Omartleb Pty Ltd (Administrators Appointed) (Formerly Trading As Enzed Perth) ACN ( Company )

Transcription

1 Omartleb Pty Ltd (Administrators Appointed) (Formerly Trading As Enzed Perth) ACN ( Company ) Report to creditors Section of the Insolvency Practice Rules (Corporations) August 2018

2 About This Report: A Guide For Creditors Voluntary administrators: Daniel Woodhouse and Ian Francis Contacts for general queries about this report: Name: Andrew Clowes Grade: Senior Consultant Phone: andrew.clowes@fticonsulting.com Name: Matthew Pallotta Grade: Associate Phone: matthew.pallotta@fticonsulting.com FTI Consulting (Australia) Pty Limited ABN Level 6, 30 The Esplanade Perth WA FTI Consulting. All rights reserved. Liability limited by a scheme approved under Professional Standards Legislation Purpose of this report The Administrators are required to prepare this report pursuant to the Corporations Act 2001 (the Act). We are required to provide creditors with information about the Company s business, property, affairs and financial circumstances. This report and its attachments contain details about the forthcoming second meeting of creditors to be held on 10 August 2018 and our opinion and recommendation about the future of the Company and what is considered to be in the creditors interests. Creditors are required to decide whether: the Company should execute a DOCA, or the administration of the Company should end, or the Company should be wound up. Alternatively, creditors can vote to adjourn the meeting for up to 45 business days to allow more time to make their decision. Information included This report contains the information we are required by law to include, plus other information considered materially relevant to creditors to enable them to make an informed decision about the Company s future. The Table of Contents on the following page lists the sections of this report. A glossary and certain other information, including details about our claim for remuneration, is included in the appendices. Key messages and recommendations Pages 4 to 6 summarises the items considered to be the most important for creditors, and includes our recommendation to creditors. Details and forms for the forthcoming creditors meeting All details, forms and instructions relating to the meeting have been included with the covering letter and other documents attached to this report. Questions and help Please contact us if you are unsure about any of the matters raised in this report and the impact that any decision about the Company s future may have on you. 2

3 Table of Contents I. Key Messages and Recommendations 4 II. Administrators Statutory Milestones 7 III. Background 8 IV. Sale of Business and Assets 11 V. Financial Position 12 VI. Investigations, Offences and Voidable Transactions 13 VII. Estimated Return to Creditors 16 VIII. Administrators Remuneration and Receipts and Payments 17 IX. Options Available to Creditors and Administrators Opinion 18 Appendix 1 Glossary and Terms of Reference Appendix 2 Creditor Information Sheet Appendix 3 DIRRI Appendix 4 - Remuneration Report 3

4 I. Key Messages and Recommendations Set out below is a summary of the key messages and recommendations that are detailed in this report. Please read this summary in conjunction with the remainder of the report including the terms of reference contained in Appendix 1 and any other attachments. Key areas Commentary Analysis Explanations for the Company s difficulties Administrators actions and strategy Estimated date of insolvency And Liability for Insolvent Trading The Director pursued a sale of the business as a going concern prior to the Administrators appointment. The campaign initially failed to attract a purchaser, with the sale price revised down on a number of occasions. Not assisting the sale process, the Company s revenue had started to decline over this period. On a revised sale price, negotiations with a purchaser were significantly progressed from approximately April to June Agreement was reached however the sale did not proceed. With no immediate sale of business likely, and insufficient cashflow to continue operating the business, the Director placed the Company into voluntary administration. On appointment, the franchisor, Parker Hannifin (Australia) Pty Ltd, terminated the franchise agreement with the Company. As a result, the Administrators were unable to trade the business as an ENZED franchise, resulting in the necessary ceasing of operations. Following this, the Administrators immediately sought interest for the Company s remaining equipment and stock whilst concurrently assessing the alternative opinion of a sale via auction. One offer was forthcoming, and after extensive negotiations, a sale of assets was entered into with a purchaser. In assessing insolvency, we note the Company had a relatively low trade creditor balance. The Administrators preliminary assessment of the date of insolvency is 1 January 2018 being the date the Company s advertised sale price was substantially reduced, and the Company appeared to have exhausted all alternate finance options. Liability for Insolvent trading The Company had a low trade creditor balance, and the estimated quantum of an insolvent trading claim is estimated to be approximately $150,000. Given the low quantum of a potential insolvent trading claim, and the doubts over the Director s ability to satisfy such a claim, we consider pursuing an insolvent trading claim to provide no commercial benefit. Further we note that the director has guaranteed a number of debts and has sold his principal place of residence to repay a significant portion of the debt owed to CBA. Section III Section III Section VI 4

5 I. Key Messages and Recommendations Key areas Commentary Analysis Voidable transactions and offences Offences by directors Proposal for a deed of company arrangement Estimated outcome for creditors Based on our investigations to date, we have identified potential unfair preference payments of approximately $25,000. Further investigation in regard to the date of insolvency is required prior to establishing the collectability of the claim. Based on our investigations to date, we do not consider the Director has breached any Sections of the Corporations Act. No proposal for a deed of company arrangement has been received. The estimates shown are based on the information presently available, our view of the Company s estimated realisable value of assets and estimated claims of creditors: Section VI Section VI Section VII Secured creditors Priority employee claims Unsecured creditors Liquidation 2 to 3 cents in the dollar 57 to 100 cents in the dollar Nil Remuneration The secured creditor return from the sale of the Company s assets is based on a debt of approximately $1.2m at appointment. We are aware the amount owed to the CBA would have significantly reduced following the sale of the Director s personal house, settling on 20 July Under Section 449E of the Act, the remuneration of the Administrators (and either the Deed Administrators or Liquidators, if appointed) can be fixed at the second meeting of creditors. Details of our proposed remuneration and resolutions are included in our Remuneration Approval Report. Appendix 4 5

