Baseline Constructions Pty. Ltd. (Administrators Appointed) (Receivers and Managers Appointed ACN ("the Company")

Transcription

1 Baseline Constructions Pty. Ltd. (Administrators Appointed) (Receivers and Managers Appointed ACN ("the Company") Administrators' Section 439A Report 12 February Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February 2015

2 Contents Section Page 1. Executive Summary 4 2. Introduction 8 3. Company History and Reasons for Failure Statement about the Company's Business, Property, Affairs and Financial Circumstances Historical Performance Investigations Effect on Employees Proposals for a Deed of Company Arrangement Estimated Outcome and Administrators' Recommendation Remuneration Meeting 61 Appendices A. Notice of Second Meeting of Creditors B. DIRRI C. Proposal for Deed of Company Arrangement D. ASIC Information Sheet - Approving fees: A guide for creditors E. Grant Thornton Hourly Charge Out Rates F. Administrators' Remuneration Report G. Formal Proof of Debt Form H. Appointment of Proxy Form 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

3 Glossary Act Corporations Act 2001 Administrators Amelia Street ARITA ASIC ATO Andrew Sallway and Said Jahani Project at Amelia Street, Waterloo Australian Restructuring, Insolvency and Turnaround Association Australian Securities and Investments Commission Australian Taxation Office Baron Corporation Baron Corporation Pty Ltd (a Secured Creditor) Baseline Bettar Holdings BRI Ferrier c. Circa CALDB Company DIRRI Director DOCA DoE Baseline Constructions Pty. Ltd. (Administrators Appointed)(Receivers and Managers Appointed) Bettar Holdings Pty Ltd BRI Ferrier (NSW) Pty Ltd The Companies Auditors and Liquidators Disciplinary Board Baseline Constructions Pty. Ltd. (Administrators Appointed)(Receivers and Managers Appointed) Declaration of Independence, Relevant Relationships and Indemnities Nicholas Bettar Deed of Company Arrangement Department of Employment ERV FEG FY14/13/12 Grant Thornton GST Management New Bounty Non-circulating PPSR Receivers and Managers RATA Estimated Realisable Value Fair Entitlements Guarantee Scheme Financial Years ended 30 June 2014, 30 June 2013 and 30 June 2012 Grant Thornton Australia Limited Goods and Services Tax The Director and the Financial Controller New Bounty Pty Ltd (a Secured Creditor) Fixed charge security interest Personal Property Securities Register Costa Nicodemou and Peter Krejci of BRI Ferrier (NSW) Pty Ltd Report as to Affairs Secured Creditors Baron Corporation Pty Ltd and New Bounty Pty Ltd YTD15 Period 1 July 2014 to 31 December Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

4 Section 1 Executive Summary 01. Executive Summary 02. Introduction 03. Company History and Reasons for Failure 04. Statement about the Company's Business, Property, Affairs and Financial Circumstances 05. Historical Performance 06. Investigations 07. Effect on Employees 08. Proposals for a Deed of Company Arrangement 09. Estimated Outcome and Administrators' Recommendation 10. Remuneration 11. Meeting 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February 2015

5 Executive Summary Executive summary Introduction Refer to Section 2 Background Information Refer to Section 3 Investigations Refer to Section 6 Andrew Sallway and Said Jahani were appointed Administrators of the Company on 15 January 2015 pursuant to Section 436A of the Act. The first meeting of creditors was held on Wednesday, 28 January The second meeting of creditors will be held on Friday, 20 February 2015 at 11.00am at the offices of Grant Thornton, Level 17, 383 Kent Street, Sydney, NSW The Company was incorporated on 7 January 1993 in the state of New South Wales. Its principal place of business is Science House, Level 5, Gloucester Street, The Rocks, NSW The Company operates within the building and construction industry. The Company recorded losses for several periods with their working capital constraints further compounded by difficulties with a project at Amelia Street, Waterloo. The Company had entered a contract with Bettar Holdings (who held the head contract with the principal) to complete the Amelia Street project. A dispute on the final progress claim between Bettar Holdings and the principal resulted in adjudication with only c. $311,000 of the $3.0 million claim being awarded to Bettar Holdings. As a result of this, Bettar Holdings has not paid the Company c. $3.0 million. Following the unfavourable adjudication determination being handed down on 6 January 2015, Receivers and Managers were appointed to the Company on 13 January 2015 and the Voluntary Administrators were subsequently appointed on 15 January Investigations to date have included a review of the trading history of the Company, transactions conducted and the movement of creditors' accounts. The investigations have focused on issues such as identifying potential voidable transactions and insolvent trading. Our key findings are detailed below: Insolvent trading The Company appears to have been trading insolvent since at least June The company has had a net liability position and negative working capital since at least this date, suggesting the Company was not able to pay creditors as and when they fell due. Evidence of creditor pressure and the establishment of payment arrangements has also been sighted from around this date. Voidable transactions Further investigations are required into payments made to approximately 43 parties valued between $526,000 and $1.8 million which appear to have the characteristics of preference payments. We are aware that the Company negotiated and entered into agreements with several creditors in return for partial payment of their claims. Pressure was being placed on the Company by many of these creditors via the issuing of demands and final notices, and the commencement of recovery proceedings. In a liquidation scenario, a liquidator would attempt to unwind and recover these unfair preference payments for the benefit of all creditors. We have not identified any uncommercial transactions or unfair loans in our preliminary investigations. Offences Based on the date of insolvency, it appears the Director may have traded whilst insolvent. However, we note that defences may also available to the Director and it may be that the Director had a reasonable expectation of the ability to secure further funding noting the secured creditors support (evidenced by an advance of $700,000 in September 2014), and expectations of realising a related party debt in relation to Amelia Street. In any event, we do not believe the Director would have sufficient financial means to pay a judgement awarding damages to the Company for trading whilst insolvent if one were obtained. Due to the limited time available to the Administrators, investigations to date have been limited and are considered preliminary. Should the Company be placed into Liquidation, further detailed investigations into the affairs of the Company will be conducted Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

6 Executive Summary Executive summary Proposal for a Deed of Company Arrangement ("DOCA") Refer to Section 8 Estimated Outcome Statement Refer to Section 9 A DOCA is a mechanism for dealing with creditors claims. A DOCA, if approved by creditors, binds all creditors of the Company arising on or before the date of the appointment of the Administrators, unless otherwise specified. Two DOCA proposals have been received from the Director: DOCA Option 1 (DOCA and Creditors' Trust) provides that upon execution of the DOCA control of the Company will revert to the Director, and the DOCA will be effectuated (i.e. completed) upon receipt of a contribution from the secured creditor, Baron Corporation, calculated at a maximum of 2 cents in the dollar on unsecured creditor claims up to $4.0 million excluding related parties (i.e. $80,000). A further amount is to be contributed by Baron Corporation to meet employee entitlements in full. Upon completion of the DOCA, a Creditors' Trust deed is to be executed under which creditors will ultimately receive a distribution of the greater of c. 2 cents in the dollar (i.e. the $80,000 contribution), or 50% of net litigation proceeds should the secured creditor successfully pursue litigation with respect to Amelia Street. It is noted that the Amelia Street litigation is not an asset of the Company. The Company will be released from all claims against it except those of the Secured Creditors and related parties. DOCA Option 2 (DOCA Only) provides for the control of the Company to return to the Director upon execution of a DOCA, with a distribution to be made to creditors via the DOCA rather than via a Creditors' Trust. DOCA Option 2 proposes that a contribution will be made by the secured creditors calculated at 3 cents in the dollar on a maximum unsecured creditor claims of $4.0 million (i.e. $120,000). A further contribution will be made by Baron Corporation to ensure employee entitlements are paid in full. Upon distribution to the unsecured creditors (excluding related parties) the DOCA will be effectuated. The Company will be released from all claims (except those from the secured creditors and related parties) on completion. Under DOCA Option 2 there is no ability to participate in the potential Amelia Street litigation. Both DOCAs provide a higher return than a liquidation, with the certainty of a return guaranteed via the contributions from the secured creditors. While it may be possible to make a distribution to creditors within six months under DOCA Option 2 (DOCA Only), subject to the adjudication of claims, any distribution under DOCA Option 1 (DOCA and Creditors' Trust) is likely to take longer as a result of the need to await the outcome of the potential litigation. As discussed on the following page, the Administrators recommend that creditors vote to execute DOCA Option 2 (DOCA Only). The estimated return to creditors in the various scenario on which creditors may vote is summarised below, with further detail set out in Section 9. Priority creditors (employees) are estimated to be paid in full in all scenarios with a claim to be made to FEG should the Company enter Liquidation. Returns to unsecured creditors range from a low of nil in a liquidation, Liquidation DOCA Option 1 DOCA Option 2 up to c. 6.6 cents in the dollar under DOCA Option 1. The high case Creditor Class Low (c/$) High (c/$) Low (c/$) High (c/$) Low (c/$) High (c/$) estimates under both a liquidation and DOCA Option 1 are highly Secured Creditors variable as they are subject to successfully pursuing litigation and Priority Creditors recovering potential preference payments. Please note that this estimate is subject to change. Unsecured Creditors Ordinary Unsecured Related Party Unsecured Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

7 Executive Summary Executive Summary (cont'd) Effect on employees Refer to Section 7 Administrators recommendation Refer to Section 9 Remuneration Refer to Section 10 Meeting Refer to Section 11 Based on the information provided, there were 13 people employed by the Company at the date of our appointment. Employee entitlements at the date of appointment are estimated at $143,000. This excludes redundancy on the basis the employees have continued to be employed by the Receivers and Managers. Should redundancies be necessary, entitlements are estimated to increase by a further $208,000. Should the Company be placed in liquidation the Liquidators will liaise with the DoE to ascertain whether funding will be made available for the employees. Please note government funding of employee entitlements is not available if the Company does not enter into Liquidation. Under both DOCA proposals, the employee entitlements are to be paid in full. Section 439A(4)(b) of the Act requires the Administrators of the Company to prepare a statement setting out their opinion on the future of the Company. In this report we have recommended to creditors that the Company execute DOCA Option 2 (DOCA Only) for the following reasons: It provides a greater return to creditors than a liquidation, with greater certainty also provided with respect to timing of a distribution; It enables the Company to implement a restructure and continue to trade, being in line with the objective of Part 5.3A of the Act; and The Administrators do not support the use of a Creditors' Trust as proposed in DOCA Option 1 (DOCA and Creditors' Trust) on the basis there are no compelling legal or commercial reasons why the Company cannot continue to trade under a DOCA as opposed to a Creditors' Trust. The Administrators do not consider it to be in the public interest to implement a Creditors' Trust as a means to enable the Company to trade without reference to an external administration in public documents. The Administrators remuneration is to be approved by creditors at the forthcoming meeting of creditors. A Remuneration Report is enclosed at Appendix F, providing details of work performed to date, estimated future remuneration up to the second meeting of creditors and estimated remuneration of the Liquidators/Deed Administrators, depending on the creditors' decision of the outcome of the Company at the second meeting. The second meeting of creditors is to be held at the office of Grant Thornton, Level 17, 383 Kent Street, Sydney at am on Friday, 20 February Registration will open 30 minutes prior to the meeting. The notice in regards to this meeting is enclosed at Appendix A. A Proof of Debt and Proxy Form are enclosed at Appendices G and H and are to be returned to our office by 10.00am on 19 February Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

8 Section 2 Introduction 01. Executive Summary 02. Introduction 03. Company History and Reasons for Failure 04. Statement about the Company's Business, Property, Affairs and Financial Circumstances 05. Historical Performance 06. Investigations 07. Effect on Employees 08. Proposals for a Deed of Company Arrangement 09. Estimated Outcome and Administrators' Recommendation 10. Remuneration 11. Meeting 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February 2015

9 Introduction Appointment and first meeting of creditors Appointment of Administrators Andrew Sallway and Said Jahani were appointed Joint and Several Administrators of the Company pursuant to Section 436A of the Act on 15 January 2015 by the Director. The appointment of Administrators follows the earlier appointment of Costa Nicodemou and Peter Krejci of BRI Ferrier as Receivers and Managers of the Company on 13 January The Receivers and Managers assumed control of the Company on their appointment and have continued to trade the business with the support of the secured creditors. The purpose of the appointment of the Administrators is for independent insolvency practitioners to investigate the affairs of the Company and provide creditors with information and recommendations to assist creditors to decide upon the Company's future. During the Administration period creditors' claims are put on hold. Events leading to the Administrators' Appointment As stated in the Declaration of Independence, Relevant Relationships and Indemnities, the Administrators were approached by Costa Nicodemou of BRI Ferrier on 13 January 2015 to consider the potential appointment as Administrators. A meeting with the Director, Mr Nicholas Bettar, was subsequently held on 14 January The Director proceeded to appoint Andrew Sallway and Said Jahani as Voluntary Administrators on 15 January First Meeting of Creditors Pursuant to Section 436E of the Act, the first meeting of the Company's creditors was held on 28 January A quorum was present and at the meeting it was resolved not to form a Committee of Creditors. A copy of the minutes of the meeting has been lodged with the ASIC and can be provided upon request. Second Meeting of Creditors The second meeting of creditors will be held at 11.00am on Friday, 20 February 2015 at the offices of Grant Thornton, Level 17, 383 Kent Street, Sydney NSW A formal notice of this meeting is attached to this report as Appendix A. The purpose of the second meeting is to contemplate the Administrators' Section 439A report on the Company's state of affairs and financial position and to consider the Administrators' investigations of the Company. At the meeting creditors will be provided the opportunity to determine the future of the Company and will resolve one of the three resolutions put forward, these resolutions being: That the Administration will end; That the Company executes a DOCA; or That the Company be placed into liquidation and wound up. The Administrators' recommendation is that the creditors of the Company resolve to execute a DOCA Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

