Former shareholders in one of Scotland's green technology pioneers have formed an action group to protest at the lightning pre-pack administration and sale of the group last month.

Dundee-based battery maker Axeon, one of the key players in European electric car development, shocked its shareholders when it announced on April 20 that it had that day been put into administration by its 20% shareholder, hedge fund Ironshield, which had immediately bought the company through a new vehicle AG Holdings.

Ironshield was the Scottish company's only substantial creditor, and administrator Malcolm Shierson at Grant Thornton in London told The Herald last week that the valua- tion of the firm - yet to be disclosed - was less than the £8m debt owed to the hedge fund. "All the normal procedures were followed," he said.

Grant Thornton has said that earlier in the year it "discreetly marketed" the company, but no interest had been shown.

At the end of last year, Axeon's founder and chief executive, Hamish Grant, resigned.

But an industry source has told The Herald that two parties had previously expressed interest in buying Axeon, and neither lead had been pursued prior to the administration. One potential buyer had proposed paying Ironshield 80% to 90% of its debt, leaving shareholders with some portion of the company.

In the event, Ironshield enforced a debt agreement giving it the right to immediate repayment, which meant no other buyer could compete in the administration, to grab 100% of the company and wipe out the other shareholders.

For shareholders, including 3.7% holder Scottish Enterprise which had invested over £814,000 in Axeon, the coup came as a bolt from the blue.

Axeon had in its previous stock exchange announcement 18 days earlier on April 2 said that "whilst in discussions with its principal lender (Ironshield) in relation to the financial covenants on its debt, it will release its preliminary results by the end of April 2009".

It went on: "The board confirms that it continues to enjoy the support of this lender and looks forward to announcing to the market the outcome of these discussions in conjunction with its preliminary results."

This seemed consistent with a reported comment made by a company spokesman in February that Ironshield was "very supportive and we would have no expectations that those covenants would not be extended".

The shares, which had fell from 80p a year earlier to 4.25p, began to tick up. On April 7, Glasgow-based car manufacturer, Allied Mobility announced £1.8m of funding to trial electric cars in the city over two years, using Axeon's lithium-ion batteries, and on April 17, amid further reports of new government subsidies for green cars, Axeon shares jumped by 50% to 9p as private investors piled back in.

When the market re-opened on Monday, April 20, the price raced up to 12p with 249,000 shares traded, giving a market value of £5.6m and an enterprise value of £15m. The shares had risen threefold since the announcement on April 2. But to investor horror, at 12.50pm that day the shares were suspended, because the company had been put into administration and sold. New 100% owner AG Holdings was looking forward to "an exciting future" for Axeon - but shareholders were told it was "unlikely" they would get anything The Accountancy Age website next day reported Grant Thornton as saying "that Axeon would be wholly acquired by multinational foreign trade and logistics company AG Holdings" after spending "less than one day in administration".

In fact, the grandiose-sounding AG Holdings had only been registered at Companies House by Ironshield on April 14. Its one director is Iron- shield's founder, David Nazar, a City banker specialising in distressed debt'.

Some 2.5 million Axeon shares were traded, sucking more shareholders in, between April 14 and April 20. Axeon was to spend only one hour in administration.

One shareholder who requested anonymity commented: "A debt waiver had been put in place but it was due to run out in late April. Why didn't management get the waiver extended before it ran out or get more proof from Ironshield that they were going to extend it?"

He added: "There were various positive announcements demonstrating that the future of the company was bright, and on the assumption that the waiver was going to be extended people went and bought shares."

Ironshield told The Herald that it was unable to comment for reasons of confidentiality. AG Holdings has said: "We have an ambitious development plan for the business as a whole and the acquisition allows us to provide the business with the necessary financial resources."

Investors Chronicle magazine noted that it was "pretty rare for a quoted company to be forced into sudden admini-stration by its lenders", but that Ironshield's actions were strictly legal. "Shareholders baffled by the sudden un-conditional takeover of their company should note that the takeover rules fall into abeyance as soon as an administrator is appointed."

It concluded: "A new insolvency practice ruling on pre-packed administrations came into effect in January to extend protection for creditors. Perhaps it needs an extra paragraph to cover shareholders."

Charles Young, a business angel backer of Axeon from its inception in the 1990s, and now chief executive of EG Thomson Holdings which was also a shareholder, commented: "Shareholders were never given the chance by the board to see whether they wanted to put money in to stop somebody appointing an administrator."

John McCone, who held 47,000 shares, has founded a shareholder action group. He writes online: "Shareholders were kept in the dark regarding a pre-pack deal where they stood to suffer the maximum possible loss."

One source close to the matter told The Herald: "The first the directors knew about it was when the administrator turned up at the door."

Shierson responded: "It would be wrong to say they weren't aware of the possibility, what degree of probability they put on it is their own judgment." The source added: "The covenant may have been breached, but the company didn't feel under particular stress in meeting interest repayments."

Charles Matthews, chairman of Axeon, declined to speak to The Herald.

Shierson said Axeon's nominated adviser had told the board there was "no prospect of raising additional funds in the market", and that "in a pre-pack administration there is a certain amount of contingency planning that has to happen".

Following a wave of controversy over pre-pack administrations, the Institute of Chartered Accounts of Scotland issued its own guidelines in January of this year. Duties of the administrator include disclosing to creditors "any valuations obtained of the business or the underlying assets", "the alternative courses of action that were considered with an explanation of possible financial outcomes," and "why it was not possible to trade the business and offer it for sale as a going concern during the administration".

Shierson said: "I am fairly confident I can defend my actions against anyone who may inquire I am not aware of any complaint having been issued. I genuinely do not believe this business was worth the value of the indebtedness to Ironshield, they paid a fullish price in the circumstances."

He concluded: "I can understand why there is shareholder unrest, because they are effectively the only victim of the process and that is unusual."

Ironshield's position emerged after the company's ambitious 2007 fund- raising to acquire Swiss/Polish power tool battery maker Ristma, with £50m of sales against Axeon's £3m, but tied to a market which last year went into sudden decline.

In early April, Axeon said it had doubled sales to £61m last year but made a £3m loss, and had shed 200 jobs, largely in Poland, from its 770 workforce.

AG has said it will transfer and protect the surviving jobs, 70 of them in Dundee.