The former CEO of organic baby food producer Bellamy’s Australia has sued her old employer over $1.2 million in options allegedly owed as part of a long-term financial incentives scheme.
In a NSW Supreme Court hearing Monday, Laura McBain’s barrister Jeremy Kirk, SC, told the court of a shareholder-approved scheme through which he said Bellamy’s ex-boss was entitled to almost 505,000 options for shares — worth around $1.56 million — when she took up the role of managing director and CEO in June 2014.
Kirk claimed that Bellamy’s had paid only 116,000 options to McBain, who stood down in January 2017 after an ASX announcement of poor sales in China led to a share price drop of 43.34% within a day that wiped $544 million from the company’s market capitalisation and resulted in a one-month trading halt.
Bellamy’s barrister Ian Jackman, SC, said that the options agreement, which was voted on and approved at the company’s 2014 annual general meeting, did not contain sufficient information on how the value of the options would be calculated. As a result, it was invalid under section 200E of the Corporations Act.
“The company has to decide upon a manner of valuation and disclose that to shareholders as part of the material for them to approve the benefit,” he told Justice James Stevenson.
The relevant part of section 200E states “[the] first condition is that the giving of the benefit be approved by a resolution passed at a general meeting of a) the company”.
Kirk argued that the AGM vote satisfied all necessary conditions under the law and that Bellamy’s was seeking some unknown “extra-textual” reason for why the vote was invalid.
“We need to be clear about what’s missing in a way that the company has not made clear,”Kirk said.
Bellamy’s has filed a cross-claim against McBain, seeking the repayment of about $225,000 handed to her on her departure. While the employment terms enforced a six-month notice period, McBain worked just one and a half months after the notice period began, with the remainder paid in lieu.
Jackman said section 200G of the Corporations Act put a cap on the amount of remuneration executives could earn on leaving a company. He said “it would be a real oddity” if Bellamy’s was forced to pay the full $1.5 million in options as well as the $225,000 already handed over.
Kirk argued back that Bellamy’s logic could lead to inconsistencies in executive benefits, and that if McBain had “served out her notice period, this wouldn’t arise”.
After the share price drop, Bellamy’s faced two shareholder class actions in the Federal Court. Slater & Gordon filed a case in February last year and Maurice Blackburn followed a month later. Both proceedings alleged continuous disclosure obligations breaches.
In August 2017, Justice Jonathan Beach ruled that the Slater & Gordon case could proceed as an open class action, while Maurice Blackburn’s case would proceed as an action closed to those 1000-odd Bellamy’s shareholders that had signed up. A case management hearing has been scheduled for the actions on July 26.
McBain is represented by Allens. Bellamy’s is represented by Herbert Smith Freehills.
The NSW Supreme Court case is Laura McBain v Bellamy’s Australia Limited. Slater & Gordon’s class action is McKay Super Solutions Pty Limited (as Trustee for the McKay Super Solutions Fund) v Bellamy’s Australia Limited. Maurice Blackburn’s class action is Peter Anthony Basil v Bellamy’s Australia Limited.
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