Carphone Warehouse Group Plc (CPW.L), Europe's largest independent mobile phone retailer, announced the resignation of its co-founder David Ross as a Director of the company with immediate effect, as he failed to disclose the use of his stake in the company as security against personal loans thus breaking the stock-exchange rules. The company, in a statement on Monday, added that Ross will continue to pursue his various other business interests.
Carphone noted that it received Ross' notification on Sunday that he had pledged 136.4 million ordinary shares in the company against personal loans. The pledge was through various agreements between 2006 and 2008 and as part of a package of security comprising other assets of substantial value.
According to reports, Ross was also under pressure to resign as chairman of National Express and quit his director posts at Big Yellow Self-Storage and Cosalt, after admitting to use his stakes in those businesses as collateral, to raise further cash.
In total, Ross reportedly has used GBP 162 million worth shares as security for a series of bank loans since 2006.
Ross, with a fortune of almost GBP 900 million, failed to disclose that he had used shares as security against personal loans. Under the rules, any director must notify the company's chairman of any share dealings, including the use of shares as security for loans, while a chairman must notify either the chief executive or senior independent director. A failure to do so warrants anything from a personal warning from the Financial Services Authority to a large fine.
Previously, before stepping down from day-to-day involvement in Carphone Warehouse and became non-executive deputy chairman, Ross had disclosed a use of 41 million shares as security for loans. Reports suggested that Ross may have thought that the rules did not include non-executive directors.
Carphone said Ross has also notified that none of his loans is currently in default and that he has no current intention to sell any of his shares in the company. In addition, he has given an undertaking to the Board to facilitate an orderly market, where possible, for any potential future disposal of shares in the company.
The company noted that none of its other directors has granted security over or entered into any financial instruments relating to any of their holdings of ordinary shares in the company.
Following the news of Ross' resignation, opposition parties on the London assembly called on the London mayor Boris Johnson to replace Ross as his representative on the 2012 Olympics organizing board, media reported.
Ross, a major player in the commercial property market, has reportedly been hit by the prevailing credit crisis and economic downturn. According to reports, majority of his personal fortune is invested in a property joint venture with Morgan Stanley called Kandahar Real Estate. There are speculations that Ross has cashflow problems and may have to sell his shares to meet demands from his bankers.
CPW.L is currently trading on the LSE at 86.75 pence, down 2.25 pence or 2.53%, on a volume of 5.4 million shares.
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