New Zealand’s most popular used car dealership chain, 2 Cheap Cars (2CC), has been fined $40,000 by the NZ Markets Disciplinary Tribunal after breaching multiple NZX listing rules.
The dealer acknowledged that it broke rule 2.1.1(c) which outlines that at least two directors must be Independent Directors, as well as rule 2.13.2(c) which states the audit committee must have a majority of Independent Directors.
In its public censure of 2CC, the NZ Markets Disciplinary Tribunal states that the dealer had only one Independent Director and did not have a majority of Independent Directors on its Audit Committee for approximately eight weeks, from 17 March 2023 until the week ended 19 May 2023.
It says that the breach arose because Gordon Shaw, Independent Director of 2CC, was not an Independent Director during the eight-week period he undertook a contractual role with 2CC Subsidiary, NZ Motor Finance Limited (NZMF).
Due to the importance of his role, NZ Markets Disciplinary Tribunal deemed the issue a “serious compliance breach”.
“While the breach appeared unintentional, the Tribunal was concerned that 2CC had not adequately considered the implications of Mr Shaw’s contractual role with NZMF on his status as an Independent Director,” the Tribunal stated.
It also added that: “Statements made in 2CC’s Annual Report 2023 gave the impression 2CC had complied with the Independent Director requirements, when for a time they had not.”
As a result, 2CC was ordered to pay a fine of $40,000, pay the costs of NZX and the Tribunal, and be publicly censured.
In response to the decision, CEO of 2CC Paul Millward said that the breach was “inadvertent” and had not caused a loss to the company’s investors. While the company appealed the decision, Millward said the final decision was accepted but regrettable.
“We certainly regret the breach, but it was not intentional. No question, we should have more carefully considered the implications with regard to ensuring independent director requirements were maintained at all times,” he said.