“These breaches were self-reported, and eventually remedied on March 31 with the appointment of three new independent directors, Michael Stiassny, Greg Cross and Steve Phillips,” Being AI said.

“Being AI cooperated fully with NZ RegCo’s investigation and reached a settlement with NZX Limited, which was approved by the tribunal.”

Mitigating factors

Higgs and O’Riley’s departures reduced the board to just two directors, leaving the audit committee without the required minimum of three members, a majority of independent directors, or a director with financial expertise.

NZ RegCo suspended trading of Being AI’s shares on February 3, citing the governance shortfall. Trading in the stock resumed in April.

The tribunal said the five breaches were “serious”, depriving the board of its ability to govern during a “tumultuous time” for the business.

“The governance requirements in the rules are intended to provide security holders with important safeguards and protections,” it said.

“Compliance with them is a fundamental obligation on all issuers of equity securities.”

By blocking investors from trading for two months, the tribunal stated that the breach likely eroded market confidence.

While the starting point penalty was assessed at $85,000, the tribunal lowered the amount to $50,000 after weighing mitigating factors, including the company’s self-reporting. Still, the tribunal noted that Being AI had also breached NZX rules in 2024.

“NZ RegCo’s previous findings of rule breaches are aggravating and particularly concerning given Being AI has only been listed since April 2024,” it said.