10 Introduction Report to creditors Report to Creditors The purpose of this report is to provide creditors with sufficient information for them to make an informed decision about the future of the company, including: Background information about the Company; Information on the Company's state of affairs and financial position; The results of our investigations; The estimated returns to creditors; Details of the proposed Deeds of Company Arrangement; and The options available to creditors and our opinion on each of these options. In the time available to us, we have undertaken preliminary investigations into the Company's business, property, affairs and financial circumstances. Our investigations have been limited due to the short period granted pursuant to the Act which requires us to report to creditors prior to the second meeting of creditors. The information contained in this report is based on the information available at the date of this report, however, should further information become available that may assist in our investigations, we will provide a further update at the second meeting of creditors. However, in our opinion the above matters have not prevented us from being able to provide sufficient, meaningful information in this report or from being able to form an opinion on what is in the creditors' best interest. At the meeting to be held on 20 February 2015, creditors will be asked to make a decision by passing a resolution in respect of options available to them. The options presented by the Act with respect to the Company which are to be voted on by creditors at that meeting are that: The Administration be terminated; The Company be wound up (liquidation); or The Company execute a Deed of Company Arrangement. In this report we recommend to creditors that the Company enter a Deed of Company Arrangement (DOCA Option 2 DOCA Only) and detail why this option is, in our opinion, in the creditors' best interests. The Administrators have relied on information provided from numerous sources to prepare this report, including: A review of the Company's books and records provided to date; Discussions with the Director and Financial Controller of the Company; Discussions with the Receivers and Managers of the Company; and Information available from public sources, such as Australian Securities and Investments Commission (ASIC) and the Personal Property Securities Register (PPSR). Whilst we have no reason to doubt the accuracy of any information, we have not performed an audit and we reserve the right to alter our conclusions should the underlying data prove to be inaccurate or change materially from the date of this report. In the event that the Company proceeds to liquidation, this report will form the basis of our further investigations. Provided that funding is available, the investigations will be more extensive than those undertaken to date, particularly due to the time constraints of the voluntary administration process. It is the Administrators' view that this report provides sufficient information to creditors to allow them to make an informed decision as to the Company's future, and allows the Administrators to make a reasoned and fair recommendation based on their opinions and the opinions available to creditors Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

11 Introduction Compliance, Independence and Communications Compliance with best practice We confirm that this report complies with the statements of best practice issued by the ARITA, with regard to content of the Administrators' report and the Code of Professional Practice with regard to remuneration (effective 1 January 2014). Independence As disclosed in our First Notice to Creditors dated 16 January 2015, the Administrators undertook a proper assessment of the risks in relation to their independence prior to accepting the appointment. Our assessment identified no real or potential risk to our independence. We confirm that there have been no changes to the DIRRI as stated in the initial Notice to Creditors, with a copy of the DIRRI enclosed at Appendix B. Disclaimer In reviewing this report, creditors should note the following: This report is based on information from the books, records and other information provided. Whilst the Administrators have reviewed the information, there has been no independent verification of the information; In considering the options available to creditors and formulating their recommendations, the Administrators have necessarily made forecasts of asset realisations and total creditors. These forecasts and estimates may change. Whilst the forecasts and estimates are the result of the Administrators' best assessments in the circumstances, creditors should note that the outcome for creditors may differ from the information provided in this report; This report is not for general circulation, publication, reproduction or any use other than to assist creditors in evaluating their position as creditors and must not be disclosed without the prior approval of the Administrators; The Administrators do not assume or accept any responsibility for any liability or loss sustained by any creditor or any other party as a result of the circulation, publication, reproduction or any use beyond that permitted above; The statements and opinions given in this report are given in good faith and in the belief that such statements are not false or misleading. Except where otherwise stated, we reserve the right to alter any conclusions reached on the basis of any changed or additional information which may be provided to us between the date of this report and the date of the second meeting; Neither the Administrators, nor any member or employee thereof are responsible in any way whatsoever to any person in respect of any errors in this report arising from incorrect information; and Creditors must seek their own independent legal advice as to their rights and the options available to them at the second meeting of creditors Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

12 Introduction Key events in the Administration The timeline below details the key milestones during the Administration. Since the date of appointment, we have conducted investigations into the reasons for the Company's failure. The reasons for the Company's failure and outcome of these investigations are discussed in Section 3 and Section 6. The Administrators have undertaken the following key actions: Preparation of the s.439a report; Held discussions with the Director and Receivers and Managers in relation to asset realisations and the DOCA proposal; Undertaken a preliminary review of creditor and employee claims; and Undertaken investigations into the Company's affairs. 13 January 2015 Meeting with the Director, Nicholas Bettar. 15 January 2015 First Meeting of Creditors DOCA (Option 2) proposal received from the Director 30 January February February 2015 Andrew Sallway and Said Jahani were contacted to potentially act as Voluntary Administrators. 14 January 2015 Appointment of Joint and Several Voluntary Administrators of the Company 28 January 2015 DOCA (Option 1) proposal received from the Director 9 February 2015 The Administrators issued their s.439a report to creditors. Second meeting of creditors where creditors will decide on the outcome of the Company, which will determine whether: 1. The Administration ends; 2. The company executes a DOCA; or 3. The company is wound up. Negotiations and discussions with the Secured Creditor and Receivers and Managers in relation to the DOCA. Preliminary investigations undertaken by the Administrators in relation to voidable transactions and potential insolvent trading Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

13 Introduction Actions undertaken to date Actions Undertaken by the Administrators Tasks undertaken by the Administrators include: Dealing with creditor matters, including: Advising creditors of our appointment; Preparing meeting notices, proxies and advertisement; Holding the first meeting of creditors; Preparing the s439a report including undertaking preliminary investigations into the Company's affairs; Receipting and filing Proofs of Debt; and Receiving and following up creditor enquiries via telephone and . Liaising with the Director and Financial Controller of the Company to obtain the necessary books and records, as well as other information of relevance; Conducting investigations, including reviewing books and records of the Company, reviewing the Company's trading history, conducting and summarising statutory searches and reviewing specific transactions, from which our findings are summarised in Section 6 of this report. Preparing, reviewing and executing the documents of appointment and filing with the ASIC as necessary. Issuing Report as to Affairs and Directors Questionnaire to the Director upon appointment. Notifying appointment to statutory bodies including the Australian Taxation Office and the NSW Office of State Revenue. Liaising with the Receivers and Managers. The Administrators have not been involved in the ongoing trading activities of the Company with control of the Company reverting to the Receivers and Managers upon their appointment. Receivership Overview Costa Nicodemou and Peter Krejci of BRI Ferrier were appointed Receivers and Managers of the Company on 13 January The Receivers and Managers were appointed by a secured creditor, New Bounty Pty Ltd. The Receivers and Managers have taken control of all assets and operations of the Company and have advised the following with respect to the various projects: Amelia Street, Waterloo: The project has been completed and is the subject of dispute with the principal. The Receivers and Managers are facilitating defect works during the defect liability period to protect retentions. The Receivers and Managers and secured creditor are working with solicitors to finalise a recovery strategy for the balance of claim and release of retention. Burns bay Road, Lane Cove: This cost plus project is proceeding and is in the early stages with the principal. QVB Refurbishment: There is a dispute with the principal to have the bank guarantee/retention returned. Bellevue Hill: The project has continued with the principal and is close to completion. The occupation certificate is expected next week, which will facilitate the release of the bank guarantee. Centro Bankstown: Final defects are being finalised to recover retention money. Ashfield: Final defects are being finalised to recover retention money Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

14 Section 3 Company History and Reasons for Failure 01. Executive Summary 02. Introduction 03. Company History and Reasons for Failure 04. Statement about the Company's Business, Property, Affairs and Financial Circumstances 05. Historical Performance 06. Investigations 07. Effect on Employees 08. Proposals for a Deed of Company Arrangement 09. Estimated Outcome and Administrators' Recommendation 10. Remuneration 11. Meeting 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February 2015

15 Company History and Reasons for Failure Background Registered Office and Principal Places of Business An ASIC search dated 13 January 2015 indicated that the Company's registered office is Level 7, Devonshire Street, Surry Hills NSW. It further lists two principal places of business as: Science House, Level 5, Gloucester Street, The Rocks NSW; and 4 Kent Street, Belmore NSW. Company Shareholding At the date of our appointment, the Company's shareholding consisted of 30,000 fully paid up ordinary shares with a total par value of $30,000. All shares are held by Nicholas Bettar. Given the expected shortfall to unsecured creditors based on the information available, it is unlikely that there will be a return available to ordinary shareholders if the Company is placed into Liquidation. There have not been any changes to shareholdings in the 12 months prior to the appointment date. Company Officeholders The ASIC search confirmed the current and historical directors and secretaries of the Company are as follows: Officeholder Position Appointment Date Cessation Date Nicholas John Bettar Director 8 January 1993 N/A Nicholas John Bettar Secretary 8 January 1993 N/A Paul Bettar Former Director 8 January May 2001 Michael Chahoud Former Director 8 January February 1998 Malcolm Walton Cooper Former Director 7 January January 1993 Janet Cooper Former Director 7 January January 1993 Malcolm Walton Cooper Former Secretary 7 January January 1993 Auditor and External Accountant The external accountants of the Company are Parras & Associates. The latest financial reports prepared by the external accountants were for FY14. According to the ASIC, the appointed auditors of the Company are Allworths. The financial statements were last audited in Organisation Structure and Related Entities The Company has a simple structure with Nicholas Bettar being the sole shareholder, director and secretary. A directors search has revealed that Nicholas Bettar is also the sole director (and shareholder) of the following companies: Baseline Developments Pty Ltd; and Baseline Concept Design Pty Ltd. Related party loans with the above companies are recorded in the accounts with the balances not changing materially in the past 12 months. Management have advised these companies are dormant. The Company owes $358,214 to Baseline Developments. The Company is owed $12,838 by Baseline Concept Design. One other related party has been noted in the Company's accounts. Bettar Holdings Pty Ltd is recorded as a receivable in the accounts, with the receivable balance reducing from $1.1 million to $503,000 between June 2014 and December 2014 as a result of contributions having been made by Bettar Holdings. Nicholas Bettar was previously a director of this entity. There is a contract between the Company and Bettar Holdings whereby Bettar Holdings has contracted the Company to undertake the construction of the project at Amelia Street. The head contract is between Bettar Holdings and Amelia 1822 Pty Ltd Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

16 Company History and Reasons for Failure Background (cont'd) Secured Creditor The Personal Property Securities Register (PPSR) records the following charges being recorded against all, or substantially all, of the assets of the Company: Chargeholder Charge Type Date Baron Corporation Pty Ltd All Present and After Acquired Property 30 January 2012 New Bounty Pty Ltd All Present and After Acquired Property 4 June 2014 In August 2010 Baron Corporation agreed to loan the Company funds and obtained security by way of a charge over the Company. Funds of up to $3.0 million were drawn down prior to the Company commencing to repay the loan. Under the prior DOCA executed in 2012, Baron Corporation's debt was not extinguished. In August 2014 Deeds of Variation and a Deed of Assignment were entered whereby Baron Corporation's debt was split and part assigned to their related party, New Bounty Pty Ltd, who also obtained security over this amount. As at the date of appointment, the debts due to the two secured creditors were advised to be: Baron Corporation Pty Ltd: $2,809,745; and New Bounty Pty Ltd: $1,677,753 The amount due on appointment includes $700,000 advanced to the Company as recently as September Pursuant to the New Bounty security, Costa Nicodemou and Peter Krejci were appointed as Receivers and Managers of the Company on 13 January The Administrators note that the amounts outstanding differ from the Management accounts with the variance appearing to relate to interest. We have not reviewed the charge documentation to confirm the validity. Leased Assets The below parties also have registered security interests on the PPSR, primarily in relation to leased assets, finance agreements and retention of title. Pursuant to Section 443B of the Act, the Administrators elected not to exercise their rights in relation to the leased assets. Chargeholder Charge Access Specialty Hardware Pty Ltd Other Goods - Equipment Action Access Hire Pty Ltd; Australia Access Hire Pty Limited Motor Vehicle and Other Goods Coates Hire Operations Pty Limited Motor Vehicles and Other Goods Energy Power Systems Australia Pty. Limited , Force Corp Pty Ltd Other Goods - Equipment Fuji Xerox Finance Limited; Fuji Xerox Australia Pty Limited Printer and/or Copier Equipment Peri Australia Pty Limited Other Goods Toyota Finance Australia Limited Forklift and Motor Vehicles Waco Kwikform Limited Other Goods - Equipment Westpac Banking Corporation Intangible Property Management has advised that some of the securities registered are not current, however, the register had not been updated to reflect their discharge Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

17 Company History and Reasons for Failure Principal Activity Principal Activity The Company was registered with ASIC on 7 January The Company operates in the Building and Construction industry, providing services to the educational, industrial, institutional, commercial, residential and retail sectors. The services provided include: Project Management; Construction Management; Concept Planning and Programming; Project Feasibility Studies; Design Management and Facilitation; and Construction Advice. The Company's projects are within the Sydney CBD and Greater Sydney regions. As at the date of the Administrators' appointment, Baseline employed 13 employees. The majority of these employees continue to be employed though arrangements with the Receivers and Managers. Previous Administration and DOCA It is noted that on 3 July 2012 Brian Silvia and Andrew Cummins of BRI Ferrier were appointed Voluntary Administrators of the Company by the Director pursuant to Section 436A of the Act. It was noted in the prior Administrators' report that the cause of the Company's failure was due to the lack of adequate working capital following significant losses, and protracted litigation with respect to a building contract. The previous administration came to an end with the execution of a DOCA and accordingly the Administrators ceased to act on 31 July The prior Administrators were appointed Deed Administrators on 31 July 2012 and ceased to act around 27 February 2013, upon completion of the DOCA. The previous DOCA is understood to have involved contributions from the Director estimated to result in a return of between 6.5 and 10 cents in the dollar to unsecured creditors. Control of the Company returned to the Director upon execution of DOCA. Project Overview Management has provided a summary of the projects worked on over the past 12 months, which is set out below: Project/Location Start Date Finish Date Value ($) Profit Margin ($) Amelia St, Waterloo 1/02/ /12/ ,460,511-2 Harnett Ave, Mosman 1/04/ /07/2014 1,126,153 38,270 St Ives Shopping Village 17/05/ /09/2014 1,383, ,412 Centro Bankstown 23/08/ /08/2014 3,961,469 (483,488) Bedford - Surry Hills 6/09/ /12/2014 3,342,334 (181,220) Commonwealth St, Surry Hills 1/01/ /11/ ,048 (19,488) QVB Refurbishment 29/01/ /12/2014 1,433,523 (260,721) MacDonald College 1/02/ /05/ ,423 35,729 Maroubra Subdivision 9/05/ /11/ ,751 85, Morley Street, Rosebery 3/09/ /10/ ,608 18,884 Subtotal - Completed projects 26,928,913 (541,189) Bellevue Hill 15/07/ /02/2015 4,386,944 (50,000) Burns Bay Road, Lane Cove 1/06/ /07/2015 2,500, ,000 Total 33,815,857 (391,189) A loss of $541,000 has been incurred on the projects completed in the past 12 months. There remain two projects on the schedule which have not been completed. The Receivers and Managers assumed control of the Company on their appointment and their comments with respect to the status of various contracts is set out on page Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