6 I. Key Messages and Recommendations Our recommendation to creditors Options available to creditors Option 1: Execute a DOCA Option 2: Administration end Option 3: Liquidation In our opinion it is in the creditors interests that the Company be wound up and a liquidator appointed. Description Key factors to considers Whether it would be in the creditors interests for the Company to execute a DOCA As no DOCA has been proposed, creditors cannot resolve to accept a DOCA at this time Whether it would be in the creditors interests for the administration to end The Company is insolvent with no cash to pay all due debts and no confirmed prospects of obtaining external funding Whether it would be in the creditors interests for the Company to be wound up We have not been provided with a proposal for a DOCA for consideration and it is not appropriate that the administration ends as the Company is insolvent Our opinion Not in the creditors interests that the Company execute a DOCA Not in the creditors interests that the administration should end Is in the creditors interests that the Company be wound up Recommended option Not recommended Not recommended Recommended Potential to adjourn the meeting to a future date Creditors may wish to adjourn the second meeting for up to 45 business days. However, the Administrators do not consider any benefit, at this stage, would be derived from adjourning the meeting. It is a matter for creditors to decide if they wish to adjourn the meeting 6

7 II. Administrators Statutory Milestones Appointment of Administrators On 6 July 2018, Daniel Woodhouse and I, Ian Francis, were appointed joint and several Administrators of Omartleb Pty Ltd in accordance with a resolution passed at a meeting of the Company s director pursuant to section 436A of the Act. In a voluntary administration, the Administrators take control of a company and its affairs, superseding the powers of the director to make decisions and perform management functions. We also have a duty to investigate the Company s business, property, affairs and financial circumstances. Outcome of the First Meeting of Creditors The first meeting of creditors was held on 18 July 2018 to consider the formation of a committee of creditors and whether or not to appoint different persons to be the Administrators of the Company. No committee was formed and there were no nominations to replace us as Administrators. Administrators Prior Involvement and Independence In accordance with s 436DA of the Act, we provided a DIRRI with our first communication to creditors. This DIRRI included the circumstances that led to our appointment as Administrators. A copy of our DIRRI is provided at Appendix 3, as provided with our first circular to creditors and referred to at the first creditors meeting. There is no change to our assessment regarding our independence or to the information provided in the DIRRI. Upcoming Second Meeting of Creditors Under section 439A of the Act, the Administrators are required to convene a second meeting of creditors, during which creditors will be given the opportunity to vote on the future of the Company. At the second meeting, creditors will be asked to decide whether the: Company should execute a DOCA; or administration of the Company should end; or Company should be wound up. Alternatively, creditors may adjourn the second meeting for a period not exceeding 45 business days. The details of the second meeting of creditors are set out below: Second Meeting Details Date 10 August 2018 Registration Meeting Time Location 10:30 am WST 11:00 am WST FTI Consulting Level 6, 30 The Esplanade, Perth, Western Australia

8 III. Background Information Corporate Structure Omartleb Pty Ltd (Administrators Appointed) Details of Security Interests and Charges Details of the security interests registered against the Company, as identified by a search of the PPSR at the date of our appointment is provided below: Michael Hey (50% Shareholder) Statutory Information Details of the Company's incorporation and office are: Details Michael Hey (Sole Director) Date of registration 18 May 2009 Place of registration Western Australia Director and Officer at Appointment Tracey-Lynne Hey (50% Shareholder) Registered Office 4 Parkwater Garden, CHURCHLANDS WA 6018 Principal Place of Business 91 Frobisher Street, OSBORNE PARK WA 6017 The Sole Director is Michael Hey appointed at the Company s inception, and shareholders of the Company are Michael and Tracey-Lyne Hey. PPSR Creditor Company Operations and Reasons for Failure No. PPSR Reg No. PMSI ALLPAP Commonwealth Bank of Australia Ltd 5 4 Yes National Australia Bank Ltd 1 0 Yes Toyota Finance Australia Ltd 3 3 No Josco Australia Pty Ltd 2 1 No Australian Automotive Distribution Pty Ltd 1 1 No Royal Wolf Trading Australia Pty Ltd 1 1 No Automotive Holdings Group Ltd 1 1 No Boc Ltd 1 1 No Macnaught Pty Ltd 1 1 No Nitto Kohki Australia Pty Ltd 1 1 No The originating business was established in 1981, trading under a franchise agreement with Parker, operating as Enzed Perth from the leased premises located at 91 Frobisher Street, Osborne Park WA The Company purchased the existing business and commenced operating approximately 10 years ago. The business had a well recognised position, servicing the wider Perth market. Prior to the appointment of the Administrators, the Director had pursued a sale of the business with the intention of exiting the industry. An interested party was identified and discussions substantially progressed in respect to a sale. However, ultimately the sale did not complete, and with insufficient cash to continue operating, the Director was forced to place the Company into administration. 8

