The Australian Securities and Investment Commission (ASIC) today announced that its application to the Federal Court for the winding up of Aviation 3030 Pty Ltd (Aviation), a company based in Melbourne, was successful and that the court has granted orders to wind up Aviation due to a legitimate lack of confidence in the management team by its directors.
Justice O’Callaghan ordered the winding up of Aviation saying:
[T]he case that ASIC makes to wind up Aviation is an overwhelming one… [D]irectors have issued to themselves and to their associates large numbers of shares at a gross undervalue; they have fabricated correspondence and invoices; they have provided false instructions to the company’s external solicitors; they duped and misled investors; they entered into related party loans; and they made unauthorized and exorbitant expenditures. The audacity of the March 2016 share issue alone could well be enough to warrant a winding up order, but it is not necessary to decide the case on that sole basis because of the many and varied ways that the directors have demonstrated that they are unfit to sit on the board of Aviation.
ASIC’s application was challenged by two majority shareholders (companies linked to Aviation’s directors), which owned 63% of Aviation’s total equity as from March 2016. However, 12 minority investors supported ASIC’s application after they were allowed to intervene in the trial proceedings.
ASIC’s winding up application was opposed at trial by Aviation and its two majority shareholders (which were companies associated with the directors of Aviation) to which 63% of Aviation’s share capital was issued in March 2016. ASIC’s application was supported, however, by a group of 12 minority investors who were granted leave to intervene in the proceeding. The Federal Court further order the closure of an unregistered managed investment scheme that was run by Aviation via five individual trusts, including the trustee companies that were involved in raising funds for Aviation’s investment scheme. The court appointed George Georges and John Lindholm of Ferrier Hodgson as joint and several liquidators of Aviation, its investment scheme and all associated entities.
The Judge granted a 7-day stay of execution on the orders to allow the defendants an opportunity to file an appeal.
John Price, an ASIC Commissioner commented:
The orders made by the Court will allow an orderly and lawful winding up of the companies and the investment scheme they have operated and will place the future process of distribution of funds to investors into independent hands. This action shows ASIC will intervene where directors prioritize their own interests above those of investors.