18 Company History and Reasons for Failure Reasons for failure Director's Reasons for Failure Following the appointment of the Administrators, a meeting was held with the Director wherein he attributed the demise of the Company to the Amelia Street project. The Director has advised: The Amelia Street project was for the development of 53 units and 2 shops for a client that the Company had not previously worked for (Amelia 1822 Pty Ltd). The starting contract value was for $14.6 million (which included a profit margin of 8%) with the contract construct only (no design risk). As a result of a number of variations the total increased to $16.9 million with $13.9 million having been paid. Disputes and delays on the project arose. The contract was run informally with respect to variations. While many of the smaller variations were informally approved and paid, the larger value variations were not approved and delayed. Between April 2014 and August 2014 a number of meetings were held with the client in an attempt to resolve the matter and obtain payment of the final progress claim of c. $3.0 million, including unpaid variations. On 15 October 2014 the Company applied for adjudication under the Security of Payment Act A determination was not made until 8 December 2014 with only a very small portion of the claim being considered. As a result of the delayed adjudication, a further application for adjudication was lodged in November This determination was handed down on 5 January 2015 with only c. $311,000 of the $3.0 million claim being awarded. Administrators' Comments Amelia Street, Waterloo Our preliminary investigations into the affairs of the Company indicate that the financial difficulties faced by the Company were magnified by the disputed final progress claim on the Amelia Street project. While the Company was not a party to the head contract on Amelia Street, an agreement was entered between Bettar Holdings (the head contractor on the development) and the Company. Under the agreement the Company was to complete the development on behalf of Bettar Holdings. Accordingly, the Company has a claim against the related party, Bettar Holdings, which in turn will need to pursue the principal in court should it decide to further pursue the claim. Other reasons for failure In addition to the Amelia Street claim, our investigations indicate that the following factors also contributed to the failure of the Company: Difficulty in re-establishing the business and securing new projects following the prior Administration/DOCA; A history of trading losses with the Company recording losses of $2.3 million in FY14 and $2.3 million in YTD15. While a profit was recorded in FY13, this resulted from the write-off of creditor claims following the 2012 Administration/DOCA, not trading performance; and General working capital constraints as a result of the history of losses. Further investigation into the reasons for failure of the Company will be undertaken by the Liquidators should the Company be placed into liquidation Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

19 Section 4 Statement about the Company's Business, Property, Affairs and Financial Circumstances 01. Executive Summary 02. Introduction 03. Company History and Reasons for Failure 04. Statement about the Company's Business, Property, Affairs and Financial Circumstances 05. Historical Performance 06. Investigations 07. Effect on Employees 08. Proposals for a Deed of Company Arrangement 09. Estimated Outcome and Administrators' Recommendation 10. Remuneration 11. Meeting 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February 2015

20 Statement about the Company's Business, Property, Affairs and Financial Circumstances Director's Report as to Affairs (RATA) RATA Summary at 13 January 2015 Description Notes Book Value ($) Directors' Estimated Realisable Value ($) Assets not specifically charged Interest in Land - - Sundry Debtors 1 2,877,019 Unknown Cash on Hand Cash at Bank 2 12,405 12,405 Stock - - Plant and Equipment 3 25,000 25,000 Other Assets - - Net Assets Subject to Specific Charge 2,914,674 37,655 Assets Subject to Specific Charge 4 63,000 - Less Amounts Owing 4 (52,194) - Total Assets 2,925,480 Less: Amount Payable in Advance of Secured Creditor - Amounts Owing for Employee Entitlements Surplus / (Deficit) in Assets before Claims of Preferential and Unsecured creditors 5 (188,812) 2,736,668 Less: Amount payable to preferential creditors/secured creditor 6 (4,487,497) Surplus / (Deficit) in Assets before Claims of Unsecured Creditors (1,750,829) Amount Owing to Unsecured Creditors 7 (5,110,720) Surplus / (Deficit) before Realisation and Administration Costs (6,861,549) Notes: The above has been reproduced based on the RATA prepared by the Director. Director's RATA Pursuant to Section 438B(2) of the Act, the Director of the Company is required to submit a statement about the Company's business, property, affairs and financial circumstances, also known a Report as to Affairs or RATA. The RATA is a snapshot in time as at the date of our appointment of the assets and liabilities of the Company, disclosing book value and estimated realisable value. On 16 January 2015 a written request was issued to the Director to complete the RATA for the Company. The RATA for Mr Bettar was received via the Receivers and Managers on 2 February 2015 and a summary is shown opposite. The RATA has been prepared as at 13 January 2015 (being the date of appointment of the Receivers and Managers). We do not believe the position would have changed materially as at the date of the administration on 15 January We comment on the key assets and liabilities in greater detail on the following pages. The RATA will be available for inspection by creditors at the second meeting should they wish to review it Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

21 Statement about the Company's Business, Property, Affairs and Financial Circumstances Administrators' notes on the director's RATA Administrators' Notes on the Director's RATA Note Assets Commentary 1 Debtors The schedule to the RATA identifies 4 debtors, with the largest being $2.7 million in relation to Amelia Street, Waterloo. With respect to Amelia Street, it is noted that: There have been two adjudications in relation to this final progress payment with the adjudicator only awarding $311,000 against a total claim of $3.0 million; The Amelia Street construction contract is between Amelia 1822 Pty Ltd and Bettar Holdings Pty Ltd (a related entity). An agreement is in place between Bettar Holdings and the Company wherein the Company is to perform the construction works on behalf of Bettar Holdings. Accordingly, the related party Bettar Holdings is the Company's debtor, not Amelia 1822 Pty Ltd; and Based on a high level review of the financial statement of Bettar Holdings, Bettar Holdings would need to recover the Amelia Street debt and/or related party loans in order to make payment to the Company. To recover the Amelia Street debt, it is necessary for Bettar Holdings to contest the matter in court. We do not have sufficient information or opinions to comment on the likely success should such action be undertaken, however, it would appear based on comments from the Director that Bettar Holdings will seek third party funding should it choose to pursue the action. Total debtors in the RATA of $2.9 million compare to $983,000 recorded in the Management accounts as at 31 December The variance primarily relates to the recorded value of the Amelia Street debt. Related party loans have been excluded from the Director's RATA. 2 Cash on Hand and Cash at Bank The NAB has confirmed that $3,241 was held in the Company's main trading account as at 15 January The Receivers and Managers have taken control of the bank account in accordance with the secured creditors' priority. In addition to the main trading account, four other accounts have been identified as being held. Management has advised the following in respect to each of the accounts: Business Cheque account (nil balance): This was a client specific account held in respect to a project and is no longer being used. Two term deposits ($202,709 balance): These term deposits are held by the bank as security for the bank guarantees issued. Letters of Set- Off are held in the amount of $193,000, with management providing a schedule of guarantees issued as at the date of appointment totalling this amount. Term deposit ($274,555 balance): A Letter of Set-Off is also held by the bank in relation to the account, with the term deposit being held as security for a bank guarantee issued. Management has advised that this term deposit has been funded by, and is held on behalf of, an individual rather than the Company. We have been provided with documentation in relation to this transaction but have not yet assessed the legal ownership of the account. 3 Plant and Equipment A depreciation schedule has been provided with the plant and equipment being identified as primarily office furniture and equipment. We expect such equipment to have minimal realisable value in a liquidation scenario, with the secured creditors' security covering these assets in priority to employee claims and unsecured creditor claims Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

22 Statement about the Company's Business, Property, Affairs and Financial Circumstances Administrators' notes on the director's RATA Administrators' Notes on the Director's RATA Note Assets Commentary 4 Assets Subject to Specific Charge Three motor vehicles utilised by the Company are subject to finance arrangements. Equity of c. $10,000 has been estimated by the Director, with the secured creditors' priority attaching to this equity. Note Liabilities Commentary 5 Employee Entitlements 6 Preferential Creditors 7 Unsecured Creditors Entitlements have been calculated for annual leave and long service leave, with an additional $25,000 general provision included for retrenchment. Also included in the schedule is $74,605 attributed to the Director and his related parties. The Administrators' estimate of employee entitlements is set out in Section 7. The liability of $4.5 million is attributed to the secured creditors, Baron Corporation Pty Ltd and New Bounty Pty Ltd, who appointed the Receivers and Managers on 13 January 2015 pursuant to their securities. The liability in the RATA compares to $3.0 million recorded in the management accounts as at 31 December The variance is attributable to capitalised interest. Included in the listing of unsecured creditors is the Director/Shareholder in the amount of $1.4 million in respect to loans made to the Company Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

23 Section 5 Historical Performance 01. Executive Summary 02. Introduction 03. Company History and Reasons for Failure 04. Statement about the Company's Business, Property, Affairs and Financial Circumstances 05. Historical Performance 06. Investigations 07. Effect on Employees 08. Proposals for a Deed of Company Arrangement 09. Estimated Outcome and Administrators' Recommendation 10. Remuneration 11. Meeting 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February 2015

24 Historical Performance Historical Performance Profit and Loss Profit & Loss Statement for Comparitive Years FY12 FY13 FY14 YTD15 Revenue 33,404,638 13,993,895 30,030,111 5,027,639 Cost of Sales (33,564,158) (7,157,861) (30,305,775) (6,607,519) Gross Profit (159,520) 6,836,034 (275,664) (1,579,880) Gross Margin -0.48% 48.85% -0.92% % Other Operating Income 716, ,487 99,546 31,820 Total Income 556,618 6,947,521 (176,118) (1,548,061) Less Operating Expenses (3,844,412) (2,346,797) (2,149,781) 759,299 NPBT (3,287,794) 4,600,724 (2,325,899) (2,307,360) Income Tax NPAT (3,287,794) 4,600,724 (2,325,899) (2,307,360) Sources: FY12 to FY14 Financial statements prepared by Parras & Associates Certified Practicing Accountants. YTD15 Management accounts Financial Statements The Company maintained monthly management accounts utilising construction management software, Cheops. The last available management accounts have been prepared for the month ending 31 December Annual financial statements were prepared by an external accountant, Parras & Associates. We have been provided with accounts for FY12, FY13 and FY14, which are summarised above together with the YTD15 management accounts. Profit and Loss Overview The Company has had mixed performance from a profit and loss perspective. It is noted that: During FY13 the Company was placed into Administration as a result of working capital deficiencies and protracted litigation. Administrators were appointed on 3 July 2012 and a DOCA was executed on 27 July Control of the Company was handed back to the Director during the DOCA period which was effectuated in February Revenue in FY13 fell significantly compared to FY12 as a result of the ramifications from the administration. During this administration and postadministration phase, Management has advised that the Company experienced difficulties in securing new contracts (with some contracts instead completed via related parties). A net profit was recorded in FY13. This was not as a result of trading results but rather as a result of the accounting practice whereby creditor balances from the prior administration period were written off. In FY14 trading conditions normalised and new contracts were secured. However, a loss was still recorded at the gross profit level indicating the construction projects entered into were not profitable. This is confirmed upon review of the schedule of projects completed by the Company, set out on page 17, which shows losses were incurred on many projects. YTD15 has seen a decline in revenue with revenue of $5.1 million for the period being c. 33% of the revenue generated for the same period in FY14. Operating losses have continued. The Company generally entered 'lump sum' contracts rather than 'cost plus' contracts resulting in the Company being at risk should there be performance issues, including those outside the Company's control such as weather Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