9 III. Background Information Opinion About Books and Records Section 286(1) of the Act requires a company to keep written financial records that correctly record and explain its transactions and financial position and performance, and enable true and fair financial statements to be prepared and audited. In considering compliance with this section, since the appointment the Administrators have: Reviewed financial reports to understand the Company s asset and liability position; Reviewed the Company s management accounting software, correspondence, files and documents relevant to the Company s operations; Discussed with the Director and Company s management, the Company s processes and record keeping practices. It is the Administrators preliminary view that, as at the Appointment Date, the financial records of the Company appear to have been maintained in accordance with section 286 of the Act. Historical Financial Performance The adjacent tables provide an overview of the Company s historical financial performance and position. The financials for FY16 and FY17 are based on the Company s statutory accounts prepared by its external accountant BDO, while the financials for FY18 are based on the Company s management accounts. Please note, the adjacent numbers represent book values only. The financial position at appointment, including estimated realisable values is shown in Section V. Financial Position Profit and Loss *Given the events unfolding, it is likely the Company traded at a loss. The Director noted that trading conditions had been difficult in the previous few years, this is reflected in the Company s declining sales. We note the FY2018 figures are interim, and do not include all trading expenses. Historical Financial Position FY 2016 ($) FY 2017 ($) Below I provide the Company s historical financial position: FY 2018 ($) DRAFT Sales 2,212,524 1,696,112 1,525,401 Cost of Sales (778,374) (565,687) (464,812) Manuafacturing Costs (25,332) (19,283) 0 Gross Profit 1,408,818 1,111,142 1,060,589 Gross profit margin 64% 66% 70% Operating Expenses Direct Wages (649,493) (568,614) (330,160) All Other Operating Expenses (744,058) (703,371) (585,448) Total Operating Expenses (1,393,551) (1,271,985) (915,608) Net Profit (Loss) Before Income Tax 15,267 (160,843) 144,981* Balance Sheet 30-Jun-16 $ 30-Jun-17 $ Total Current Assets 571, ,554 Total Current Liabilities (530,789) (683,705) Net Current Asset Position 40,552 (128,151) Total Assets 1,759,299 1,718,871 Total Liabilities (1,496,333) (1,718,861) Total Net Asset Position 262,

10 III. Background Information Events leading to the Company being placed into Voluntary Administration Trading income declines through to June 16 Franchise agreement with Parker In late 2016, the Director engaged GMO to conduct a sale campaign. The sale price was revised down twice to entice interested parties. Trading income continues to decline through to June 17 Commenced sale process Sale Negotiations Negotiations for the sale of business stalled. Without immediate alternatives for a sale or cash injection, the Company was placed into Voluntary Administration on 6 July Sale Discussions Stalled Appointment of Administrators Administrators actively sought interest from parties for the sale of the Company s remaining equipment and stock. Administrators continued sale process The Company entered into a franchise agreement with Parker Hannifin (Australia) Pty Ltd ( Parker ) trading as Enzed Perth. An interested party was identified and sale negotiations commenced. An agreed price was negotiated, below the advertised price. After further communications and delays, the sale price was revised down further. Following our appointment, Parker issued a notice of termination of the franchise agreement. The Company necessarily ceased trading effective 9 July 2018 and employees terminated. Historical Sale of Business Campaign As detailed above, the Company s Director engaged business brokers, GMO, to seek a buyer for the business. The business was initially purchased for approximately $1.2m, which was the initial listing price for the sale of business. Adjacent I provide a further timeline of the sale of business campaign conducted prior to the appointment of the Administrators. Ultimately the business failed to sell, the catalyst being the purchaser s condition of obtaining an authorised franchise with Parker, which could not be expedited in time for the sale to be effected. It is noted the franchising rights of Parker were outside of the Director s control. Date Price Details Late 2016 $1.245m First listing price January 2018 $770k Revised sale price March 2018 $695k Second revised sale price April 2018 $600k Executed sale contract with buyer June 2018 $500k Secondary executed sale contract with buyer 10

11 IV. Administrators Sale of Business Administrators Sale of Business Assets Given the extensive sale of business campaign conducted prior to appointment, and the Company s operations ceasing, the Administrators did not consider a formal sale of business campaign would produce a material outcome. Alternatively, the Administrators contacted six (6) potential parties directly, comprising of other ENZED franchisees, competitors to the business and interested parties previously identified by the Company. The Administrators engaged with three (3) potential parties and conducted onsite inspections. Unfortunately, interest in the assets was minimal, with only one party submitting an offer. The major issues identified by parties were: The stock was old and obsolete; The leased premises required material capital improvement to desirable to trade from; Given the premises, considerable costs would be incurred to relocate equipment and stock; and Trading performance. Negotiations with Interested Party Mr Brad Fletcher submitted an offer on 11 July 2018 on the following basis: Total purchase price of $190,710; and All assets as is where is free of encumbrances. The Administrators reverted to Mr Fletcher requesting he submit an offer for all unencumbered assets of the Company, noting that the market value for encumbered equipment and vehicles was below the payout figures. No offer was forthcoming, with Mr Fletcher advising that the sale must be for all items, free of encumbrances, to be commercially viable. The Administrators considered the offer and countered, discussed overleaf. be Final Sale Offer Noting the low auction realisation, the Administrators entered into further negotiations with Mr Fletcher and with the consent of the CBA a final sale price of $225,000 was agreed. The sale price would achieve the following net return: Asset The offer was formally accepted and sale proceeds have been received. Alternate Strategy Auction Realisation ($) Incl GST Property, Plant and Equipment (PP&E) 162,350 Less: PP&E Payout to Financiers (103,968) Stock 62,650 Net Receipt 121,032 Concurrently to seeking a sale, the Administrators engaged Gregsons valuers to submit a proposal for the sale of the Company s assets via auction. The proposal considered an onsite auction over 3 weeks, with the below estimated net receipt: Auction ($) Excl. GST Unencumbered Equipment & Stock 59,810 Gregsons Direct Costs (Labour / Advertisement costs) (8,000) Gregsons Commission (10% of Gross Sale Price) (5,981) Leased Premises costs (3 weeks) (5,325) Total Net Receipt 40,504 Given no other interested party submitted an offer, the agreement with Mr Fletcher represented the best result to stakeholders. 11

