# Bytes Technology Group updates on investigation into resignation of BTG’s CEO, Neil Murphy

- Link: https://www.directorstalkinterviews.com/bytes-technology-group-updates-on-investigation-into-resignation-of-btgs-ceo-neil-murphy/4121147631
- Published: 2024-03-18T07:48:17+00:00
- Author: Amilia Stone

**Bytes Technology Group plc** (LON:BTG), one of the UK’s leading software, security
and cloud services specialists, has provided the following update on the Board’s
investigation into the circumstances related to the resignation on 21 February 2024
of BTG’s former CEO, Neil Murphy.

In a separate announcement today, the Company provides a scheduled trading update
on its financial performance in the year ended 29 February 2024, a record year for
the Group.

**Circumstances around Mr Murphy’s resignation**

Mr Murphy’s resignation was prompted by a voluntary request for information (“RFI”)
from the Financial Conduct Authority (“FCA”), which was sent to Mr Murphy on 14 
February 2024. The RFI indicated that Mr Murphy may have conducted additional transactions
that were not disclosed to the market or the FCA since the Company’s IPO. Mr Murphy
informed the Board that he would share his draft response to the FCA’s inquiries
at a scheduled Board meeting on 21 February 2024. However, on the morning of this
meeting, Mr Murphy unexpectedly resigned with immediate effect, indicating that 
he had failed to make disclosures related to his share dealings, and this was announced
by the Company on the same day.

As subsequently notified to the Company and announced on 23 February 2024, it transpired
that Mr Murphy had engaged in unauthorized and undisclosed trading of the Company’s
Ordinary Shares on 66 trading days between 6 January 2021 to 10 November 2023, totalling
119 transactions. This revelation came as a shock to the other Board members, especially
considering the Company’s previous investigation during 2023 into an unrelated share
dealing disclosure matter (as further described below) which had clearly highlighted
to all Board members the importance of absolute accuracy and transparency in all
matters related to share dealings by directors, PDMRs, and persons closely associated
with them (“PCAs”).

Subsequently, on 12 March 2024, Mr. Murphy’s lawyers provided the Company with additional
information outlining 15 additional transactions on 10 different trading days conducted
by Mr Murphy on behalf of his wife, between 29 December 2021 and 20 November 2023.
The Company disclosed this information to the London Stock Exchange (LSE) and Johannesburg
Stock Exchange (JSE) on 13 March 2024. Additionally, on 12 March 2024, Mr. Murphy,
through his legal representatives, reiterated that there were no further relevant
transactions.

Given Mr Murphy’s longstanding leadership position in the Company, the Board of 
Directors is saddened as well as shocked by Mr Murphy’s actions, which it finds 
hard to comprehend. His actions were entirely at odds with the values of openness,
honesty, and transparency which have been and which remain central to the Group’s
culture and to its ongoing success.

**Revised Director’s Shareholding information**

As a result of these undisclosed trades, BTG is aware that each Annual Report and
Accounts for the three years ended 28 February 2021 (FY21), 28 February 2022 (FY22)
and 28 February 2023 (FY23) had incorrect Directors’ Shareholding disclosures for
Mr Murphy despite him having represented those disclosures to the Company and the
Group’s Auditors, Ernst & Young LLP (“EY”) as part of the External Audit. Taking
all the disclosed and undisclosed transactions known by the Company to date into
account in respect of Mr Murphy and his wife, the Company has produced the following
reconciliations to the previously announced PDMR notifications issued by the Company
in respect of Mr Murphy and the disclosed positions in the FY21, FY22 and FY23 Annual
Report and Accounts.  Mr Murphy, through his lawyers, has been provided with the
Company’s reconciliations and has confirmed that the information is correct and 
there are no other transactions that need to be considered.

**Neil Murphy’s PDMR announcements**

| **Date** | **PDMR announcement holding** | **Announced change in holding** | **Intervening undisclosed trades** | **Revised  holding (unaudited)** | **Note** | **Disclosed vs Revised** | 
| 17-Dec-20 | 4,190,941 | – | – | 4,190,941 |  | – | 
| 14-Jan-22 | 3,690,941 | (500,000) | 235,085 | 3,926,026 | 1 | (235,085) | 
| 06-Jan-23 | 3,735,424 | 44,483 | 93,322 | 4,063,831 | 2 | (328,407) | 
| 01-Feb-23 | 3,786,218 | 50,794 | (63,740) | 4,050,885 | 2 | (264,667) | 
| 22-Jun-23 | 2,836,218 | (950,000) | 326 | 3,101,211 | 2 | (264,993) | 
| 27-Nov-23 | 2,890,218 | 54,000 | (264,993) | 2,890,218 |  | – |

**Annual Report Disclosures**

| **FY** | **Disclosure date** | **Disclosed holding** | **Total undisclosed trades** | **Revised holding (unaudited)** | **Note** | **Disclosed vs Revised** | 
| FY21 | 28-Feb-21 | 4,190,941 | 8,852 | 4,199,793 |  | (8,852) | 
| FY22 | 28-Feb-22 | 3,690,941 | 267,421 | 3,958,362 | 1 | (267,421) | 
| FY23 | 28-Feb-23 | 3,786,218 | 264,667 | 4,050,885 | 2 | (264,667) |

**Notes**

Of Mr Murphy’s revised holding:-

1.   as at these dates, 6,556 Ordinary Shares were beneficially owned by his wife,
Alison Murphy.