25 Historical Performance Historical Performance Balance Sheet Balance Sheet As at 30 June 2012 As at 30 June 2013 As at 30 June 2014 As at 31 December 2014 Current Assets Cash at Bank - NAB 62, , ,987 Cash At Bank - Arab GST Acc - David Hicks A/C - 52, NAB A/C Term Deposit - St George 1,868, , Term Deposit - NAB 1,256, , , ,000 Receivables 2,484,507 2,148,058 3,267, ,133 Other 4, ,670 3,926 Total Current Assets 5,676,991 3,153,311 3,470,999 1,335,046 Non-Current Assets Receivables 66, ,315 1,107,133 Property, Plant & Equipment 304, , , ,635 Intangibles 12,825 8,933 5,039 - Total Non-Current Assets 383, ,615 1,294, ,635 Total Assets 6,060,773 3,574,926 4,765,266 1,488,681 Current Liabilities Accounts Payable 9,439,872 2,104,960 4,814,873 3,733,637 Borrowings 1,429, ,399 34,481 2,860,287 Other (357,628) 379, , ,834 Total Current Liabilities 10,511,690 2,863,628 5,450,305 7,100,758 Non-Current Liabilities Accounts Payable 93,163 42,411 32,147 32,147 Borrowings 3,030,409 3,099,975 4,037,899 1,418,222 Total Non-Current Liabilities 3,123,572 3,142,386 4,070,046 1,450,369 Total Liabilities 13,635,262 6,006,014 9,520,351 8,551,127 Total Assets (7,574,489) (2,431,088) (4,755,085) (7,062,446) Shareholders Equity Issue Capital 30,000 30,000 30,000 30,000 Reserves (1,276) (509) - Accumulated Losses (7,603,213) (2,460,579) (4,785,084) (7,092,444) Total Shareholders Equity (7,574,489) (2,431,088) (4,755,084) (7,062,444) Balance Sheet Overview The Company has had a net liability position since at least 30 June While the net liability position improved between FY12 and FY13 as a result of accounts payable being written off following the compromise under the last DOCA, the net liability position has remained and has since been increasing as accumulated losses have been incurred. During the 6 months to 31 December 2014, net liabilities increased from $4.8 million to $7.1 million. This deterioration is linked to the reported trading losses, such that receivables have been collected, however, these debtor collections have not been sufficient to pay its trading liabilities. Further, despite having incurred expenses on the Amelia Street project but not having received the final progress payment, the full $3.0 million claim on that project is not shown as an asset (neither work in progress, trade debtors or contingent asset). This is as a result of the Company not recording receivables until the amount has been certified. The Company's main asset is the receivables book. Of the $983,000 of trade debtors as at 31 December 2014, $806,000 is recorded as being in respect of Amelia Street and would therefore be encapsulated in the adjudication determination. As the head contract on Amelia Street is with the related entity Bettar Holdings, for the Company to recover the debt from Bettar Holdings (via the agreement in which the Company completed the work on behalf of Bettar Holdings), it appears as though it would be necessary for Bettar Holdings to first recover this amount under the head contract, which is likely to require legal action given the adjudications were not in Bettar Holdings' favour. During the 6 month period to 31 December 2014 funds were injected by the secured creditor and related parties in an attempt to appease creditors while the Amelia Street discussions and subsequent adjudication were progressing. Baron Corporation Pty Ltd loaned the Company $700,000 in September 2014 and Bettar Holdings repaid the Company in November and December 2014, reducing its loan from $1.1 million to $503,000. The shareholder/director loan position did Sources: 30 June 2012 to 30 June 2014 Financial statements prepared by Parras & Associates Certified Practicing Accountants. 31 December 2014 Management accounts not move materially in the last 6 months Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

26 Section 6 Investigations 01. Executive Summary 02. Introduction 03. Company History and Reasons for Failure 04. Statement about the Company's Business, Property, Affairs and Financial Circumstances 05. Historical Performance 06. Investigations 07. Effect on Employees 08. Proposals for a Deed of Company Arrangement 09. Estimated Outcome and Administrators' Recommendation 10. Remuneration 11. Meeting 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February 2015

27 Investigations Investigations overview Unfair Preferences Refer to page 29 Uncommercial Transactions Refer to page 30 Directors Transactions Refer to page 30 Breaches of Director Duties Refer to page 30 Insolvent Trading Refer to page 32 Books and Records Refer to page 33 Based on the Administrators' review of Company accounts and transactions, it is the view of the Administrators that payments of between $526,000 and $1.8 million have been made to selective creditors which appear to display characteristics of potential unfair preference payments. These payments require further investigation to be conducted in order to cross-check all invoices and correspondence to determine an exact figure paid in preference. Based on our investigations, the Administrators have not become aware of any uncommercial transactions to third parties or related entities entered into by the Company. Further investigations may be required should the Company be placed in liquidation. Our investigations have identified personal payments in the amount of c. $84,000 made from the Company's bank account. These payments have correctly been debited from the Director's shareholder loan account. Should the Company be placed into liquidation, these payments will be investigated in greater detail. This brief investigation into the Company's affairs has not identified any material breaches of director duties. Should the Company proceed into liquidation, the Liquidator will review any potential breaches in greater detail. Creditors should note however, that the Director may have breached his duties by trading insolvent. Defences are, however, available to a director which need to be considered. Based on our review of the Company's books and records, it is clear the Company had been experiencing difficulty in paying its creditors from at least June 2014 and potentially earlier. The cashflow test undertaken highlighted an excess amount of creditors compared with the amount of cash the Company held at bank. Similarly the balance sheet test highlighted the Company's net liability position and poor current ratio. On this basis, the Administrators have estimated that the Company was insolvent from at least June In accordance with Section 286 of the Act, we note that we have not identified any material concerns with the books and records prepared and provided by the Company. We do however note that the Company did not maintain a cashflow statement in its intended form, nor did it prepare cashflow projections Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

28 Investigations Investigations overview (cont'd) Antecedent Transactions Recoverable by a Liquidator. In accordance with Regulation 5.3.A.02 of the Act, the Administrator of a company in setting out his or her opinions in a statement mentioned in paragraph 439A(4) of the Act, must specify whether there are any transactions which appear to the Administrator to be voidable transactions in respect of money, property or other benefits which may be recoverable by a Liquidator pursuant to Part 5.7B of the Act. The Administration process set down in Part 5.3A of the Act, provides a very short time within which to conduct investigations into potential recoveries from voidable transactions. At this stage, due to the short time frame allowed, it is difficult to definitively identify the likely courses of actions and/or recoveries that may be available to a Liquidator. Such conclusions would usually be made after more detailed investigations have been undertaken. Such investigations would normally include: A further detailed review of the Company's books and records; Discussions with various stakeholders of the Company; A detailed review of documentation produced by relevant parties following enquiry by a Liquidator/Administrator; and The public examination under oath, of relevant parties regarding the transactions concerned. Accordingly, whilst we have conducted the necessary enquiries required of an Administrator, the conclusions drawn herein with respect to our investigations into the Company's affairs should be viewed as preliminary and may be confirmed, or otherwise, by way of other sources of investigation should the Company proceed to liquidation. The transactions generally fall into two categories, being insolvent trading and voidable transactions (comprising unfair preferences, uncommercial transactions and unfair loans). The prospect of recovery of any antecedent transactions will depend on two key issues: Availability of funding to allow the cost of further investigation and litigation to be met. At this stage, we are unable to quantify the funds estimated to pursue such actions and a cost benefit analysis would be conducted prior to instigation of actions as well as consultation with the creditors and/or a Committee of Creditors; and The ability of the party (potential defendant) to be able to meet and pay any successful judgement against it in favour of the Liquidators. A cost benefit analysis will need to be conducted on each case to determine if there is merit and a net recovery to creditors in pursuing action Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

29 Investigations Voidable transactions Unfair Preference Payments The payments referred to are generally recoverable under Section 588FA of the Act if the payments were made during a period of six months prior to the commencement of the winding up date, or the date the Voluntary Administrators were appointed (otherwise known as the relation back date ), which in this case would be the period 14 July 2014 to 14 January To constitute an unfair preference payment, it must be proven that the company to the transaction was insolvent at the time of the payment and that the creditor had a suspicion or ought to have had a suspicion that the company was insolvent. As a general guide, the following factors can be demonstrative of that suspicion: The Company Having failed repayment arrangements; Making payments to suppliers outside of normal trading terms; and/or Seeking additional finance or cash injection. Creditors Resorting to legal actions to recover the debts; Receiving post-dated cheques following the commencement of legal proceedings; Entering into cash-on-delivery payment arrangements with suppliers; Making demands for clearance of the debt unrelated to a promise to recommence supply; and/or Seeking additional security to secure the debt. We have undertaken the following procedures in determining whether unfair preferences occurred: Review of the Company's books and records; Analysis of ageing of creditors as at the appointment date and over the relation back period; Identification of suppliers at risk of unfair preferences; and Review of bank statements produced during the relation-back period, identifying large, round sum or regular payments. Unfair Preference Payments Findings From the Administrators' investigations, potential unfair preferences appear to have been made between the period of September 2014 and December It is likely that unfair preference payments may have been made prior to this period as it is the belief of the Administrators that the Company was insolvent prior to June 2014 as discussed below. These payments may have totalled between $526,762 and $1,818,371 and relate to 22 and 43 parties respectively. These payments exclude any potential preference payments that may have been made to the ATO. We are aware that the Company made arrangements with some suppliers to make an interim part payment based on the availability of cash. Creditors should note that these payments will require further investigation to confirm their nature, including sourcing back to invoices and creditor correspondence. Further investigations into potential unfair preference payments being made to the ATO are to be conducted, noting the Company engaged with the ATO on a payment plan in July The payment plan was amended in December 2014, expiring in March Over the period August 2014 to December 2014 a total of $105,000 was paid to the ATO. Creditors should note that whilst unfair preference payments have been identified, recovery of these payments are subject to the Company being insolvent at the time the payments were made. An analysis on the Company's solvency is provided on pages 32 to 38. Should creditors elect to place the Company into liquidation and the Voluntary Administrators be appointed Liquidators, a more detailed investigation into unfair preference payments will be undertaken Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

30 Investigations Voidable transactions (cont'd) It should be noted that pursuing recovery of preference payments can be costly, lengthy and may not be successful. We stress that any party subject to an unfair preference payment claim may have valid defences preventing a claw back by a Liquidator. Uncommercial Transactions Section 588FB(1) of the Act defines an uncommercial transaction as "a transaction of the company if, and only if, it may be expected that a reasonable person in the Company's circumstances would not have entered into the transaction, having regard to: The benefits (if any) to the company of entering into the transaction; The detriment to the company of entering into the transaction; and The respective benefits to other parties to the transaction." Section 588FC of the Act defines an insolvent transaction as one which is an uncommercial transaction and entered into when the company was insolvent at the time of the transaction, or would become insolvent as a result of entering into the transaction. To date in our preliminary investigations we have not identified any uncommercial transactions. Director's Personal Liability for Employee Entitlements A director may be ordered to pay compensation if agreements or transactions were entered into with the intention of avoiding payment of employee entitlements or reducing the amount of entitlements that can be recovered. No transactions or agreements of this nature or intention were discovered during our investigation. Director Related Transactions In accordance with Section 588FD of the Act, payments, the issue of securities, conveyances or other dispositions of property by the company in favour of a director, a relative or de facto spouse of a director may constitute an unreasonable director related transaction. In order to determine whether any transactions were made to the Director, the Administrators reviewed the Company's accounts over the last six months. We note the following in relation to Director's transactions: During the period 1 July 2014 to 14 January 2015, the Director used the Company bank account to pay personal payments of between $84,000 and $86,000; Whilst the Director was utilising the facilities of the Company's bank account, the transactions were being recorded against his Shareholders Loan account. Accordingly the Director's Loan account reduced by c. $84,000 during the six month period with the management accounts as at 31 December 2014 recording the Director as a creditor for $1.4 million. Should the Company be placed into liquidation, further investigation will need to be undertaken, however we note from a personal assets and liabilities statement prepared by the Director, that he is unlikely to be able to repay any transactions proven to be voidable as he does not have the financial wherewithal to meet a demand for repayment. The Director also drew a wage in support of his role as managing director of the Company. Preliminary investigations indicate this to be reasonable. The Director has advised his annual salary was $80,000. Our analysis indicates he was paid c. $32,000 during the six months to 31 December Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

31 Investigations Voidable transactions (cont'd) Related Company Loans and Transactions The management accounts record the following loans with related parties, with the movements in these accounts not being material: Entity Type 30-Jun Dec-14 Movement ($) Baseline Concept Designs Asset 12,595 12, Baseline Developments Liability 358, ,214 (242) The loan from Baseline Developments has remained relatively constant throughout the period indicating little material payment made. Creditors should note that Baseline Concept Designs is now a dormant entity and debt is unlikely to be recovered. Although not a current director, Nicholas Bettar was formerly a director of Bettar Holdings. As at 30 June 2014, Bettar Holdings owed the Company $1.1 million. As a result of contributions from Bettar Holdings in November and December 2014, this was reduced to $502,000. Accordingly, we do not consider this to be an unreasonable director related transaction. The key action point is that the debt from Bettar Holdings needs to be recovered. The above data suggests that the Director has not used available funds to repay intercompany loans. Unfair Loans Pursuant to Section 588FD of the Act, a Liquidator is able to recover from directors any unfair loans which are extortionate or have become extortionate. We note that the Director loaned funds in his personal capacity to the Company as an unsecured loan prior to July The loan only reduced by c. $84,000 in the relation-back period as a result of director-related transactions being offset against the loan. We note the secured creditors were charging default interest rates. Report Pursuant to Section 438D Under Section 438D of the Act, an Administrator is required to lodge a report to ASIC if he/she becomes aware that: A past or present officer, employee or member of a company has been guilty of an offence in relation to the company; or a person who has taken part in the formation, promotion, Administration, management or winding up of the company has: (i) (ii) Misapplied or retained, or may have become liable or accountable for money, or property (in Australia or elsewhere) of the company; or Been guilty of negligence, default, breach of duty or breach of trust in relation to the company. Potential Breaches of Director Duties This brief investigation into the Company's affairs has not identified any material breaches of director duties. Should the Company proceed into Liquidation, the Liquidator will review any potential breaches in greater detail. In the event breaches are identified, we do not believe the Director would have the ability to meet a judgement if the Liquidators are successful in pursuing a claim Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

