A company controlled by a parent of former Creso Pharma chairman Adam Blumenthal has been directed to divest 14.5 million shares in the cannabis firm after an ASX rule violation came to light.
Suburban Holdings received the shares through a placement in February that allowed Creso to raise A$5 million.
Although Creso became aware that Suburban was under the control of one of Blumenthal's parents — and that shareholder approval was therefore required before the firm could take part in the raise — the shares were issued regardless.
"Under the Corporations Act, a holding controlled by a parent of a director is deemed to be a related party of the company," Creso said in a statement. "Therefore, Suburban's participation in the placement required prior shareholder approval."
Creso attributed the error to "an administrative oversight during the direct settlement of the placement between the broker who managed the placement, and the company's share registry".
The ASX has now instructed Suburban to offload its shares within six weeks, with any profit from the sale to be donated to charity.
Suburban will also be excluded from receiving any additional options connected to the share placement.
Creso said it has since reviewed its internal processes and "implemented appropriate controls to ensure such a breach does not happen in the future".
Blumenthal stepped down as a board member of Creso earlier this month.
He had previously given up his position as chairman after the Australian Securities and Investments Commission launched an investigation (ASIC) in late 2021.