2.   as at these dates, 14,992 Ordinary Shares were beneficially owned by his wife,
Alison Murphy.

The Company is cooperating fully with the FCA and provided a response to FCA’s RFI
on 9 March 2024 that pertains to the Company’s processes and procedures and will
respond to any further requests to assist the FCA in a timely manner.

**Previous investigation during year ended 29 February 2024 (“FY24”)**

Earlier in FY24, the Board undertook an externally facilitated review of the circumstances
relating to a share purchase by a PCA of former non-executive director Alison Vincent
not being notified to the Company.  The Board has since implemented the recommendations
from that investigation.

On 14 July 2023, the Company issued a notification to the market detailing a purchase
of 608 ordinary shares by a PCA of Alison Vincent that had taken place on 29 March
2022. The Company was not properly notified of the full details of this trade until
30 May 2023. At that time, the Company did not issue a notification to the market
regarding this trade as the value of this PCA transaction fell below the de minimis
threshold of EUR 5,000 under Article 19(8) of the Market Abuse Regulation (EU) 596/
2014, which is part of English law by virtue of the European Union (Withdrawal) 
Act 2018 (“UK MAR”). At the Company’s Board meeting on 11 July 2023, the Board confirmed
that the Company’s Securities Dealing Code did not include this de minimis exclusion
and its policy was to disclose all PDMR Dealings notified to the Company to the 
market via RNS. The Company then issued the 14 July 2023 RNS.

The Board also noted that: (i) the transaction had occurred during a Company Closed
Period (but not in a Closed Period under UK MAR and not at a time where any Inside
Information existed) and it was the Company’s policy under its Securities Dealing
Code that PDMRs are required to notify their PCAs of Company Closed Periods and 
take steps to prevent them dealing in such periods; and (ii) the Directors’ Shareholding
information in the FY22 and FY23 Annual Report and Accounts for the years was incorrect
with respect to the shareholding of Alison Vincent and her PCAs.

To establish the root cause of these issues and make recommendations for improvement,
the Board appointed an independent committee of the Board. The committee engaged
PwC to undertake independent investigative work to establish the facts of what had
happened and to advise whether the FY22 or FY23 Annual Report and Accounts would
need to be revised. Furthermore, Travers Smith LLP, the Company’s external legal
counsel, provided advice as to whether certain regulations had been breached. Both
firms were asked to make recommendations for improvement in the Company’s corporate
governance and PDMR share dealing processes. The committee also engaged with EY,
the Company’s external auditors, in respect of the incorrect disclosure in the Directors’
Remuneration Report on the Directors’ shareholdings in the FY22 and FY23 Annual 
Reports.

The committee completed its work in early October 2023. The conclusion of its investigation
was that the FY23 Annual Report and Accounts did not need to be reissued. There 
will be a prior year adjustment to the Directors’ shareholdings table in this year’s
Directors’ Remuneration Report and recommendations from the committee provided by
both PwC and Travers Smith have been implemented and the Company is maintaining 
records of ongoing activities to monitor progress.

Throughout this investigation, it was emphasised with great clarity to all Directors
and PDMRs that any share dealings involving the Company’s shares must be reported
to the Company. At no time during the period from 14 July 2023 to 20 February 2024
did Mr Murphy disclose to the Board his own nor his PCA’s incorrect shareholding
position in the FY21, FY22 and FY23 Annual Report and Accounts.

**Current investigation**

The Board has now appointed another independent committee of the Board to investigate
the resignation of Mr Murphy and his undisclosed share transactions that were not
in accordance with the Company’s Securities Dealing Code. PwC and Travers Smith 
are advising the committee.  The outcome of the committee’s investigation will be
shared with EY, the external auditors, in the context of their current year Audit.
The independent committee will work with the Audit and the Remuneration Committees
to ensure the proper disclosures are made, and a further prior year adjustment made,
to the Directors’ shareholdings table in this year’s Directors’ Remuneration Report.

Once the committee has completed its investigation and reported to the Board, Bytes
Technology Group will be able to provide a date for the release of its preliminary
results for FY24.  It is currently envisaged that this will be in late May or early
June 2024.

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