32 Investigations Insolvent trading Insolvent Trading Overview Pursuant to Section 558G of the Act, it is the duty of the director to take actions to prevent insolvent trading. Directors will be found guilty of the offence of insolvent trading if they allow a company to occur debt when they are aware that there were grounds for suspecting that the company was insolvent at the time of entering the transaction. Personal Financial Position of the Director In order to justify an insolvent trading action, the Administrators must be satisfied that the director will be able to pay any judgement against them. In this regard, we note: An asset and liability statement has been provided by the Director which shows he has minimal assets, and liabilities of c. $3.0 million; and The Administrators have undertaken multiple property searches and have determined that the Director does not directly hold property in NSW. We are not aware of the Director holding a director and officeholders insurance policy. It should be noted that it is normal for the policy to include an insolvent trading exclusion clause in any event. Accordingly, we do not believe the Director would be able to pay any judgement against him should one be obtained. Defence There are four distinct statutory defences where a contravention of 588G occurred. These defences are designed for protecting a director where one of the following has occurred: The director had reasonable grounds to expect solvency (588H(2)); The director had reasonable grounds to expect solvency based on information supplied by a subordinate (588H(3)); Illness or other good reason prevented the director from being involved in management activity(588h(4)); and The director took all reasonable steps to prevent the company from incurring the debt (588H(5)). The Administrators' review identified the following key factors which may mitigate the indicators of insolvency mentioned above: Prior to the date of the Administrators' appointment the secured creditors continued to provide financial support to the Company. The Director may have taken on more debt assuming the secured creditor would continue to provide the necessary funding to pay debts when they fall due; and The Director may have reasonably expected that the Company would receive c. $3.0 million for work completed on the Amelia Street project, however, the adjudication resulted in the Company only receiving c. $300,000. When this was realised, the Director moved quickly to appoint Voluntary Administrators. Key Indicators of Company Insolvency Our review identified the following key considerations of insolvency for the Company: A net liability position since 2012 when control of the Company was returned to the Director upon execution of the prior DOCA; A significant trading loss in the financial year ending 30 June 2014 and in the year to date period to 31 December 2014; A current ratio below one for at least the six months prior to the Administrators' appointment, indicating a lack of liquidity; Various creditor demands and claims having been received; and An increase in the ageing of creditors Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

33 Investigations Insolvent trading (cont'd) Books and Records Sections 588E(3) and 588E(4) of the Act describes a presumption of insolvency should the Company be proved to have not kept proper financial records for the period of 12 months from the relation back date in accordance with Section 286 of the Act. Should the Company proceed into liquidation, a Liquidator would investigate the adequacy of the maintenance of Company books and records in accordance with Section 286 of the Act, and the reliability of the reports relating to the monthly financial position of the Company. The adequacy or inadequacy of the records would assist in the decision whether to take action against the Director in accordance with the Act. The books and records requested and received by the Administrators included: Bank statements; Management accounts; Employee records and liabilities; Creditor listings; Creditor letters of demand and adjudication; Details of utility and service providers; Debtors ledger; Financial statements prepared by the external Accountants; and Monthly management reports. During this investigation, management were able to provide the majority of the information required by the Administrators. Books are records were kept up to date with reports prepared monthly by the financial controller and by the external accountants at the end of the financial years. For the current year to date, management accounts were prepared monthly to 31 December 2014 and ledgers and bank balances were updated sufficiently. It is the view of the Administrators that the Company was effective in maintaining adequate books and records Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

34 Investigations Insolvent trading (cont'd) Indicators of Insolvency Indicator Overview Cash Flow Test The test for solvency and consequently insolvency is prescribed by Section 95A of the Act which states that: "(1) a company is solvent if, and only if, the company is able to pay all the company's debts, as and when they become due and payable; and (2) a company who is not solvent is insolvent." This translates into the "cashflow test", however analysis of the balance sheet is also important in forming a view as to solvency. Administrators findings The Administrators conducted a review of the Company's financial positon for the period FY12 to YTD15, with particular emphasis on the period of June 2014 to 14 January In conducting the cash flow test to determine company solvency, the Administrators analysed the Company's monthly bank balance, and compared the cash at bank with the total monthly creditors balance to determine if the Company could pay its debts when they fall due. The chart below on the left presents the Company's cash balance over the period of June 2014 to December 2014, compared with the Company's trade creditor balance over the same period. Over the period of review, the creditor balance was relatively stable. Trade creditors decreased 20% during the period. One reason for the reduction in trade creditors was the injection of $700,000 from the Secured Creditor on 22 September 2014, which was subsequently used to pay outstanding creditors the Company deemed urgent. The chart on the right is a magnified snapshot of the Company's cash balance as monthly intervals. The spikes in the chart represent loans made to the Company from the Secured Creditor and a related party. $000's 6,000 5,000 4,000 3,000 2,000 1,000 0 (1,000) 30 June July August September October November 2014 (20) 30 June August October December 2014 Bank Account Balance ($) Trade Creditors Balance ($) Bank Account Balance ($) 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February December 2014 $000's Bank Account Balance ($)

35 Investigations Insolvent trading (cont'd) Table heading Indicator Administrators findings Cash Flow Test Baseline's cash balance was variable during the period. The Company's cash balance increased to a high at July month end of c. $137,000 and was overdrawn by c. $9,000 at the end of October The cash at bank balance averaged c. $59,000 over the period of review. It is noted that our analysis to date has focused on month end accounts and therefore does not consider inter-month movements. As the Company did not prepare cashflow forecasts, we have not been able to assess whether there was a reasonable expectation that funds would be received to apply towards creditors. Over the period the Company's cash balance was insufficient to discharge its aged creditors. The cash balance was below 3% of total aged creditors at any point in time during the period. On a cashflow basis, it is the opinion of the Administrators that the Company was insolvent and unable to discharge its debts since at least June Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

36 Investigations Insolvent trading (cont'd) Indicators of Insolvency Indicator Overview Balance Sheet Test The balance sheet test considers whether a company may be insolvent if the total liabilities exceed the value of the assets and there are insufficient assets to discharge the liabilities. Administrators findings as at 31 July 2014 as at 31 Aug 2014 as at 30 Sept 2014 as at 31 Oct 2014 as at 30 Nov 2014 as at 31 Dec 2014 Current Ratio (Working Capital Ratio) 47.51% 38.01% 29.23% 24.71% 21.21% 18.80% Net Working Capital (3,742,868) (4,349,378) (4,908,590) (5,342,214) (5,808,415) (5,765,710) Net Working Capital (excl secured creditors loans) (1,441,132) (2,047,642) (1,906,854) (2,340,478) (2,806,679) (3,303,974) Net Assets (5,013,315) (5,627,400) (6,182,836) (6,613,719) (7,078,273) (7,062,444) % Net Assets ($000's) (1,000) (2,000) (3,000) (4,000) (5,000) (6,000) (7,000) (8,000) 31 July August September October Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February November % 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 31 December 2014 Current Ratio (%) Net Assets Current Ratio The Administrators carried out investigations of the balance sheet from 31 July 2014 to 31 December The period of investigation revealed the following findings: Net Assets were negative prior to the period and further decreased 40.8% during the 6 month period. The Company has had a net liability position since at least 30 June 2012 with the position deteriorating prior to the appointment of Administrators. The Company recorded a current ratio of below one for the entire period. A ratio below one indicates that a Company holds insufficient current assets to meet its current liabilities. From the above table Baseline could not meet its current obligations prior to July Baseline's net working capital position continued to decrease throughout the period with the exception of a slight increase in December. Net working capital declined to a deficiency of c.$5.0 million, or $3.3 million excluding secured creditors loans.. On a balance sheet basis it is the opinion of the Administrators that due to the Company's negative net asset position and current ratio of less than one, the Company has insufficient assets to discharge its liabilities. Accordingly, the Company has been insolvent since at least July 2014.

37 Investigations Insolvent trading Indicators of Insolvency Indicator Other tests/investigations Aged Creditors The following graph represents aged creditor balances of the Company between 30 June 2014 and 31 December $000's 6,000,000 Retention 5,000, Days + 4,000, Days 3,000, Days 2,000,000 1,000, Days 0 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Current Secured Creditor Balance The books and records of the Company present a decrease in the balance of creditors by 21% from c.$4.7 million to c.$3.7 million as a result of an advance of funds from the Secured Creditor and related party. Whilst the Company had a creditor balance of c.$4.7 million at the end of June 2014, only 17% of money owed related to creditors aged 90 days or over. Throughout the period this percentage increased from 17% to 45% of creditors being aged 90 days or over, indicating that creditors were not being paid within their contractual terms. The aged creditor balance as at 30 September 2014 was lowermost at c.$3.5 million due to an injection of funds by the Secured Creditor in the amount of $700,000. The graph highlights the reduction in creditors and creditor turnover, which indicates that Baseline was failing to meet its liabilities prior to 30 June 2014, however, from August onwards the Company began accumulating mature creditors. This is consistent with at least 25 creditor issuing letters of demand, final notices, or instigating recovery proceedings. Relationship with Financier Outstanding/overdue Commonwealth and State Taxes We note the Secured Creditor continued to fund the Company as recently as September However, the Secured Creditor has since appointed Receivers and Managers on 13 January The Company has been on a payment plan with the ATO since June 2014 and has had the original payment plan amended due to an inability by the Company to meet the repayment plan. At the date of the Administrators' appointment the Company owed c. $209,000 to the ATO Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

38 Investigations Insolvent trading (cont'd) Indicators of Insolvency Indicator Legal Proceedings and Trade Creditors Other tests/investigations At the request of the Administrators, the Company provided a list of all demands and proceedings currently being undertaken against the Company. The Director advised through the Receivers and Managers questionnaire that the Company began to receive demands in October It should be noted that some creditors who have issued demands have been identified as also receiving potential preference payments. Based on the ASIC search there have been no winding up applications filed against the Company since 3 April This application was subsequently removed Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

39 Section 7 Effect on Employees 01. Executive Summary 02. Introduction 03. Company History and Reasons for Failure 04. Statement about the Company's Business, Property, Affairs and Financial Circumstances 05. Historical Performance 06. Investigations 07. Effect on Employees 08. Proposals for a Deed of Company Arrangement 09. Estimated Outcome and Administrators' Recommendation 10. Remuneration 11. Meeting 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February 2015

40 Effect on Employees Effects on employees Overview Prior to the appointment of the Administrators, the Company employed 13 full time employees. To date the majority of employees of the Company have been retained by the Receivers and Managers. The Receivers and Managers are continuing to meet the obligations of all employees with the Administrators are accepting no liability. The below table highlights the total amounts owed in entitlements to employees calculated by the Administrators. This amount is based on preliminary calculations using the books and records of the Company. Creditors should note that these amounts calculated are estimates and each employee claim will require formal adjudication. Should the Company proceed into liquidation, all employee contracts and payroll records will be reviewed so as to determine an exact entitlement figure. Outstanding Employee Entitlements Entitlement Amount Outstanding ($) Unpaid Superannuation 12,000 Annual Leave 56,509 Long Service Leave 74,587 Total 143,096 Pursuant to the Act, an employees claim on outstanding entitlements will rank as a priority debt in the Administration. Should the Company be placed into liquidation, employees will receive our initial assessment of entitlements in writing. Should employees believe our assessment is incorrect, they are advised to contact the Administrators. Further, the above estimates exclude termination and redundancy. Should redundancies be made, we estimated entitlement may increase by a further $208,000. Excluded Employees Pursuant to Section 556(2) of the Act, any employee classified as a director for the preceding 12 months, or any relative of the Director is considered an excluded employee. Creditors should note that any claim by excluded employees for outstanding entitlements is capped as follows: $2,000 for unpaid wages and superannuation; and $1,500 for outstanding leave entitlements. Should there be any amounts which exceed the capped bracket, the excess will rank as an unsecured claim in the Administration. This will be continued into the Liquidation. DOCA Proposal The DOCA proposal put forward by the Director resolves to pay employee claims in full. Should creditors resolve to execute the DOCA, employees will continue to be employed and can expect to have all entitlements, including superannuation, paid in full. Payment to Employees In the case there are insufficient funds to pay any outstanding claims, employees will be able to claim under the Government's Fair Entitlements Guarantee ("FEG") scheme (discussed on the following page) for payment of the amounts in a liquidation. Should the Company proceed into liquidation, employees may be paid the amounts owing to them by FEG. The future Liquidators would communicate and correspond with employees to correctly ascertain their entitlements, and would then relay this information to FEG Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

41 Effect on Employees Fair Entitlements Guarantee ("FEG") Fair Entitlements Guarantee Overview In the event the Company is placed into liquidation following the second meeting of creditors, any priority creditors will be referred to FEG. It may be unlikely that the Company will be able to pay all employee entitlements in full. The FEG scheme covers outstanding entitlements owed to employees with the exception of superannuation. Further information in regards to the FEG scheme can be found at: Under FEG, where employees have a legal entitlement derived from legislation, an award, a statutory agreement or a written contract of employment, they are eligible to receive the following (based on earnings capped at $127,452): Unpaid wages (for up to 13 weeks); All long service leave; All annual leave; Payments in lieu of notice (up to a maximum of 5 weeks); and Up to four (4) weeks redundancy pay per completed year of service. Should the Company be placed into liquidation, the Liquidators would liaise with FEG in order to assist employees with the provision of their entitlements. Employees should note that FEG is only available to Australian citizens. Any non-australian citizen, and employees with 457 Visas will not be eligible to claim from FEG. Should a payment to employees be made by FEG, these funds are recoverable from the Company, by FEG, pursuant to Section 560 of the Act. FEG will take over the employee's priority claim as a creditor of the Company to the extent of amounts paid by FEG. Accordingly, the payment of employee entitlements by FEG does not improve the quantum of potential recoveries available for distribution to ordinary unsecured creditors. Should creditors resolve to accept either of the DOCA proposals put forward by the Director, FEG will not be available to priority creditors. As previously discussed, priority creditors will be paid in full under the DOCA proposal Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

42 Section 8 Proposals for a Deed of Company Arrangement 01. Executive Summary 02. Introduction 03. Company History and Reasons for Failure 04. Statement about the Company's Business, Property, Affairs and Financial Circumstances 05. Historical Performance 06. Investigations 07. Effect on Employees 08. Proposals for a Deed of Company Arrangement 09. Estimated Outcome and Administrators' Recommendation 10. Remuneration 11. Meeting 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February 2015