12 V. Financial Position Report As To Affairs by Director The Director has provided a statement about the Company s business, property, affairs and financial circumstances in the form of a RATA, received on 9 July A summary of the RATA is shown adjacent. Notes to RATA 1. The Director estimates that $93,035 was collectable from debtors. The Administrators have issued debtor letters and collected $41,744 to date. 2. The Director estimates Stock and Equipment to realise approximately $250,000. The Administrators have addressed the realisable value of stock and equipment separately in this report. 3. Other Assets relate to an unencumbered vehicle. 4. This asset relates to a vehicle encumbered to the CBA. The Administrators note there were two additional vehicles under finance with Toyota. All vehicles were captured as part of the sale of assets. 5. The Director estimates employees claims to total $10,324, which only relates to leave entitlements. Additional amounts in respect of payment in lieu of notice and superannuation is outstanding. The Administrators estimate the total amount owed to employees equates to $75, As previously noted, the CBA have an all present and after acquired property registration against the Company. The CBA are owed approximately $1.22m at appointment. RATA Notes Book Value ($) Assets not subject to specific security interests Cash on hand Cash at bank 2,988 2,988 Debtors 1 93,035 93,035 Stock 2 331, ,000 Plant and equipment 3 87, ,000 Other Assets 4 8,000 8,000 Totals assets not specifically charged 523, ,433 Assets subject to specific security interests 5 20,000 20,000 Less amounts owing 5 (14,834) (14,834) Net assets subject to specific charges 5,166 5,166 Total Estimated Realisable Values 528, ,599 Payable in advance of secured creditor (employees) 6 (10,324) (10,324) Owed to Secured - debenture or floating charge 7 (1,210,000) (1,210,000) Total claims (1,220,324) (1,220,324) Unsecured creditors (321,440) (321,440) Surplus / (Deficiency) (before costs) (1,013,135) (1,182,166) ERV ($) 12

13 VI. Investigations, Offences, Voidable Transactions and Insolvency Duty to Investigate The law requires us to investigate and specify whether there appears to be any voidable transactions in respect of which money, property or other benefits may be recoverable by a liquidator under Part 5.7B of the Act. We have sought to ascertain whether the Company was insolvent at any particular point in time prior to our appointment as Administrators, in order to determine a point in time from which these provisions may apply. Relevance of Liquidation Versus DOCA Voidable transactions and other actions that a liquidator can make are not available if the Company executes a DOCA. As no DOCA proposal has been submitted, creditors are not required to consider between the benefits between a liquidation and a DOCA. Relevance of Insolvency and Liquidation The ability to challenge voidable transactions and recover money/property for creditors is contingent on two elements: The Company being placed into liquidation, and A liquidator being able to establish that the Company was insolvent at the time it entered into any particular transaction, or that the Company became insolvent as a consequence of that transaction. Work Performed We have made enquiries into the financial affairs of the Company. In this section, we set out our preliminary views and findings about: Offences that may have been committed. The solvency position of the Company. Existence of voidable transactions including unfair preferences/loans, uncommercial transactions, arrangements to avoid employee entitlements, and unreasonable director related transactions. Charges that may be voidable. Whether there is the prospect of a claim for insolvent trading. Please note the investigations we have undertaken are only indicative of the actions that may be possible in the event of liquidation. 13

