Liquidator s Statutory Report to Creditors

Transcription

1 Metaltech Fabrications Pty Ltd (in Liquidation) ACN: ( the Company ) Prepared pursuant to section of the Insolvency Practice Rules (Corporations) 2016 Dated 12 February 2018 Liquidator Kim Wallman Date of Administration 11 October 2017 Date of Liquidation 14 November 2017 Contact Jasmin Greenaway Telephone Number HLB Mann Judd (Insolvency WA) ABN Level 3, 35 Outram Street West Perth WA 6005 PO Box 622 West Perth WA 6872 Telephone Fax Website: Liability limited by a scheme approved under Professional Standards Legislation HLB Mann Judd (Insolvency WA) is a member of International. A world-wide network of accounting firms and busines s advisers.

2 Contents 1. Introduction Update on the Progress of the Liquidation Brief Update Summary Update on Asset Realisations and Claims Received Investigations Undertaken to Date Explanation of Difficulties and Causes of Demise of the Company Further Investigations to be Undertaken Receipts and Payments Likelihood of a Dividend Costs of the External Administration What Happens Next? Where Can You Get More Information?... 8 Page 2

3 1. Introduction As creditors will be aware, I, Kimberley Stuart Wallman was initially appointed Administrator of the above Company on 11 October 2017 pursuant to section 436A of the Corporations Act 2001 ( the Act ). At a meeting of creditors held on 14 November 2017, it was resolved that the Company be placed into liquidation. As there were no nominations for an alternative liquidator, I automatically became liquidator of the Company in accordance with sections 446A and 499(2A) of the Act. The purpose of this report is to comply with the requirements of section of the Insolvency Practice Rules (Corporations) 2016 as follows: provide creditors with a written account of the winding up the estimated amounts of assets and liabilities of the Company inquiries relating to the winding up of the Company that have been undertaken to date further inquiries relating to the winding up of the Company that may need to be undertaken what happened to the business of the Company the likelihood of creditors receiving a dividend before the affairs of the Company are fully wound up possible recovery actions This report should be read in conjunction with my section report to creditors dated 7 November 2017, which provided information regarding: Statutory details about the Company My initial estimate of the asset and liability position of the Company Details of my preliminary investigations 2. Update on the Progress of the Liquidation 2.1. Brief Update To assist creditors, I have set out below a brief summary of the status of certain aspects of the liquidation: Plant and equipment realisations have been concluded, the results of which were superior to initial estimates Following the auction of the plant and equipment assets, the Company s secured creditor, the National Australia Bank ( NAB ) was settled in full in the amount of $147K on 5 December 2017 Debtor recovery activities are ongoing; however I note that of the accounts remaining for recovery, several disputes have been identified I have acquitted my investigatory duties and submitted my report to the Australian Securities and Investments Commission ( ASIC ), to which ASIC does not intend to take any further action with respect to my findings The Fair Entitlements Guarantee ( FEG ) has assisted, or will assist, all eligible employees with receiving their unpaid entitlements I have sufficient funds on hand to now declare a first dividend to priority creditors, primarily in respect of unpaid Superannuation Guarantee Charge ( SGC ), advances made on behalf of employees by FEG and priority claims from excluded employees Page 3

4 2.2. Summary Update on Asset Realisations and Claims Received Further to the summary provided in my section report to creditors dated 7 November 2017, I have set out below an update with respect to the assets and liabilities of the Company: Administrator's Initial Estimated Realisable Asset Values Assets Realised To Date of this Report $ $ Notes ASSETS Stock 5,000 N/A 1 Trade debtors 500, ,817 2 Plant and equipment 250, ,977 1 Equity in financed Assets 5,000 20,222 Director s loan 35,000 Nil 3 TOTAL ASSETS 795, ,016 LIABILITIES Administrator's Initial Estimated Liabilities Claims Received / Estimated Liabilities Notes Priority Creditors Wages Nil 900 Superannuation 50,000 60,030 4 Annual Leave 125, ,914 5 Long service leave 172, ,154 5 Pay in lieu of notice 150, ,619 5 Redundancy 365, ,116 5 Secured Creditor National Australia Bank 150, ,405 6 Unsecured Creditors Trade Creditors 600, ,000 Australian Taxation Office 155, ,000 Shortfall on financed assets 50,000 21,614 Non-priority entitlements 172, ,000 TOTAL LIABILITIES 1,989,000 1,889,752 Notes: 1. I based my initial estimate of the value of the plant and equipment on a valuation conducted by a firm of independent auctioneers. The auction recovered more than expected. The Company did not own any material levels of stock, as most was recovered by the respective suppliers. 2. Debtor recoveries are ongoing; however, a number of material accounts are subject to dispute. 3. Based on the apparent limited assets owned by the Director, I have concluded that this amount will not be recovered. 4. I have lodged SGC statements with the Australian Taxation Office, resulting in a total of $60, The Fair Entitlements Guarantee has advanced (or will advance in the near future) the majority of these entitlements to eligible employees. In the category of annual leave, I have added the amounts owed to excluded employees, three of which can claim $1,500 each. 6. The NAB was settled in full on 5 December Page 4

