Board of Directors under fire at General Assembly Nyrstar NV : €5 million per year for an empty shell

Minority shareholders sound the alarm about poor governance, conflicts of interest, mismanagement, and excessive spending.

Nyrstar NV, a Belgian listed company that was active in the zinc sector but has had no operational activities or significant assets since 2019, continues to spend approximately €5 million annually on directors' fees, administrative costs, and legal assistance. Meanwhile, the Board of Directors stubbornly refuses to oppose commodities giant Trafigura, which took over the company's assets. Since the contested takeover by Trafigura, costs have risen to around €25 million. The recurring misuse of the company's few remaining resources, the many indications of conflicts of interest on the part of the Board of Directors, and the saga surrounding the candidacy of former Flemish Prime Minister and federal minister Kris Peeters, which was to be confirmed at the General Meeting but was withdrawn at the last minute by Peeters himself, caused quite a stir.

General Assembly: tensions run high

During the General Assembly on June 24, the Board of Directors of Nyrstar NV was pressed with questions from dissatisfied minority shareholders. The inquiries related, among other things, to the violation of principles of corporate governance, the independence of certain board members, and the high costs incurred at the expense of small shareholders. The company's Board of Directors took a particularly defensive stance and often remained silent. At times, the only Belgian member of the board even refused to answer questions, much to the frustration of certain shareholders who have been fighting for greater transparency for years. The General Assembly of Nyrstar NV was once again a prime example of poor governance, with so-called independent directors at times even blatantly claiming to know nothing. Even when faced with a number of essential questions in the context of the investigation by the FSMA stock market regulator and an ongoing criminal investigation, they proved unable or unwilling to answer.

Board of Directors mainly defends itself and Trafigura

Although Nyrstar NV has had no activities or assets since its acquisition in 2019, significant budgets continue to flow into all kinds of legal and consultancy costs, as well as remuneration for the directors. This amounts to a whopping €5 million per year, or around €25 million since the company became an empty shell. About 80 percent of that amount was spent on legal advice. Meanwhile, the 2024 financial year shows a loss of €4.5 million and equity has fallen to -8.5 million.

Shareholders are wondering how such expenses can be justified in a company that is no longer operational. All the more so now that Nyrstar NV itself states in its annual report that no civil proceedings have been brought against it and that it can only be the beneficiary of the minority claim brought by the shareholders. This claim amounts to approximately €2 billion. The question therefore arises as to how such exorbitant expenses can be in the interests of the company, given that they cannot prevent a significant loss or yield a significant benefit for the company.

At the very least, the company's Board of Directors could have taken protective measures against Trafigura, the commodity trader that was recently convicted for corruption in Switserland. Trafigura took control of Nyrstar's assets following a highly-disputed restructuring with abundant indications of malpractice resulting in scrutiny by the authorities. For example, the FSMA auditor concluded in no uncertain terms that the restructuring operation was subject to market manipulation, although this still has to be confirmed by the FSMA's sanctions committee.

The question of why the company continues to spend millions on legal advice while stubbornly refusing to file claims (even if only as a precautionary measure) in the ongoing proceedings against Trafigura has been met with a great deal of incomprehension by the minority shareholders, including allegations of conflicts of interest.

Criminal investigation: Board of Directors takes a passive stance

In the meantime, the public prosecutor's office has appointed an investigating judge to conduct a criminal investigation into offences including misuse of company assets, which means that there are also indications that assets were unlawfully withdrawn from Nyrstar NV. Yet again, the Board of Directors of Nyrstar NV believes that there are no grounds for taking precautionary measures. Minority shareholders also question why the company did not join the criminal investigation as a civil party.

Quite a few shareholders suspect that the lax attitude of the Board of Directors of Nyrstar NV can only be explained by the fact that the directors want to save their own skins and that of the majority shareholder Trafigura, to whom they are beholden, even though they consistently claim the opposite.

After all, Trafigura lent Nyrstar NV a substantial amount of money upon completion of the restructuring, which may only be used for legal proceedings against parties challenging the restructuring. This means that Nyrstar NV can never take legal action against Trafigura, even though this is directly contrary to the legal obligation of directors and advisors to act in the interests of the company and not of its reference shareholder. Shareholders see this as proof that the Board of Directors is not serving the interests of the company, but rather its own interests and those of Trafigura.

Perquisitions: from smokescreen to memory loss

Several shareholders requested clarification of the very limited information in Nyrstar NV's annual report regarding the search of the company's premises ordered by the investigating judge in Antwerp. The annual report devotes only a single sentence to these perquisitions, while these are serious criminal offences.

Although Nyrstar, Trafigura, and possibly several directors themselves are the subject of this criminal investigation, they stubbornly continued to deny any knowledge of it. They refused to provide any information whatsoever, which was again perceived by minority shareholders as a conflict of interest.

It became downright embarrassing when the Board of Directors, through its Belgian independent director, first claimed three times that these house searches had only taken place after the previous General Assembly, only to admit after lengthy deliberation that this information was manifestly incorrect. Strikingly, at the previous General Asembly, the board claimed that there was no indication whatsoever that a claim for provisional relief should be brought against Trafigura. This brief lapse of memory even prompted auditor Gert Claes of BDO to conclude that it would have been “elegant” if he had been informed about the perquisitions prior to last years' General Assembly. However, he lacked the courage to draw the necessary conclusions and revise his highly contested audit opinion.

Candidate director Kris Peeters withdraws

The last-minute withdrawal of the candidacy of former Flemish Prime Minister and Belgian federal minister Kris Peeters also raised quite some questions at the General Assembly. But on that point too, the shareholders received little to no information.

A group of minority shareholders had spoken to Mr. Peeters on the morning of his withdrawal. It soon became clear that he had not been fully and correctly informed. Among other things, he was unaware of the loan granted by Trafigura and the conditions attached to it, which effectively imply that Nyrstar NV was (and still is) being held in a stranglehold. When asked what information Mr. Peeters had received, the Board of Directors merely stated that all publicly available information had been provided to him.

The minority shareholders regret that Mr. Peeters will not be joining Nyrstar NV as an independent director. The addition of a truly independent profile with the experience and credibility of Mr. Peeters would have been a positive shift. Nevertheless, the shareholders are convinced that Kris Peeters made the only correct decision by withdrawing his candidacy, as might be expected of (candidate) board member who learns that conditions would be imposed on him that could compromise his independence.

Nyrstar Collective opens front against mismanagement

The minority shareholders have now joined forces in the Nyrstar Collective. With this initiative, they want to expose the malpractices in the case and open a public debate on good governance, transparency, and shareholder rights in listed companies. In addition to their public action, they are also continuing their legal battle unabated, determined to demand accountability for what they believe is a textbook example of bad practice and violation of corporate governance rules and regulations.

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