14 VI. Investigations, Offences, Voidable Transactions and Insolvency Insolvency - Summary of Findings The Administrators have identified limited indicators of insolvency prevalent to companies that enter administration, during the lead up to appointment. In summarising our findings on a date of insolvency, we have considered: The Company was provided a $150,000 loan for a 12 month term in June The funds were utilised to continue to trade the business whilst a sale was pursued; The extensive sale process undertaken by the Company prior to the appointment of the Administrators; The ultimate sale price achieved for the business; The declining sales generated by the Company for the 12 months prior to appointment; and The debt owed to the CBA. The Company initial advertised the sale of business for $1.24m and was provided a loan of $150,000 to assist with trading whilst a sale of business was pursued. The loan was repayable upon the successful sale of business. Our preliminary view is that the Company may have been insolvent in January 2018 or potentially earlier. The key trigger being the advertised sale price being substantially reduced from $1.24m to $700,000 due to limited interest in the business and tough trading conditions experienced. Should a sale have occurred at the revised figure, it was unlikely this would be sufficient to discharge the debts ofthe Company. Preliminary View on Liability for Insolvent Trading Based on our estimated date of insolvency, the maximum quantum of an insolvent trading claim is likely to be in the vicinity of $150,000. We note the Company incurred limited trading debts from 1 January 2018 that remained unpaid at appointment. We note the quantum of an insolvent trading claim is low, and therefore, regardless of the status of the Director s capacity to pay a claim, it is likely uncommercial to pursue given the costs that would be incurred to recover same. Director s Capacity to Pay Claims by a Liquidator We are aware that the Director has granted personal guarantees to the CBA for any shortfall on the Company s debt. Recently, the Director sold his personal house in order to reduce the Company s debt owed to the CBA. After the proceeds from the sale of the property are applied, we have been advised there will be a shortfall remaining to the CBA. Given the estimated dividend to the CBA in the administration, we consider there to still be a shortfall remaining to the CBA and therefore it is unlikely the Director has any capacity to meet an insolvent trading claim. 14

15 VI. Investigations, Offences, Voidable Transactions and Insolvency We set out below our preliminary findings in relation to potential recoveries from voidable transactions in a liquidation scenario including our view on the likelihood of there being substantiated and supportable claims. Where applicable, we have included our estimate of possible recoveries along with any other pertinent information. Area Our view Comments Unfair preferences Uncommercial transactions Possible claims No claims We have reviewed the payments made by the Company during the period leading up to appointment, taking into account the potential date of insolvency of the Company. We have identified approximately $25,000 of payments that might be considered preferential. Prior to pursuing any claim, further investigation into a date of insolvency would be required. We are not aware of any potential uncommercial transactions that would likely result in property being recovered for the benefit of creditors. Unfair loans No claims We are not aware of any potential unfair loans that would likely result in property being recovered for the benefit of creditors. Unreasonable payments to directors No claims We are aware the Director has contributed approximately $1.28m in personal funds between 2016 to 2018 in order to discharge debts of the Company. Our investigations to date have not found any evidence of unreasonable payments to directors. Related entity benefit No claims Our investigations to date have not revealed any transactions with related entities that would likely result in property being recovered for the benefit of creditors. Arrangements to avoid employee entitlements No claims Our investigations to date have not revealed the existence of any such arrangements. Voidable charges None Our investigations have not revealed any charges or registered security interests that would be void against a liquidator. Offences by directors None Based on our investigations to date, it does not appear that offences have been committed by the director. 15

16 VII. Estimated Return to Creditors Detailed adjacent is the estimated return to creditors: Estimated Return to Creditors Secured Creditor For all non-circulating asset realisations (sale proceeds received in respect to equipment and vehicles), the CBA are estimated to receive a dividend of between $28,075 and $30,347. In respect to circulating asset realisations, if there is a surplus after satisfying priority creditor claims, this will be distributed to the secured creditor. On a High scenario this is estimated to be $22,281. Priority Creditors An estimated partial return of 57 cents in the dollar, or full return in the High scenario, to priority creditors is anticipated in a liquidation scenario. The final return is dependent upon debtor collections and final costs incurred in the liquidation. Should the Company enter liquidation, employees will be entitled to lodge a claim for their unpaid entitlements under the Fair Entitlements Guarantee Scheme administered by the Federal Government. The Federal Government will have a subrogated claim for any amounts advanced to employees through the FEG scheme. Accordingly, the payment of employee entitlements through the FEG scheme does not discharge the priority claim against the Company. Unsecured Creditors No dividend to unsecured creditors is envisaged at this stage. Estimated Return to Creditors Low ($) (incl GST) High ($) (incl GST) Non-Circulating Assets Equipment and Vehicles 162, ,350 Less: PP&E Payout to Financiers (103,968) (103,968) Less: VA's Direct Fees and expenses (non-circulating) (27,500) (25,000) Less: GST Payable (2,807) (3,035) Estimated Funds available to Secured Creditor 28,075 30,347 Circulating Assets Stock 62,650 62,650 Less: GST payable (5,695) (5,695) Debtors 50,000 80,000 Voidable Transactions Unfair Prefence Payment - 25,000 Total Recoveries 106, ,955 Professional Fees and Disbursements Voluntary Administrators Fees (circulating) (22,287) (24,787) Liquidators Fees (38,500) (38,500) Other Costs (valuation, landlord, wages one day) (8,800) (6,600) Disbursements incurred (550) (550) Add: GST Refund 6,376 6,403 Total Professional Fees and Costs (63,761) (64,034) Net Funds Available for Priority Creditors 43,194 97,921 Priority Creditor Balance 75,640 75,640 Estimated Cents in the $ Return to Priority Estimated funds available for Secured Creditor Nil 22,281 Estimated return to Unsecured Creditors Nil Nil 16

