Gold one kilogram bars and silver one kilogram bars are seen in this arranged photograph at Gold Investments Ltd. bullion dealers in London, U.K., on Jan. 15, 2014Chris Ratcliffe/Bloomberg
An independent director of two Canadian metals funds, which are the subject of a hostile takeover bid, has resigned as lead director amid allegations he is receiving compensation from the administrator of the funds.
Silver Bullion Trust and its parent company Central Fund of Canada Ltd. – which also owns Central Gold Trust and is controlled by the Spicer family of Ancaster, Ont. – issued press releases Friday announcing independent trustee Ian McAvity was stepping down as lead trustee and lead director of both boards. He will remain as a director of both.
Replacing Mr. McAvity at Silver Bullion Trust will be Jason Schwandt, an engineer who was a trustee of the fund since 2012. At Central Fund, Mr. McAvity will be replaced by Glenn Fox, an economist who has been a director since February.
Sprott Asset Management, the Toronto-based asset manager that is trying to purchase the funds, alleges that Mr. McAvity received millions of dollars in the past from the administrator of Central Fund, breaching his duties as an independent director. Sprott alleges the arrangement means he will continue to receive 6 per cent of the revenue of the administrator of Central Fund for life. Sprott brought the allegation to the Ontario Superior Court after Central Gold Trust and Silver Bullion Trust sued Sprott to stop its $898-million takeover bid, launched in April. In a recent ruling, the court said it did not feel it was necessary to address the issue after determining that the trusts' case was already invalid.
"It is unfortunate that Sprott has resorted to making disparaging attacks against me personally," Mr. McAvity said in a press release. "I am stepping aside from these roles so that these desperate personal attacks by Sprott do not become a sideshow and distraction to Central Fund. I look forward to continuing to support Central Fund and its shareholders in my role as a director of Central Fund."
Sprott alleged in its court application that the father of Bruce Heagle, a director on Central Fund's board, was also a "beneficiary" of a relationship with the Spicer Family.
"This is just one more example of why unitholders need their investment managed by a professional, regulated entity," said John Wilson, chief executive officer of Sprott. "The changes do nothing to address the conflicts and underperformance at Central GoldTrust, Silver Bullion Trust and Central Fund of Canada."