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City grandee Sir Paul Judge warned Felix Vulis, then acting chief executive of Eurasian Natural Resources Corp, two years ago to stay on only if governance radically improved, it has emerged.

Sir Paul’s intervention reflected discord within the boardroom of the FTSE 100 miner that has continued to this day.

People close to events say Sir Paul, an independent director since the 2007 initial public offering, told the board in May 2011 that it would be foolish for Mr Vulis, a longstanding associate of powerful shareholders, to be reinstated as permanent chief executive.

Mr Vulis, a Russian American businessman, had announced in February 2011 that he would step down for personal reasons, but had continued in a stopgap capacity. The move followed a board discussion during which other directors declined to express confidence in him, say individuals familiar with the matter.

Sir Paul believed that Alexander Mashkevich, one of three powerful shareholders, supported the reinstatement of Mr Vulis. The former Cadbury executive opposed this, but continued as a director after Mr Vulis stayed on as chief executive. Corporate governance difficulties persisted.

Sir Paul also told the board it was a mistake for Mr Mashkevich to seek the chairmanship, say people involved in the situation, because he believed the appointment could be blocked by the Financial Services Authority. He also expressed reservations that Mr Mashkevich would aid the company’s efforts to improve investors’ perceptions of corporate governance. Mr Mashkevich did not pursue his ambition.

The following year Sir Paul received a 15.7 per cent increase in his annual base salary as an independent director to £125,000. The non-executive directors who have been with ENRC since its London listing have collectively earned nearly £1.7m in fees.

Last month Mr Mashkevich said he was pondering buying out ENRC’s 18 per cent free float in consortium with the Kazakh government and two other founding shareholders, Patokh Chodiev and Alijan Ibragimov.

May 17 is the deadline by which the consortium needs to table a firm offer for the outstanding shares.

According to one person with knowledge of ENRC’s thinking, the miner is likely to seek an extension to that deadline from the Takeover Panel early next week, to give the consortium more time, if needed, to table a firm offer.

Under newly reformed UK takeover rules, the Takeover Panel typically grants extensions requested by boards.

Sir Paul was unavailable for comment as were the company’s founding shareholders. ENRC declined to comment.

Mr Vulis said on Thursday that ENRC was “co-operating fully” with a Serious Fraud Office criminal investigation in a statement to investors.

Copyright The Financial Times Limited 2017. All rights reserved.
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