17 VIII. Administrators Remuneration Administrators Remuneration The Administrators first circular to creditors indicated their intention to claim remuneration on a time basis in accordance with. The firm s hourly rates as at 1 March The Administrators have incurred fees in the amount of $45,261 (excluding GST) for the period 6 July 2018 to 29 July Pursuant to Section 449E of the Act, the Administrators remuneration can be fixed at the Second Meeting of Creditors. The Administrators will only draw remuneration based on actual time incurred and, as such, if a lower amount is incurred compared to that approved, then the Administrators will only draw the lower amount. Total Remuneration Appendix 4 provides the Administrators Remuneration Report seeking approval from creditors for the periods, as detailed in the adjacent table. The amount listed for Liquidators remuneration is an interim estimate only. Period Administrators Amount ($) excluding GST and Disbursements 6 July 2018 to 29 July , Jul 2018 to 10 August ,000 Liquidator (if Appointed) 11 August 2018 to completion 35,000 Internal Disbursements 6 July 2018 to conclusion of liquidation Administrators receipts and payments The receipts and payments from 6 July 2018 to 1 August 2018 are included in the Administrators Remuneration Report enclosed as Appendix 4. 17

18 IX. Opinion and Recommendation to Creditors What Creditors can Decide at the Meeting At the second meeting of creditors, creditors are required to decide whether: The Company should execute a DOCA The administration of the Company should end, or The Company should be wound up. In accordance with the requirements of Section of the Insolvency Practice Rules (Corporations) 2016, the Administrators must provide an opinion on each of the above options, and whether the option is in the creditors interests. Administrators Opinions on the Options Available to Creditors 1. Execution of a deed of company arrangement As no DOCA has been proposed, creditors cannot resolve to accept a DOCA at this time. Therefore, we do not consider it would be in the creditors interests for the Company to execute a DOCA. It remains an option for creditors to consider whether they may wish to adjourn the forthcoming meeting of creditors to allow time for a DOCA proposal to be submitted. 2. The Administration comes to an end If the creditors vote for this alternative, control of the Company would revert to the directors following the second meeting to be held on 10 August The Company is insolvent with no assets to pay all of the Company s debts and no confirmed prospects of obtaining external funding. In that regard, we do not consider that it is in the creditors interests for the administration to end. 3. The Company is wound up Absent of any other options available, we consider that it would be in the creditors interests for the Company to be wound up. Dated this 3 rd day of August 2018 Ian Francis Joint and Several Administrator 18

19 Annexure 1 - Glossary and Terms of Reference Item Act ASIC ATO CBA Company DIRRI DOCA EBIT / EBITDA ERV FEG GST NPAT Parker PPSR RATA YTD Definition Corporations Act 2001 (Cth) Australian Securities and Investments Commission Australian Taxation Office (incorporating the Deputy Commissioner of Taxation, as applicable) Commonwealth Bank of Australia Ltd Omartleb Pty Ltd Declaration of independence, relevant relationships and indemnities Deed of company arrangement Earnings before interest and tax / Earnings before interest, tax, depreciation and amortisation Estimated realisable value Fair Entitlements Guarantee Scheme Goods and Services Tax, as applicable in Australia Net profit after tax Parker Hannifin (Australia) Pty Ltd Personal Property Securities Register Report as to affairs Year to date Terms of Reference This report has been prepared for the creditors of Company to assist them in evaluating their position as creditors and in deciding on the Company s future. None of the Administrators, FTI Consulting and its staff shall assume any responsibility to any third party to which this report is disclosed or otherwise made available. This report is based on information obtained from the Company s records, the directors and management of the Company and from our own enquiries. While we have no reason to doubt the veracity of information contained in this report, unless otherwise stated we have proceeded on the basis that the information provided and representations made to us are materially accurate, complete and reliable. We have not carried out anything in the nature of an audit, review or compilation. This report may contain prospective financial information, including estimated outcomes for creditors, and other forward looking information. As events and circumstances frequently do not occur as expected, there may be material differences between estimated and actual results. We take no responsibility for the achievement of any projected outcomes or events. We reserve the right to alter any conclusions reached on the basis of any changed or additional information which may become available to us between the date of this report and the forthcoming meeting of creditors. Creditors should seek their own advice if they are unsure how any matter in this report affects them. 19

20 Annexure 2 Creditor Information Sheet Source: ASIC and Company records 20

21 Creditor Information Sheet Offences, Recoverable Transactions and Insolvent Trading Offences A summary of offences under the Corporations Act that may be identified by the administrator: 180 Failure by company officers to exercise a reasonable degree of care and diligence in the exercise of their powers and the discharge of their duties. 181 Failure to act in good faith. 182 Making improper use of their position as an officer or employee, to gain, directly or indirectly, an advantage. 183 Making improper use of information acquired by virtue of the officer s position. 184 Reckless or intentional dishonesty in failing to exercise duties in good faith for a proper purpose. Use of position or information dishonestly to gain advantage or cause detriment. This can be a criminal offence. 198G 206A Performing or exercising a function or power as an officer while a company is under administration. Contravening a court order against taking part in the management of a corporation. 206A, B Taking part in the management of corporation while being an insolvent, for example, while bankrupt. 206A, B Acting as a director or promoter or taking part in the management of a company within five years after conviction or imprisonment for various offences. 209(3) Dishonest failure to observe requirements on making loans to directors or related companies. 254T Paying dividends except out of profits. 286 Failure to keep proper accounting records. 312 Obstruction of an auditor Failure to comply with requirements for the preparation of financial statements. 437D(5) 438B(4) 438C(5) Unauthorised dealing with company's property during administration. Failure by directors to assist administrator, deliver records and provide information. Failure to deliver up books and records to the administrator. 590 Failure to disclose property, concealed or removed property, concealed a debt due to the company, altered books of the company, fraudulently obtained credit on behalf of the company, material omission from Report as to Affairs or false representation to creditors. Recoverable Transactions Preferences A preference is a transaction, such as a payment by the company to a creditor, in which the creditor receiving the payment is preferred over the general body of creditors. The relevant period for the payment commences six months before the commencement of the liquidation. The company must have been insolvent at the time of the transaction, or become insolvent because of the transaction. Where a creditor receives a preference, the payment is voidable as against a liquidator and is liable to be paid back to the liquidator subject to the creditor being able to successfully maintain any of the defences available to the creditor under the Corporations Act. Uncommercial Transaction An uncommercial transaction is one that it may be expected that a reasonable person in the company's circumstances would not have entered into, having regard to: the benefit or detriment to the company; the respective benefits to other parties; and, any other relevant matter. AUSTRALIAN RESTRUCTURING INSOLVENCY & TURNAROUND ASSOCIATION