5 2.3. Investigations Undertaken to Date Pursuant to section 533 of the Act, I am required to investigate the past affairs of the Company and report my findings to ASIC. I submitted my report to ASIC on 19 December ASIC responded to my report, advising me that it does not intend to take any further action with respect to my findings, the Company or its officers. I have set out below a summary of the investigations I have undertaken. Duty to ensure books and records are maintained in accordance with the Corporations Act 2001 (Section 286) a company must keep written financial records that: a) correctly record and explain its transactions and financial position and performance, and b) would enable true and fair financial statements to be prepared and audited. As detailed in my report to creditors of 7 November 2017, I have formed the view that the Company maintained accurate books and records in compliance with the requirements of the Act. Insolvent transactions (Section 588FC) these are unfair preferences or uncommercial transactions entered into when a company was insolvent or became insolvent as a result of entering into the transaction. My investigations into this matter are set out below: Unfair preferences (Section 588FA) these are transactions where a company transacts with a creditor resulting in that creditor receiving more than the creditor would receive if the transaction were set aside and the creditor claimed the same amount in a liquidation. Unfair preferences paid a company within six months of the relation-back day (the day of the liquidator s appointment) are void against the liquidator. This timeframe is extended to four years should a related entity be a party to the transaction (s588fe(4)). My investigations have identified payments made to a related party that may be considered to be preferential in nature and therefore repayable to a Liquidator. I am yet to finalise my investigations into this matter, however my preliminary understanding is that the party in question is unlikely to be in a positon to repay a preference recovery claim. Uncommercial transactions (Section 588FB) these are transactions entered into that a reasonable person would not have entered, having regard to the benefits and detriment to the company and to the other parties involved in the transaction. Uncommercial transactions entered into by a company are voidable against the Liquidator if they were entered into within two years of the relation-back day. My investigations have not indicated the presence of any uncommercial transactions. Unfair loans to a company (Section 588FD) these are loans made to a company where interest and other charges on the loan are extortionate. These transactions can be recovered regardless of when they were entered into as long as they were entered into on or before the winding up begun. My investigations have not revealed any unfair loans. Unreasonable director-related transactions (Section 588FDA) these are transactions entered into by a company and a director, close associate of a director, or person on behalf of a director, which a reasonable person would not have entered into. The transaction must be a payment by a company, the transfer of property by a company, or the incurrence of an obligation of a director s by a company. These transactions are voidable if they were entered into within four (4) years of the relation-back day. My investigations have not revealed any related party transactions. Page 5

6 Transactions entered into for the purpose of defrauding Creditors (Section 588FE (5)) these are insolvent transactions entered into for the purpose of defeating, delaying or interfering with the rights of creditors and were entered into within a period of ten (10) years prior to the relation-back day. My investigations have not revealed any such transactions. Circulating Security Interest created within six months (Section 588FJ) where a circulating security interest is granted by a company within six months of the relation-back day, the security interest is void against the liquidator unless valuable consideration was given or the company was solvent at the time of granting of the circulating security interest. My search of the PPSR has not revealed any circulating security interests registered against the Company within six months of the relation-back day. Directors duty to prevent insolvent trading (Section 588G) a director of a company has a duty to prevent a company from incurring a debt when the company is insolvent or there are reasonable grounds to suspect that the company is or would become insolvent. A director would fail to fulfil that duty if the director was aware of the grounds for suspecting the company is or would become insolvent or a reasonable person in a like position would be aware of such grounds. The defences available to a director are as follows; (i) (ii) (iii) (iv) The director had reasonable grounds to expect, and did expect, that the company was solvent and would remain so; or The director had reasonable grounds to believe, and did believe, that a competent and reliable person was providing adequate information to the Director and based on that information the director expected the company to be solvent and to remain so; or The director did not take part in the management of the company at the time due to illness or other good reason; or The director took reasonable steps to prevent the company from incurring the debt. As detailed in my report of 7 November 2017, I have formed the view that the Director may have traded whilst insolvent. This matter was reported to ASIC as part of my investigation into the affairs of the Company. I have formed the conclusion, however, that given the sole Director does not appear to possess any material personal assets, an insolvent trading claim is unlikely to yield a recovery for creditors. Given the above, no further action will be take in respect of insolvent trading recovery actions Explanation of Difficulties and Causes of Demise of the Company Creditors will recall that the Director cited the following reasons for the demise of the Company: Shortage of work available. Depleted profit in contracts. I agree with the Director s comments, noting that in late 2017, at least one other metal fabrication business entered external administration in Perth, Western Australia. In what are appearing to be consistent features of the construction industry in the current and recent economic climate in Western Australia, a lack of margin and profitability in contracts leaves little room for error with regard to the management of the contract and delivery of the agreed goods and services. The Company appears to have experienced setbacks with respect to its projects, resulting in restricted cash flow and increasing liabilities. Page 6