43 Proposals for a Deed of Company Arrangement Proposals for a Deed of Company Arrangement Overview The Administrators have received two DOCA proposals for the Company as at the date of this report. A DOCA aims to maximise the chances of a company continuing, or to provide a better return for creditors than an immediate winding up of the company, or both, by entering an agreement binding a company and its creditors and governing how the company s affairs will be dealt with. More information on both proposals is set out on the following pages and in the proposal attached as Appendix C. In summary: DOCA Option 1 (DOCA and Creditors' Trust): proposes that the DOCA will be effectuated and creditor claims convert to a Creditors' Trust upon receipt of contributions funded by the secured creditor. Creditors are to receive a distribution being the greater of c. 2 cents in the dollar (from the contributions/trust fund) or the Net Proceeds from litigation. As a result of needing to wait on the outcome of litigation prior to making a distribution, it is estimated that a distribution will not be made for at least 12 months. DOCA Option 2 (DOCA Only): proposes a DOCA where contributions are to be received from the secured creditor to facilitate a distribution of c. 3 cents in the dollar to ordinary unsecured creditors. It is estimated that a distribution will be made in six months (subject to the adjudication of claims). Under both DOCA proposals, control of the Company is to return to Mr Bettar on execution of the DOCA, and the Company will be released from all claims (excluding related party and secured creditor claims) upon the DOCA being effectuated. Our financial modelling with respect to the estimated returns available to the various classes of creditors under the DOCA proposals is set out in Section 9, with ordinary unsecured creditors estimated to receive: DOCA Option 1 (DOCA and Creditors' Trust): 1.8 to 7.38 cents in the dollar; DOCA Option 2 (DOCA Only): 2.7 to 3.0 cents in the dollar. The analysis compares to an estimated return to unsecured creditors of between nil and 0.7 cents in the dollar in a liquidation scenario. While further information is provided on the following pages, it is the Administrators' opinion that creditors should vote to execute DOCA Option 2 (DOCA Only) as: The Administrators do not support DOCA Option 1 (DOCA and Creditors' Trust) on the basis that we do not believe it meets the public interest test in that it seeks to circumvent the requirement to note the external administration in public documents, and that there are no valid commercial reasons why the proposal could not be executed under a DOCA without the use of a Creditors' Trust; DOCA Option 2 provides a greater return than liquidation; There is greater certainty on timing of a distribution compared to DOCA Option 1 and a Liquidation, both of which are dependant on litigation. DOCA Option 2 provides an opportunity for the company to restructure and continue in existence, being consistent with the objective of Part 5.3A of Act. Important Information Employees should note that if creditors vote to execute a DOCA they will be unable to make a claim to DoE under the FEG scheme for their outstanding employee entitlements. Employees should refer to Section 7 for further details on the FEG scheme. Employees and creditors should also note that actions available to a Liquidator to recover funds in relation to antecedent transactions are not available to a Deed Administrator. Further, a Deed Administrator does not have reporting obligations to ASIC in relation to the conduct of the Company prior to the Administration. Employees and creditors should refer to Section 6 for further details on potential antecedent transactions. A DOCA involving a creditors' trust creates special risks for creditors, with further detail provided in pages 44 to 50. ASIC recommends creditors have the opportunity to obtain independent professional advice in relation to a proposed creditors' trust Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

44 Proposals for a Deed of Company Arrangement DOCA Option 1: DOCA and Creditors' Trust Key features of the proposed DOCA Option 1 (DOCA and Creditors' Trust) The key terms of the proposal received for DOCA Option 1 include: A contribution of 2 cents in the dollar, capped on unsecured creditors claims up to $4.0 million, is to be contributed by the secured creditor (Baron Corporation or their related entity). Accordingly, the maximum contribution is to be $80,000. Baron Corporation or their related entity is to contribute an amount for outstanding employee claims to be paid in in full. Control of the Company (and its assets) is to return to Mr Nicholas Bettar on execution of the DOCA. There is no requirement for further contributions to be made to the DOCA from future trading profits. The Administrators, Said Jahani and Andrew Sallway, are to be Deed Administrators. The DOCA is to bind all persons having a claim that arose before the date of appointment of the Receivers and Managers, or out of events or circumstances which occurred before this date. Accordingly, during the DOCA period creditors cannot commence or proceed with court proceedings or enforcement processes against the Company. On completion of the DOCA, the Company will be released from all claims, with the exception of claims from Baron Corporation, New Bounty and related parties. Upon receipt of the contribution of $80,000, the DOCA will be considered to have been effectuated and the Company, the Director and the Deed Administrators will execute a Creditors' Trust Deed. The key terms for the Creditors' Trust include: The deed funds of $80,000 are to constitute the trust funds. Baron Corporation will review the litigation claim in relation to Amelia Street and at it sole discretion determine whether to pursue the claim. Should Baron Corporation pursue the claim, they will fund the claim in return for 50% of the balance of proceeds should the matter be successful. The remaining 50% of proceeds is to be paid to the Creditors' Trust and made available for a distribution to all creditors. Subject to the outcome from the litigation, a distribution will then be made, being the greater of: The trust funds of $80,000 to be distributed between unsecured creditors (excluding related parties). Based on creditor claims of $4.0 million, this is estimated at a return of 2 cents in the dollar; or The 50% of the balance of proceeds from litigation (after costs), to be distributed among all creditors, including related parties and the secured creditors (who rank equally with unsecured creditors with respect to this amount). Completion of the Creditors' Trust is to occur upon making the distribution. It is noted that the Amelia Street litigation is an asset of Bettar Holdings given they were the party to the contract, not the Company. Accordingly, Bettar Holdings will need to be a party to the Trust deed and agree to assign 50% of the net proceeds of the claim to the creditors' trust. Creditors' Trust Arrangement The DOCA Option 1 involves a Creditors' Trust. Upon receipt of the contribution from Baron Corporation, the DOCA is fully effectuated (i.e. concluded) and the funds and claims are transferred to a Creditors' Trust. A Creditors' Trust is a mechanism that is utilised to accelerate a company's exit from external administration. A Creditors' Trust is established by the creation of a legal trust and the creditor claims are transferred to the trust. Creditors become beneficiaries of the trust and thus are subject to special risk for creditors as they no longer receive the statutory protection of the Act but are merely beneficiaries under a trust Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

45 Proposals for a Deed of Company Arrangement DOCA Option 1: DOCA and Creditors' Trust In the case of the Company, following transfer of the creditor claims and the Deed Fund, the Company will exit external administration with control to have already passed to Mr Nicholas Bettar upon execution of the DOCA. It is important that creditors are fully informed in respect of the terms of the Creditors' Trusts and the risks that a Creditors' Trust pose for creditors. ASIC has issued a regulatory guide in respect of creditors' trusts and we have followed their guidelines in respect of disclosures made in this report. ASIC recommends that creditors have the opportunity to obtain independent professional advice in relation to a proposed Creditors' Trust, if they wish. In accordance with ASIC's Regulatory Guide 82 'External Administration: Deeds of company arrangements involving a creditors trust', we have set out on the following pages material information creditors should be aware of in relation to a Creditors' Trust. Estimated return to creditors under the Deed and Creditors' Trust The estimated return to unsecured creditors is between 2 and 7 cents in the dollar, with the variance being subject to the success of the litigation. As a result of being subject to litigation, the timeframe for a distribution is likely to exceed 12 months. The low case estimate is based on the capped contribution of $80,000 being distributed among $4.0 million of unsecured creditor claims (excluding related parties). Should creditor claims exceed $4.0 million, the low scenario return to creditors will reduce. The administrators have not yet adjudicated on creditor claims, however, note the books and records of the Company recorded creditor claims at c. $3.7 million on appointment. Employee claims are to be paid in full. Secured creditors and related parties will only participate in a distribution with unsecured creditors should the litigation be successful. As with all litigation, there is a risk the claim may not be successful, in which case the secured creditors and related parties would not receive a distribution. It is noted that under the proposal the secured creditor and related party claims against the Company will not be released upon completion of the DOCA or creditors' trust. The distribution to the secured creditor from the litigation proceeds via the creditors' trust is separate to the success fee due in return for funding the litigation. Further information on estimated returns to the various classes of creditors is set out in Section 9. As set out in Section 9, a greater return to creditors is expected under DOCA Option 1 compared to a liquidation as a result of the contribution from Baron Corporation. For the distribution to exceed the return to creditors compared to DOCA Option 2 (DOCA Only), it would be necessary for litigation to be successful. There is also greater certainty of return in DOCA Option 1 compared to a liquidation which is dependant on recovering antecedent transactions. Monitoring and reporting arrangements The Administrators will request it be a term of the Trust Deed that annual reporting be provided to the creditors, and that creditors have the power to request a meeting should this be supported by a majority. Remuneration Baron Corporation has agreed to provide an indemnity to the Deed Administrators/Trustee for their fees in the amount of $12,500, plus GST, plus $5,000 (plus GST) per annum on a pro rata basis should the trust period exceed 12 months Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

46 Proposals for a Deed of Company Arrangement DOCA Option 1: DOCA and Creditors' Trust Payment by a third party As mentioned above the contribution to the Deed, capped at a maximum of $80,000, is to be made by the secured creditor, Baron Corporation or their related entity. Baron Corporation (and related entities) have previously advanced $3.0 million to the Company pursuant to a loan agreement, are funding the Receivership and the Administrators fees (capped at $25,000 plus GST for the Administration), and are understood to have the capacity to make the proposed payment. As receipt of the funds is a condition for the DOCA to end (and before the Creditors' Trust commences), should the contribution not be received, the DOCA will terminate and the Company will proceed to liquidation. Guarantees We have been advised by the Director that a number of personal guarantees have been provided to creditors. As the Director proposes to retain control of the business pursuant to the proposed DOCA, we request creditors holding guarantees provide us with details of the quantum of the debt secured by the guarantees. Advantages of DOCA Option 1 DOCA Option 1 is likely to result in a higher return to creditors than in a liquidation scenario. There is also a higher level of certainty on the minimum return as a result of the contribution. Of all of the options, DOCA Option 1 has the potential for the highest return, however, this is highly contingent on the litigation being successful. As with all litigation, there is risk that the action may not be successful.. Disadvantages of a DOCA Option 1 In accordance with Section 445F of the Act, the Deed Administrators may call a meeting of creditors to vary or terminate the DOCA. In the event that the terms of the DOCA are not complied with the DOCA will terminate and the company will go into liquidation. However, once the DOCA transitions to a creditors trust, creditors lose their statutory rights to recovery from the Company should the creditors trust not be effectuated. If the proposed DOCA and Creditors' Trust is approved by creditors, then the recovery actions that the Administrators have identified, primarily in relation to the recovery of preference payments and insolvent trading claims, would no longer be available. Section 6 refers to the amounts that may be recovered from these potential actions, together with the further investigations required by the Liquidators, should they be appointed. Employees will be unable to make a claim to DoE under the FEG scheme. Aside from the contribution, the key asset proposed for the creditors trust is the litigation. The litigation claim is an asset of Bettar Holdings rather than the Company. While an assignment of 50% of the net proceeds will be a term of the DOCA and trust deed, there are risks involved. The Administrators recommend that creditors resolve NOT to execute DOCA Option 1 (DOCA and Creditors' Trust) as the Administrators consider the reasons for the DOCA Option 1 (DOCA and Creditors Trust) are not sufficiently appropriate to justify the used of a creditors trust, as: The underlying reason for using a creditors trust appears to be to circumvent the requirement of the Company to note the external administration in all public documents, and therefore is not in the public interest; and There does not appear to be any compelling reason why the continued existence of the Company could not be achieved under a DOCA Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

47 Proposals for a Deed of Company Arrangement Creditors' Trust Material Information Items Reasons for Proposing Creditors' Trusts Key Events Estimated Return to Creditors Explanation The Creditors' Trust has been proposed to enable the Company (under the control of the Director) to recommence trading without the external administration status which is claimed will limit the Company's ability to secure work, engage subcontractors and obtain project financier approval. It is argued that while subject to DOCA, the Company may also struggle to secure new projects and this will impact the ability of the Company to continue to trade. The Administrators do not consider the reasons sufficiently appropriate to justify the use of a Creditors' Trust in the circumstances as: A DOCA without a creditors' trust would achieve the same purpose of allowing the Company to continue in existence, an objective of Part 5.3A of the Act. Even though there is the requirement for a company subject to a DOCA to set out in every public document the expression 'subject to deed of company arrangement' after its name, which is not required in a Creditor's Trust, any party looking to into the history and creditworthiness of the Company will be able to see that the company was subject to external administration. Accordingly, re-establishing the Company under a DOCA should not be any more detrimental than attempting to re-establishing the Company via a creditors' trust. It is not in the public interest to use a creditors trust to try and circumvent the requirement of the Section 450E of the Act which requires notice of the external administration to be set out in public document, via the notation 'subject to deed of company arrangement' appearing after the company name. The key events in the DOCA and Creditors Trust are: Execution of the DOCA (within 15 business days of the second meeting of creditors); Payment of the contribution into the DOCA fund (within 21 days of executing the DOCA); DOCA effectuated (i.e. completed) and Creditors Trust deed executed (on receipt of contribution) Distribution of the greater of the contribution (c. 2 cents in the dollar) or net litigation proceeds (estimated to be at least 12 months after commencement of the Creditors' Trust due to the need to litigate). The estimated return to the various classes of creditors is summarised below (with further detail including the assumptions set out in Section 9): Secured Creditors Priority Creditors Ordinary Unsecured Creditiors Unsecured Creditors Low (c/$) High (c/$) The return to creditors will be dependant on both the total value of claims admitted and the success of the litigation should it be pursued. It is also highlighted that the litigation is an asset of Bettar Holdings, not the Company, as a result of the contractual relationships. Should adequate security not be obtained over this asset/claim, there is a risk that litigation proceeds may not be paid to the trust. Section 9 also details the estimated return available to creditors from DOCA Option 2 (DOCA Only) and in a liquidation scenario Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