22 To be voidable, an uncommercial transaction must have occurred during the two years before the liquidation. However, if a related entity is a party to the transaction, the period is four years and if the intention of the transaction is to defeat creditors, the period is ten years. The company must have been insolvent at the time of the transaction, or become insolvent because of the transaction. Unfair Loan A loan is unfair if and only if the interest was extortionate when the loan was made or has since become extortionate. There is no time limit on unfair loans they only must be entered into before the winding up began. Arrangements to avoid employee entitlements If an employee suffers loss because a person (including a director) enters into an arrangement or transaction to avoid the payment of employee entitlements, the liquidator or the employee may seek to recover compensation from that person. It will only be necessary to satisfy the court that there was a breach on the balance of probabilities. There is no time limit on when the transaction occurred. Unreasonable payments to directors Liquidators have the power to reclaim unreasonable payments made to directors by companies prior to liquidation. The provision relates to payments made to or on behalf of a director or close associate of a director. The transaction must have been unreasonable, and have been entered into during the 4 years leading up to a company's liquidation, regardless of its solvency at the time the transaction occurred. Voidable charges Certain charges over company property are voidable by a liquidator: circulating security interest created within six months of the liquidation, unless it secures a subsequent advance; unregistered security interests; security interests in favour of related parties who attempt to enforce the security within six months of its creation. Insolvent trading In the following circumstances, directors may be personally liable for insolvent trading by the company: a person is a director at the time a company incurs a debt; the company is insolvent at the time of incurring the debt or becomes insolvent because of incurring the debt; at the time the debt was incurred, there were reasonable grounds to suspect that the company was insolvent; the director was aware such grounds for suspicion existed; and a reasonable person in a like position would have been so aware. The law provides that the liquidator, and in certain circumstances the creditor who suffered the loss, may recover from the director, an amount equal to the loss or damage suffered. Similar provisions exist to pursue holding companies for debts incurred by their subsidiaries. A defence is available under the law where the director can establish: there were reasonable grounds to expect that the company was solvent and they did so expect; they did not take part in management for illness or some other good reason; or they took all reasonable steps to prevent the company incurring the debt. The proceeds of any recovery for insolvent trading by a liquidator are available for distribution to the unsecured creditors before the secured creditors. Important note: This information sheet contains a summary of basic information on the topic. It is not a substitute for legal advice. Some provisions of the law referred to may have important exceptions or qualifications. This document may not contain all of the information about the law or the exceptions and qualifications that are relevant to your circumstances. Version: August (VA) - INFO - Offences recoverable transactions and insolvent trading v1_1.docx1 AUSTRALIAN RESTRUCTURING INSOLVENCY & TURNAROUND ASSOCIATION PAGE 2

23 Annexure 3 DIRRI Source: ASIC and Company records 21

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28 Annexure 4 Remuneration Approval Report Source: ASIC and Company records 22

29 REMUNERATION REQUEST APPROVAL REPORT OMARTLEB PTY LTD (FORMERLY T/A ENZED PERTH) (Administrators Appointed) ( Company ) ACN August 2018 FTI Consulting (Australia) Pty Limited ABN ACN Level 6, 30 The Esplade PERTH WA 6000 Australia +61.(0) main fticonsulting.com Liability limited by a scheme approved under Professional Standards Legislation. Omartleb Pty Ltd (Administrators Appointed) ACN Remuneration Request Approval Report 3 August 2018 Page 1

30 Table of Contents PART 1: DECLARATION... 3 PART 2: EXECUTIVE SUMMARY... 3 PART 3: DESCRIPTION OF WORK COMPLETED... 4 PART 4: DESCRIPTION OF WORK TO BE COMPLETED... 9 PART 5: CALCULATION OF REMUNERATION PART 6: STATEMENT OF REMUNERATION CLAIM PART 7: DISBURSEMENTS PART 8: REPORT ON PROGRESS OF THE EXTERNAL ADMINISTRATION PART 9: SUMMARY OF RECEIPTS AND PAYMENTS PART 10: INFORMATION SHEETS ON REMUNERATION APPROVAL PART 11: QUERIES Schedule 1: Schedule of Rates Omartleb Pty Ltd (Administrators Appointed) ACN Remuneration Request Approval Report 3 August 2018 Page 2

