoods Limited hinges on its ability to restore investor confidence and ensure compliance with all relevant regulations. The seafood industry is highly competitive, and the company cannot afford further missteps, particularly with its significant business ties to markets in China and the Asia-Pacific region.

New Zealand Coastal Seafoods Limited’s termination of the Gold Saint supply agreement, along with its decision not to issue refunds, marks an important turning point for the company. While the breach of ASX Listing Rule 10.1 casts a shadow over its corporate governance, the new appointments and internal changes offer a path forward. However, the company must now work hard to rebuild trust among its shareholders and regulatory bodies.