48 Proposals for a Deed of Company Arrangement Creditors' Trust Material Information Items Trustee Particulars Trustees' Remuneration Indemnities Explanation The trustees of the proposed Creditors' Trusts will be the current Administrators, Andrew Sallway and Said Jahani. A copy of the proposed Trustees' profiles can be found at our website: Both Andrew Sallway and Said Jahani are registered liquidators and have the relevant experience to accept the appointment as Trustees of the Creditors' Trust. Both ASIC and the CALDB have certain supervisory powers over the conduct of the Trustees under Part 9.2 of the Act. We have undertaken a proper assessment and determined that there is no actual or perceived threat to our independence that would prevent us from accepting the appointment. We refer creditors to our DIRRI attached to our report dated 16 January Grant Thornton has current professional indemnity insurance that will cover us in our capacity as Trustees of the Creditors' Trusts. If creditors vote for DOCA Option 1, at the upcoming meeting of creditors on 20 February 2015, we will be seeking approval for the prospective remuneration of the administrators/trustees' for the DOCA and Creditors' Trust as follows: Deed Administrators: $1,500 (plus GST and disbursements); and Trustee: $11,000 (plus GST and disbursements) plus $5,000 (plus GST and disbursements) per annum on a pro rata basis should the trust extend beyond 12 months. The fee approval sought under the Creditors' Trust will be by way of vote at the meeting. However, if any beneficiary wishes to challenge those fees, it would be necessary to make an application to the Supreme Court under the relevant Trustee Act for the purposes of challenging those fees. Whilst a challenge to administrators'/deed administrators' remuneration is also generally by way of Court application, the basis of challenge under the Act is relatively simpler. The proposal for DOCA Option 1 provides that the Trustees will receive priority to the trust funds for their costs, fees and expenses. Baron Corporation has provided an indemnity for the Deed Administrators' and Trustee's remuneration to a total of $12,500 plus GST, plus $5,000 plus GST per annum on a pro rata basis after the first 12 months. Baron Corporation will fund the $12,500 in addition to their contributions to the trust fund. This indemnity ensures that the Trustees are paid in accordance with the statutory priorities that would ordinarily be afforded to the Deed Administrators. Powers and Responsibilities In a DOCA scenario, the Deed Administrators have a number of responsibilities, powers and functions conferred on them by the Act. The key powers include: The supervision and administration of the Deed; Administering the assets available for the payment of claims; To make interim or other distributions of the proceeds of the realisation of the assets available for the payment of claims of creditors; and To do anything else that is necessary or convenient for the purpose of administering the deed Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

49 Proposals for a Deed of Company Arrangement Creditors' Trust Material Information Items Powers and Responsibilities (continued) Creditors' Claims FEG Scheme Compliance Opinion Explanation As a Creditors' Trust is not specifically governed by the Act, the powers and responsibilities of the Trustees are expressly set out in the Trust Deed. We have not yet received a copy of the trust deed, however, note that it is proposed that the powers and responsibilities will be modelled on Schedule 8A of the Corporations Regulations and the Trustees Act These duties and responsibilities include: Administering the Trust Fund; Adjudicating and admitting creditor/beneficiary claims; and Distributing the Trust Fund to eligible and admitted creditors; One key difference is that under the Creditors' Trust, the Trustees would not have the power that the Deed Administrators would have under section 445F of the Act to convene a meeting of the beneficiaries to consider the termination of the Creditors' Trust. Such termination is not contemplated by the Trust Deed and would more than likely require a Court application. Whilst that power is absent, given that the Creditors' Trusts will only come into operation once the initial contribution of $80,000 has been received, we do not consider this to be of major significance. Upon execution of the Trust Deeds, all creditors will become beneficiaries and their claims (once adjudicated upon by the Trustees) will become claims against the Trust Fund. At that point, creditors claims will be released as against the Company. The Trustees will be required to call for proofs of debt and advertise their intention to declare a dividend. The Beneficiaries (i.e. former Creditors) will have 21 days to submit a formal proof of debt and support for their claim and the Trustees will follow the adjudication process established by the Act. Those Beneficiaries will have 21 days to appeal to Court if they do not agree with the Trustees' adjudication. The Company must provide the Trustees with reasonable access to the books and records for the purpose of the Trustees adjudicating proofs of debt and fulfilling any reporting statutory obligations imposed upon them. In a DOCA scenario, if the DOCA is terminated and the company is placed into liquidation, priority creditors will be able to lodge a claim under the FEG scheme. If creditor claims are transferred to a Creditors' Trust, priority creditors will no longer have recourse to the FEG scheme if the Trust is terminated or there are insufficient funds to allow for a full return to priority creditors in accordance with the FEG rules. However, it should be noted that the Trust Fund is required to be paid in full at the execution of the Trust Fund reducing the risk to creditors of their claims being transferred to the Creditors' Trust without sufficient funds. In the Administrators' opinion, Baron Corporation (or its related entity) is capable of complying with the terms of the proposed DOCA and Creditors Trust, primarily being the payment of $80,000 to the deed/trust fund. Baron Corporation has previously provided loans to the Company, indemnified the Receivers and Managers and the Administrators, and is part of a group understood to have sufficient financial resources Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

50 Proposals for a Deed of Company Arrangement Creditors' Trust Material Information Items Solvency Statement Tax (company/trust) Tax (creditor/beneficiary) Explanation At the time of effectuation of the DOCA, creditor claims are to be transferred to a Creditors' Trust. The Company is to be released from all claims with the exception of claims from Baron Corporation, New Bounty and related parties. With these liabilities, the Administrators do not believe the Company will be solvent at the date of the effectuation of the DOCA unless the Company continues to receive financial support from the Secured Creditor and repayment of the existing liabilities are deferred. The Trustees will need to consider the potential tax implications of establishing the trusts, transferring liabilities and other property of the Companies to the Trusts and distributing trust assets to the beneficiaries. If it is determined that there is a tax liability, this will be funded from the Deed Fund. The Administrators' initial view is that the establishment of the trust is not likely to give rise to a tax liability, however, professional tax advice will be sought in this regard. Creditors should note that there may be tax implications as a result of receiving a distribution as a beneficiary of a trust, rather than receiving a payment in the capacity of a creditor. We recommend that creditors seek their professional tax advice in relation to the treatment of the distribution and the possible tax implications Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

51 Proposals for a Deed of Company Arrangement DOCA Option 2: DOCA Only Key features of the proposed DOCA Option 2 (DOCA Only) The key terms of the proposal received for DOCA Option 2 include: A contribution of 3 cents in the dollar, capped on unsecured creditors claims up to $4.0 million, is to be contributed by the secured creditors (Baron Corporation or their related entity). Accordingly, the maximum contribution is to be $120,000. A distribution, estimated at 3 cents in the dollar, is to be made to creditors (excluding Baron Corporation, New Bounty and related parties). Baron Corporation or a related entity is to contribute an amount for outstanding employee claims to be paid in in full. Control of the Company (and its assets) is to return to Mr Nicholas Bettar on execution of the DOCA. There is no requirement for further contributions to be made to the DOCA from future trading profits. The Administrators, Said Jahani and Andrew Sallway, are to be Deed Administrators. The DOCA is to bind all persons having a claim that arose before the date of appointment of the Receivers and Managers, or out of events or circumstances which occurred before this date. Accordingly, during the DOCA period creditors cannot commence or proceed with court proceedings or enforcement processes against the Company. On completion of the DOCA, the Company will be released from all claims, with the exception of claims from Baron Corporation, New Bounty and related parties. The DOCA will be effected and terminated upon payment of distributions. Subject to the adjudication process, it is estimated the timeframe for effectuating the DOCA will be within 6 months. For the avoidance of doubt, creditors will not participate in the litigation, unlike DOCA Option 1. Estimated return to creditors under the Deed The estimated return to unsecured creditors is between 2.7 and 3.0 cents in the dollar and is estimated to distributed within six months, subject to the adjudication process. As the contribution is capped based on creditor claims of $4.0 million, should creditor claims exceed $4.0 million, the return to creditors will reduce. In the event admitted claims were to total $5.0 million, the return to creditors would reduce to 2.4 cents in the dollar. The administrators have not yet adjudicated on creditor claims, however, note the books and records of the Company recorded creditor claims at $3.7 million on appointment. Employee claims are to be paid in full. Secured creditors and related parties are to receive no return, however, their claim against the Company will not be released upon completion of the DOCA. Further information on estimated returns to the various classes of creditors is set out in Section 9. As set out in Section 9, a greater return to creditors is expected under DOCA Option 2 compared to a liquidation as a result of the contribution from Baron Corporation. There is also greater certainty of return in DOCA Option 2 compared to a liquidation which is dependant on recovering antecedent transactions. Monitoring and reporting arrangements As it is anticipated that DOCA Option 2 can be effectuated within six months, a formal reporting mechanism is not proposed. Remuneration Baron Corporation has agreed to provide an indemnity to the Deed Administrators for their fees in the amount of $12,500, plus GST. This is in addition to their contribution to the deed fund. No further funds are expected to be available to fund the Deed Administrators should fees exceed this amount Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

52 Proposals for a Deed of Company Arrangement DOCA Option 2: DOCA Only Payment by a third party As mentioned above, the contribution to the Deed, capped at a maximum of $120,000, is to be made by the secured creditor, Baron Corporation or their related entity. Baron Corporation (and related entities) have previously advance $3.0 million to the Company pursuant to a loan agreement, are funding Receivership and the Administrators fees (capped at $25,000 plus GST for the Administration), and are understood to have the capacity to make the proposed payment. Should the contribution not be made the DOCA will fail. Failure of the proposed DOCA In accordance with Section 445F of the Act, the Deed Administrators may call a meeting of creditors to vary or terminate the DOCA. In the event that the terms of the DOCA are not complied with (e.g. if the contribution of $120,000 is not made), the Deed Administrators will call a meeting of creditors and creditors can resolve to terminate the DOCA and place the Company into liquidation. Guarantees We have been advised by the Director that a number of personal guarantees have been provided to creditors. As the Director proposes to retain control of the business pursuant to the proposed DOCA, we request creditors holding guarantees provide us with details of the quantum of the debt secured by the guarantees. Advantages of a DOCA DOCA Option 2 is likely to result in a more timely resolution and distribution to creditors than in a liquidation scenario, which would be dependant on pursuing recovery of antecedent transactions. Under the DOCA Option 2, there is also greater certainty as to the return available to creditors, and the return is likely to be a greater than in a liquidation scenario. Disadvantages of a DOCA If the proposed DOCA is approved by creditors, then the recovery actions that the Liquidators have identified, primarily in relation to the recovery of preference payments and insolvent trading claims, would no longer be available. Section 6 refers to the amounts that may be recovered from these potential actions, together with the further investigations required by the Liquidators, should they be appointed. Given the uncertainty and costs involved with pursuing recoveries of this nature, the DOCA represents the greatest and most certain return to unsecured creditors. Employees will be unable to make a claim to DoE under the FEG scheme. The Administrators recommend that creditors resolve to execute DOCA Option 2 (DOCA Only) as it: Provides a greater return to creditors than in a liquidation; Reduces the uncertainty of return with respect to quantum and timing compared to a liquidation in which is a return is dependant on pursuing potential preference and insolvent trading actions (which can be a timely and costly process); Is a DOCA which provides mechanisms to protect creditors should the DOCA fail, in comparison to a creditors trust where there are greater risks to creditors; and The Administrators consider the reasons for DOCA Option 1 (DOCA and Creditors Trust) are not appropriate to justify the use of a creditors' trust given the risks to creditors Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

53 Section 9 Estimated Outcome and Administrators' Recommendation 01. Executive Summary 02. Introduction 03. Company History and Reasons for Failure 04. Statement about the Company's Business, Property, Affairs and Financial Circumstances 05. Historical Performance 06. Investigations 07. Effect on Employees 08. Proposals for a Deed of Company Arrangement 09. Estimated Outcome and Administrators' Recommendation 10. Remuneration 11. Meeting 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February 2015

54 Estimated Outcome and Administrators' Recommendation Estimate Outcome Statement Estimate Return for Classes of Creditors Liquidation DOCA Option 1 DOCA Option 2 Creditors Low (c/$) High (c/$) Low (c/$) High (c/$) Low (c/$) High (c/$) Secured Creditors Baron Corporation Pty Ltd & New Bounty Pty Ltd Priority Creditors Employee Entitlements and Superannuation Unsecured Creditors Ordinary Unsecured Creditiors Related Party Unsecured Creditors Overview We have conducted comparisons of the likely return available to the various classes of creditors under the various options available, being: Liquidation; DOCA Option 1 (DOCA and Creditors' Trust); and DOCA Option 2 (DOCA Only). The table opposite summaries the estimated return available for each class of creditor under each option, with further detail on the key assumption set out on the following pages. Based on our analysis, it appears that ordinary unsecured creditors may receive a distribution of between nil and 6.6 cents in the dollar. The estimates are subject to change. Key factors which may impact the estimated return include: The total value of creditor claims (with creditor claims yet to be adjudicated); The value and recoverability of potential preference claims in a liquidation; and The success of litigation in DOCA Option 1. In calculating the estimated returns: Values have not been attributed to assets such as debtors or plant and equipment on the basis that any realisations from these assets would be applied towards the secured creditors debt and the Receivers and Managers costs pursuant to the security; and Administrators fees have been excluded from the assessment on the basis that an indemnity has been provided by the secured creditor and will therefore not expected to impact upon the return to creditors Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