31 PART 1: DECLARATION This report sets out the information that the Corporations Act 2001 ( Act ) and the 3 rd Edition of the Code of Professional Practice published by the Australian Restructuring Insolvency & Turnaround Association ( ARITA ) requires Creditors to receive before voting on resolutions with respect to our claim for remuneration at the meeting of Creditors convened for 10 August We have undertaken a proper assessment of the claim for remuneration as detailed in this report arising from our appointment as Administrators of Omartleb Pty Ltd (Administrators Appointed) ACN in accordance with the law and applicable professional standards. We are satisfied that the remuneration claimed is in respect of necessary work, properly performed, or to be properly performed, in the conduct of the administration. PART 2: EXECUTIVE SUMMARY Remuneration for which approval is sought This report provides details of the following remuneration of which approval is sought: To date, no remuneration has been approved and paid in this administration. This remuneration report details approval sought for the following fees: Table 1: Remuneration for which approval is sought Period Report Reference Amount (ex. GST) Resolution 1: 6 July 2018 to 29 July 2018 (inclusive) Table 2 $45, Resolution 2: 30 July 2018 to conclusion of the Voluntary Administration* Table 3 $10, Total $55, Liquidation Resolution 3: Liquidators remuneration from 30 July 2018 to conclusion* Table 4 $35, Internal Disbursements Resolution 4: 6 July 2018 to finalisation* Table 5&6 $ * Approval for the future remuneration sought is based on an estimate of the work necessary to the completion of the administration. Should additional work be necessary beyond what is contemplated, further approval may be sought from creditors. Please refer to the sections of the report detailed above for further details. Omartleb Pty Ltd (Administrators Appointed) ACN Remuneration Request Approval Report 3 August 2018 Page 3

32 PART 3: DESCRIPTION OF WORK COMPLETED Table 2 Company Omartleb Pty Ltd (Administrators Appointed) ACN From 6 July 2018 To 29 July 2018 Practitioner Ian Francis, Daniel Woodhouse Firm FTI Consulting Administration Type Voluntary Administration Task Area General Description Includes Assets $18, Sale of Business Inventory, Equipment and vehicles Contacting potential interested parties regarding the sale of remaining assets; Correspondence with interested parties regarding sale of assets and onsite inspections; Providing information to interested parties on assets avaiable; Review offer received, break down of assets and comparison to auction; Negotiate on sale price to increase offer; Obtain final payout values for encumbered assets; Communicate final sale price with CBA for approval; Commission and review sale agreement; Execute agreement, receipt of purchase price and attend to handover of assets. Take control of Companies assets; Reviwe stock and equipment listing; Commission Gregsons to list and value equipment; Assess and deal with encumbered equipment as necessary; Determine insurance requirements for assets. Debtors Review Company s debtor ledger at appointment and investigate collectabilty; Omartleb Pty Ltd (Administrators Appointed) ACN Remuneration Request Approval Report 3 August 2018 Page 4

33 Table 2 Creditors $11, Creditor Enquiries Creditor meetings Creditor Reports Creditors claims and processing proofs of debt ( PODs ) Liaising with management to reconcile the debtor ledger at appointment; Obtain and review statements and invoices for chasing debtors; Collating and sending out debtor demands; Telephone calls from Debtors regarding payment; Reviewing the collection of pre-appointment debtor receipts. Receiving and dealing with creditor queries by telephone, and post; Maintaining register of creditor enquiries; and Liaise with creditors regarding substantiation of claims. Organising meeting notices and convening the first meeting of creditors; Preparing creditors brief to be presented at the first meeting of creditors; Attendance at the first meeting of creditors; Preparation and lodgment of the minutes of the first meeting of creditors; Drafting circular to creditors regarding the second meeting of creditors; and Lodging statutory documents pertaining to convening the second meeting of creditors. Preparing and sending the first report to creditors; Preparing Remuneration Notice and DIRRI; Discussions with internal staff regarding the status and outline of the report; Requesting information from Company staff for inclusion in the report; and Preparing the second report to creditors and remuneration report. Reviewing the Company s creditors records; Receiving and filing PODs Omartleb Pty Ltd (Administrators Appointed) ACN Remuneration Request Approval Report 3 August 2018 Page 5

34 Table 2 Employees $1, Calculating entitlements Employee Correspondence Reviewing employees entitlement calculation at appointment; Sending letters to employees regarding their preappointment entitlements and termination; Answering questions with respect to FEG; and Liaising with the Australian Taxation Office regarding calculation of the Superannuation Guarantee Charge. Providing updates to employees; and Attending to ad hoc queries raised by employees. Trade On $3, Operations Landlords Attendance on site to assess trading and employee queries; Review previous trading performance and current WIP; Discuss ongoing trading with hose doctors (contractors) and nature of their engagement with the Company; Correspondence with the franchisor, Parker, regarding termination of agreement; Discuss potential rescinding of the termination notice and ongoing trading; Cease operations and terminate employees; Attend to final payment of wages, changing locks. Notifying landlord of the appointment of the Administrators; Requesting rental concessions with landlord for the administrators trading period; Reviewing lease documents and payment of Administrators liability period. Omartleb Pty Ltd (Administrators Appointed) ACN Remuneration Request Approval Report 3 August 2018 Page 6