Director who flagged ‘abusive’ salary hikes, loses court action

A company director in family business Francis Busuttil & Sons failed to get the courts to stop shareholders from removing her as company director, allegedly after flagging what she believed were unjustified remuneration increases.

Suzanne Busuttil and her husband Brian had asked the courts to order family companies Francis Busuttil & Sons and the directors of related companies Foster Clark Products Ltd and B&S Contractors to stop what they termed was “abusive governance”.

The Busuttils claimed the company’s affairs were being managed unfairly, identifying non-observance of corporate governance principles, a lack of transparency and no respect to minority shareholders.

They also claimed there was a lack of communication of information and instances when some board members concealed information from the rest of the directors.

But a Court of Appeal confirmed the first court’s judgement, accepting the defendants’ arguments that the Busuttils were not shareholders of Foster Clark Products, FBS and B&S, and could not invoke any unfair prejudice action against such companies.

The court case revealed the rift at the heart of the Francis Busuttil companies after shareholders presented a motion during a company AGM to remove Suzanne Busuttil from director of the companies.

Busuttil claimed the removal was down to her protestations of abuse in the company management, allegedly after she complained over the remuneration of certain directors.

She accused the company’s main directors of having “an excessive desire for greed and power” for having increased their remuneration without any justifiable reason. “The majority of the board members of the FBS and B&S have been on a quest to have me removed from the respective boards ever since my appointment. The objection to my being a director reached astronomical proportions whilst proposals were being ‘discussed’ regarding the remuneration of certain directors which were being put forward by the unofficially appointed remuneration committee.”

Busuttil accused Franco Busuttil, one of FBS’s chief directors, of taking a 350% remuneration increase in 2012 and that he was earning more than FBS had made in average yearly profits. “It is far easier to increase one’s income by way of a salary than by way of a dividend. This method is unethical, unprofessional and is a clear case of abuse of power.”

She also claimed directors Harry Smith, Chris Degiorgio and Joseph Busuttil took remuneration increases ranging from 58% to 260% “without any justifiable reason”.

She was also emphatic that the figures disclosed by auditors PricewaterhouseCoopers in financial statements did “not agree with the declared values for tax purposes” nor with the actual remuneration received by directors.

In reply, the defendants pleaded that since the Busuttils were not shareholders of Foster Clark Products, FBS and B&S, the companies should be freed from the proceedings.

They also said that it was not clear what remedy the Busuttils were seeking. They said that the applicants’ allegations were unfounded and that the defendants’ companies were managed according to law, in the interest of all shareholders.

The Court of Appeal accepted that there was no appeal from the first court’s decision that the Busuttils could not invoke the law against the companies, because they were not shareholders of the companies.