7 2.5. Further Investigations to be Undertaken The below listed investigations remain outstanding as at the date of this report: Finalisation of preference claim recovery actions Finalisation of debtor recovery actions 3. Receipts and Payments Attached at Appendix A are details of all receipts and payments in the liquidation to date. 4. Likelihood of a Dividend The Act specifies that if there are funds left over after the payment of the costs of the liquidation, the Liquidator will pay these to creditors as a dividend. Generally, the order in which funds are distributed are as follows: 1. Costs and expenses of the liquidation, including Liquidator s approved fees; 2. Outstanding employee wages and superannuation (equal ranking); 3. Outstanding employee leave of absence payments including annual leave and long service leave; 4. Employee retrenchment pay (redundancy payments or pay in lieu of notice as the case may be); and 5. Ordinary unsecured creditors. Each category is paid in full before the next category is paid. If there are insufficient funds to pay a category in full, the available funds are paid on a pro-rata basis. The next category or categories will not receive a dividend. The likelihood of a dividend being paid to creditors will be affected by a number of factors including: the size and complexity of the liquidation the amount of assets realisable and the costs of realising those assets the statutory priority of certain claims and costs the value of various classes of claims including secured, priority and unsecured creditor claims the volume of enquiries by creditors and other stakeholders As noted above, following the sale of the Company s plant and equipment assets, the Company s secured creditors, the National Australia Bank, was settled in full in the amount of $147,000. Accordingly, given the asset position of the Company and the costs involved with the voluntary administration and liquidation of the Company, I anticipate that priority creditors will receive a partial dividend from the surplus non-circulating and circulating asset realisations. I have notified creditors of my intention to declare a first priority dividend, set for distribution on Thursday, 5 April I anticipate that unpaid wages and superannuation will be paid in full, and that a dividend at the rate of approximately 40 cents in the dollar will be paid in respect of leave of absence entitlements. As priority creditors are unlikely to be paid in full, it is my view that unsecured creditors are unlikely to receive a return. If you have not already done so, I respectfully suggest that you should write off your unsecured debts. Page 7

8 5. Costs of the External Administration My remuneration was approved by creditors on 14 November 2017 in the total amount of $150, I have set out below a summary of the resolutions that were approved: Remuneration Details Amount (Exc GST) Remuneration approvals sought Resolution from 11 October 2017 to 5 November 2017 Administration period $66, Resolution from 6 November 2017 to 14 November 2017 Administration period $20, Resolution from 15 November 2017 to finalisation Liquidation period $63, Total remuneration approved 150, What Happens Next? I will proceed with the liquidation, including: Realising the remaining assets Recovering any further available property Completing my investigations into the Company s affairs I may write to you again with further information on the progress of the liquidation. I expect to have completed this liquidation within the next four to six months. 7. Where Can You Get More Information? You can access information which may assist you on the following websites: ARITA at ASIC at (search for insolvency information sheets ) You can contact my office and speak with Jasmin Greenaway on 08) or via on jgreenaway@hlbinsol.com.au. There is also information about this liquidation on my firm s website: Yours faithfully, Kim Wallman Liquidator of Metaltech Fabrications Pty Ltd (In Liquidation) ACN Page 8

9 Annexure A Page 1 of 1 Metaltech Fabrications Pty Ltd (In Liquidation) ACN: Administrator s and Liquidator s Account of Receipts and Payments 11 October 2017 to 9 February 2018 Receipts $ Sale of assets 400,199 Pre-appointment debtors recoveries 196,817 FEG verification services 11,968 Misc refund 169 Total 609,153 Payments Secured creditor settlement NAB 147,405 Administrator s remuneration 95,891 Asset realisation costs 62,454 Liquidator s remuneration 38,107 PMSI holder settlement 5,277 Insurance costs 3,456 Administrator s disbursements 2,350 Rent 2,200 Valuation costs 825 Liquidator s disbursements 47 Bank Charges 31 Total 358,043 Cash Balance 251,110