Armatura shareholders, captive in the company after an "invisible" error for all BVB suspended

Armatura, a company listed on the Main Market of the Bucharest Stock Exchange (BVB), organized a shareholders' meeting that led to the suspension of shares from trading and, implicitly, to the impossibility of minority investors to capitalize on their holdings, amid incorrect information.

In mid-May, the company's management convened shareholders for an Extraordinary General Meeting (EGM), scheduled for June 24, to decide on measures such as the dissolution of the company, the initiation of the liquidation procedure, the appointment of a judicial liquidator, the suspension and withdrawal of securities from trading.

According to documents published on the BVB website, the dissolution and liquidation of the company were motivated by the decrease in net assets below half of the value of the subscribed share capital, as well as the impossibility of carrying out the object of activity, according to the provisions of the commercial companies law.

In order to assess the financial situation of the company and the prospects for continuing the activity, the Armătura board hired the auditor Noa Tax Advisors. He prepared a report according to which, in 2024, the equity (net assets) of the listed issuer decreased to 6.9 million lei - below 50% of the subscribed and paid-up share capital, in the amount of 18.1 million lei. The external auditor also states that there are no realistic prospects for resuming Armatura's activity in its current form, due to the cessation of operational activity starting in 2020, the lack of the necessary material base, the fact that the only source of income - sublease - does not cover fixed costs, generating losses, as well as other factors that prevent the relaunch of operations.

However, the issuer's annual report for 2024 indicates a share capital of 4 million lei, so the legal condition regarding the reduction of net assets below half of the share capital was not met. Only the cash held by the company, in the amount of 6.5 million lei, exceeded this limit.

The dissolution and initiation of the liquidation procedure, the suspension and withdrawal from trading of securities were approved at the EGMS on June 24, by the vote of the majority shareholder Herz Armaturen from Vienna, which holds 86.2% of the share capital of the Armatura company.

• Armatura shares fall by over 40% from the convening of the EGMS to the suspension of trading

The Bucharest Stock Exchange announces, on July 16, that it will suspend Armatura shares from trading starting July 21, given the EGMS decisions that provided for the voluntary dissolution and liquidation of the company, but which, as we have seen, were taken based on incorrect information.

From the convening of the EGMS to the suspension of trading of the shares, Armatura shares depreciated by 43%, generating losses for minority shareholders. And after the suspension of trading, on July 21, investors only had the prospect of liquidating the company in order to recover part of their investment.

• Armatura will convene shareholders again to cancel the decision to dissolve the company due to the reduction of net assets below half of the value of the share capital

The Financial Supervisory Authority requested clarifications from Armatura regarding the amount of 18.1 million lei mentioned by Noa Tax Advisors as the share capital only on July 31, according to a report published on the Bucharest Stock Exchange website on August 5.

The company's management claims that the amount of 18.1 million lei was the result of a material translation error between the Romanian and English versions of the report prepared by Noa Tax Advisors, an error that was not reported before the adoption of the EGMS decisions. According to the company, the amount comes from IFRS adjustments made in 2012 and does not reflect the actual share capital, which is 4 million lei, according to the financial statements from 2024.

Under these conditions, Armatura's management will convene a new general meeting of shareholders to annul the EGMS decision of June 24, which decided to dissolve the company due to the reduction of net assets below half of the value of the subscribed share capital. However, the dissolution and initiation of the liquidation procedure will be put to a vote again, this time only based on the impossibility of carrying out the object of activity, according to the provisions of the commercial companies law.

• Error not noticed for months; confusion for investors and possible case of capital market manipulation

On July 31, the Bursa newspaper requested a point of view from the Financial Supervisory Authority and Armatura company, regarding the situation of the company and its shares. The company representatives informed us that, following an address received from the ASF and checks that revealed the error in the external consultant's report, they will convene a new General Meeting of Shareholders to cancel the decision adopted on June 24. The authority partially answered our questions, pointing out that it is monitoring the situation of Armatura company and, depending on the aspects resulting from the analyses performed, will adopt the necessary measures.

For over two and a half months, information was displayed on the Bucharest Stock Exchange website that misled investors regarding the financial situation of Armatura company. BVB published the call for the Extraordinary General Meeting of Shareholders, the decisions adopted and, subsequently, ordered the suspension of the company's securities from trading, following shareholder decisions taken on the basis of incorrect information.

A decision as important as the dissolution of a company, based on an error in the documents related to the EGMS - an error that could have been easily identified, given that the real value of the share capital is published in most of Armatura's reports, including on the BVB website - was not notified even by ASF, the institution that must ensure the protection of investors' interests.

One of the central roles of capital markets is to facilitate the free trading of financial instruments, in a transparent and secure framework for all participants. However, currently, investors cannot capitalize on their Armatura share holdings in the market and they are not certain if and when they will be able to do so, given that ASF has not provided explanations regarding the options that the affected minority shareholders currently have.

Last but not least, the Armătura situation raises questions regarding a possible case of capital market manipulation, given that the decisions taken were based on erroneous information.

”For the purposes of this title, market manipulation represents the following types of activities: ... c) the dissemination of information through mass media, including on the internet or by any other means, which gives or is likely to give false or misleading signals regarding the supply, demand or price of a financial instrument (....)”, it is mentioned in Law no. 24/2017 on issuers of financial instruments and market operations, Chapter III, art. 120 para. (1).

An error, even unintentional, costs investors and the market time, money and trust. Who is responsible?