55 Estimated Outcome and Administrators' Recommendation Estimated Outcome Statement - Liquidation Estimated Outcome Statement - Liquidation Notes Low ($) High ($) Contribution for outstanding employee claims 1 351, ,377 Priority Creditors (employee claims) 1 (351,377) (351,377) Net Surplus/(Shortfall) to Priority Creditors - - Assets of the Company Potential Preference Recoveries (net of costs) 3 420,000 Total Asset Available for all creditors - 420,000 Priority Creditors (FEG reimbursement) 1 (351,377) (351,377) (351,377) 68,623 Ordinary Unsecured Creditors 4 (4,500,000) (4,021,824) Related Party Unsecured Creditors 4 (1,409,409) (1,409,409) Secured Creditors 2/4 (4,480,832) (4,480,832) Total Shortfall (10,741,618) (9,843,442) Returns Liquidation Secured Creditors (cents per $) Priority Creditors (employee claims) (cents per $) Ordinary Unsecured Creditors (cents per $) Related Party Unsecured Creditors (cents per $) Overview Unsecured creditors are estimated to receive a distribution of between nil and 0.6 cents in the dollar in a liquidation scenario. The variable return is driven by assumptions with respect to the value and recoverability of potential preference claims and is therefore volatile. Pursuing preferences is a timely and costly process and there is a risk that should a judgement be awarded, the party pursued may be unable to pay. Accordingly, a liquidator would need to assess the commerciality of pursuing claims and we expect is to take in excess of 12 months to determine whether there would ultimately be any returns available for distribution. Notes/Assumptions 1. In a liquidation outstanding employee entitlements are to be paid in full via FEG. Should preferences be recoverable, FEG will assume the priority of the employees for the funds they have advanced. Priority claims are an estimate only based on the annual and long service leave entitlement recorded by the Company, together with an estimate for termination/redundancy for modelling purposes only. 2. Analysis excludes any realisable value for plant and equipment and debtors on the basis that these assets would be realised by the Receivers and Managers with the secured creditor obtaining priority to these realisations (together with priority creditors with respect to debtors). Any returns to the secured creditor would reduce their claim, however, no adjustment has been included in this analysis. It is important to note that due to the structuring of the Amelia Street project, the Company's only avenue for realising any value from successful litigation against the owner rests with the payment of this debtor amount, which employees and secured creditors receive priority over. 3. Preliminary investigations have identified potential preference payments of between $500,000 and $1.8 million. Estimated net recoveries of $420,000 have been assumed, allowing for litigation risk, settlement discounts, legal recovery costs and Liquidators remuneration. 4. All classes of creditors (except priority creditors) are to rank equally with respect to recoveries from preference actions Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

56 Estimated Outcome and Administrators' Recommendation Estimate Outcome Statement DOCA Option 1 and Option 2 Estimated Outcome Statement - DOCA Option 1 and Option 2 Assets Notes Low ($) High ($) Low ($) High ($) Contribution for outstanding employee claims 1 143, , , ,096 Priority Creditors (employee claims) 1 (143,096) (143,096) (143,096) (143,096) Net Surplus/(Shortfall) to Priority Creditors DOCA Contribution (DOCA Fund) 2 80, , ,000 Ordinary Unsecured Creditors (4,500,000) (4,021,824) (4,500,000) (4,021,824) Surplus/(Shortfall) to Ordinary Unsecured Creditors (4,420,000) (4,021,824) (4,380,000) (3,901,824) 50% of net Litigation Proceeds 3-656, Residual Ordinary Unsecured Creditors 4 (4,420,000) (4,021,824) (4,380,000) (3,901,824) Related Party Unsecured Creditors 4 (1,409,409) (1,409,409) (1,409,409) (1,409,409) Secured Creditors 4 (4,480,832) (4,480,832) (4,480,832) (4,480,832) Total Shortfall (10,310,241) (9,255,165) (10,270,241) (9,792,065) Returns DOCA Option 1 (DOCA and Creditors Trust) DOCA Option 2 (DOCA Only) Secured Creditors (cents per $) Priority Creditors (employee claims) (cents per $) Ordinary Unsecured Creditors (cents per $) Related Party Unsecured Creditors (cents per $) Overview Unsecured creditor returns are estimated to range between 1.8 cents and 6.6 cents in the dollar under DOCA Option 1, and between 2.7 and 3.0 cents in DOCA Option 2. The key variance between the two scenarios is driven by DOCA Option 1 potentially sharing in the litigation proceeds. Although the contributions to the DOCAs are based on a fixed return to creditors, i.e. 2 cents in the dollar in DOCA Option 1 and 3 cents in the dollar in DOCA Option 2, the contribution is capped on claims up to $4.0 million. Although we have not yet adjudicated on claims, based on the books and records of the Company and proofs of debt received to date, total unsecured creditor claims may exceed this amount. Accordingly, the distribution to creditors may be less than the 2 or 3 cent estimated provided. The timing of distributions is expected to be at least 12 months under DOCA Option 1 as a result of the time required to conduct litigation. Notes/Assumptions 1. Outstanding employee entitlements are to be paid in full via contribution from Baron Corporation. The estimate assumes leave entitlements only with no termination/redundancy payments payable for modelling purposes only. 2. The contributions are to be capped based on claims up to $4.0 million. Accordingly, should creditor claims exceed $4.0 million, the distribution to ordinary unsecured creditors will be less. 3. We have not assessed the merits of the litigation nor received any legal advice as to the chances of success or likely quantum of recovery. So as not to prejudice any potential actions, our detailed assumptions have not been disclosed, however the net litigation proceeds incorporate: The headline claim based on the final progress claim per the adjudication; A discount applied to the headline claim for litigation risk; Estimated costs to pursue the action have been deducted; and The funder (being the secured creditor) is to receive 50% of the net proceeds as success fee. 4. Should litigation proceeds be available, related parties (being Mr Bettar) and unsecured creditors are to rank equally in the distribution. Should only the contribution be available for distribution, related parties and unsecured creditors will not participate in the distribution Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

57 Estimated Outcome and Administrators' Recommendation Administrator's recommendation Administrator's recommendation The following options are available to creditors to decide pursuant to s439c of the Corporations Act, being that: The company execute the proposed Deed; The administration should end; or The company be wound up. Our opinion on each option and the reasons for our opinion are set out in the following: The company execute the proposed Deed DOCA Option 1 (DOCA and Creditors' Trust) DOCA Option 1 involves the use of a Creditors Trust which we do not believe is appropriate or necessary in the circumstances. There do not appear to be any compelling reasons why the proposal (whereby creditors share in potential litigation upside) cannot be achieved without a Creditors' Trust, nor why the Company cannot continue to trade during a DOCA. Further, the use of a Creditors Trust appears to circumvent the requirement for the Company to note the external administration in all public documents, which we do not consider to be in the public interest. Despite resulting in a higher return to creditors than a liquidation, we do support the use of a Creditors Trust and therefore do not recommend DOCA Option 1. DOCA Option 2 (DOCA Only) DOCA Options provides a return higher than in a liquidation scenario, with greater certainty as to the amount of the return and the timing (as a result of the distribution not being subject to the outcome of litigation). DOCA Option 2 also enables the Company to continue to trade with control reverting to the Director upon execution of the DOCA, while not imposing special risks on creditors via the use of a Creditors Trust. Accordingly, we recommend DOCA Option 2 (DOCA Only). The administration end Should creditors resolve to end the Administration, the Company would be placed in a similar position to that which existed prior to our appointment (i.e. as if the Administration did not occur). Creditors would then have the option of pursuing their usual recovery actions against the Company such as court actions to obtain judgments, warrants of execution or even winding up the Company. As the Company is insolvent, we do not believe there would be any benefit to creditors in ending the administration. The return of control of the Companies to the current Director would not be a satisfactory solution for creditors and is therefore not recommended. The company be wound up Creditors may resolve to wind up the Company which would result in Andrew Sallway and Said Jahani being appointed Joint and Several Liquidators of the Company. A winding-up would allow time for more detailed investigations into the Company's affairs to be conducted and to prepare a report on the affairs and conduct of the Company officers to ASIC. In a liquidation eligible employees would be entitled to apply to FEG for payment of their outstanding employee entitlements (subject to limited and conditions). The DOCA proposals received provides a higher and more certain return to creditors than a liquidation and we therefore do not recommend liquidation. Recommendation The Administrators recommend that creditors resolve to execute DOCA Option 2 (DOCA Only) Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

58 Section 10 Remuneration 01. Executive Summary 02. Introduction 03. Company History and Reasons for Failure 04. Statement about the Company's Business, Property, Affairs and Financial Circumstances 05. Historical Performance 06. Investigations 07. Effect on Employees 08. Proposals for a Deed of Company Arrangement 09. Estimated Outcome and Administrators' Recommendation 10. Remuneration 11. Meeting 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February 2015

59 Remuneration Remuneration Administrators' Remuneration The Voluntary Administrators' remuneration is to be approved by the Company's creditors. Creditors should note that all work has, and will be, performed by the appropriate level of staff in order to optimise any potential realisations which may be available to unsecured creditors. Costs Approved to Date At the date of this report, no remuneration has been approved by creditors. At the forthcoming meeting of creditors we will be requesting creditors to approve remuneration. A copy of the ASIC creditor information sheet providing information on approval of remuneration has been attached in Appendix D. Staffing of Administration The Administrators' staff team is structured such that tasks are completed by staff with the appropriate level of experience. Grant Thornton hourly charge out rates are included in Appendix E. Remuneration to be Approved Voluntary Administration The Administrators remuneration has been split between : Actual time incurred for the period 15 January 2015 to 11 February 2015; and The estimated future fees to be incurred for the period 12 February 2015 to 20 February 2015, being the date the of the second meeting of creditors. At the forthcoming meeting of creditors on 20 February 2015, creditors will be requested to approve our remuneration as follows: Voluntary Administrators' Remuneration (excl of GST and Disbursements) Description Amount ($) Joint and Several Administrators' remuneration for the period 15 January 2015 to 11 February 2015 Joint and Several Administrators' remuneration for the period 12 February 2015 to 20 February 2015 Detailed information on the calculation of remuneration and the Administrators' request for remuneration is provided in the attached Remuneration Report at Appendix F. In our initial remuneration report dated 16 January 2015, we estimated that the total remuneration for the Company to the completion of the Voluntary Administration would be in the range of $37,500 to $50,000 (excl of GST and disbursements). The remuneration we are seeking approval for exceeds this initial estimates, primarily as a result of receiving multiple DOCA proposals for consideration, It is noted that Baron Corporation has provided an indemnity for the Administrators fees in the amount of $25,000 plus GST. $54, $7, Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

60 Remuneration Remuneration Remuneration to be Approved - DOCA It will be necessary for creditors to approve the drawing of remuneration for the Deed of Company Arrangement should creditors vote that the Company executes a DOCA. The remuneration approved will be calculated on a time basis by applying the hours worked by the applicable charge out rate for the person involved. The remuneration is split between the following periods: 20 February 2015 to the date the DOCA is executed; and The date of the execution of the DOCA to the termination of the DOCA. Our estimates are based on the calculations as detailed in Appendix F. It is noted that Baron Corporation has provided an indemnity for the Deed Administrators' fees up to $12,500, plus GST. Should creditors vote to approve a DOCA, we will request creditors approve the following remuneration, subject to the DOCA proposal approved: DOCA Option 1: Deed Administrators/Trustees' Remuneration (excl of GST and Disbursements Description Amount ($) DOCA Option 2: Deed Administrators' Remuneration (excl of GST and Disbursements Description Amount ($) Joint and Several Administrators' remuneration for the period 20 February 2015 to the execution of the DOCA. Joint and Several Deed Administrators' remuneration for the period from the execution of the DOCA to the termination of the DOCA. Remuneration to be Approved - Liquidation 1, , It will be necessary for creditors to approve the future remuneration of the Liquidators, should creditors vote that the Company be placed in liquidation. The remuneration to be approved will be calculated on a time basis by applying the hours worked by the applicable charge out rate for the person involved. Our estimates are based on the calculations as detailed in Appendix F. Should creditors vote to place the Company into Liquidation we will request creditors approve the following remuneration: Joint and Several Administrators' remuneration for the period 20 February 2015 to the execution of the DOCA. Joint and Several Deed Administrators' remuneration for the period from the execution of the DOCA to the termination of the DOCA. Trustee's remuneration for the period from the execution of the Creditors' Trust to termination of the Creditors' Trust, plus annual fee to be pro rated should the trust period exceed 12 months 1, , , , p.a. Liquidators' Estimated Future Remuneration (excl of GST and Disbursements Description Amount ($) Joint and Several Liquidators' remuneration for the period 20 February 2015 to the conclusion of the liquidation. 12, Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

61 Section 11 Meeting 01. Executive Summary 02. Introduction 03. Company History and Reasons for Failure 04. Statement about the Company's Business, Property, Affairs and Financial Circumstances 05. Historical Performance 06. Investigations 07. Effect on Employees 08. Proposals for a Deed of Company Arrangement 09. Estimated Outcome and Administrators' Recommendation 10. Remuneration 11. Meeting 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February 2015

62 Meeting Second meeting of creditors Second meeting of creditors The second meetings of creditors is to be held at the office of Grant Thornton, Level 17, 383 Kent Street, Sydney, NSW 2000 at 11:00 on Friday, 20 February Please arrive 15 minutes before hand to allow sufficient time for registration. The notice in regards to the meeting is enclosed as Appendix A. We advise the Directors' RATA will be available for the creditors to inspect 30 minutes prior to commencement of the creditors meeting. The meeting will be open to creditors for questions and general discussion. Should you wish to have us address any issue in detail please advise us prior to the meeting date. This will allow sufficient time to prepare a detailed response to your question. Please note that attendance at the meeting is not compulsory. Lodging of proofs of debt Should you not have already lodged a proof of debt, you are required to complete the proof of debt as attached a as Appendix G. Lodging of proxies Proxies lodged for the previous meeting are not valid for this meeting and therefore, new proxies need to be lodged to enable voting at the second meeting. Please ensure that the proxies are signed under seal, where appropriate (if you are a company) and if the proxy is executed by a power of attorney, that a copy of the power of attorney is enclosed with the proxy form. The proxy form is enclosed as Appendix H. Proxies for the meeting can be lodged in the following ways: Post: to arrive no later than 10:00 AM on the business day prior to the meeting, being 19 February 2015; Facsimile: to (02) no later than 10:00 AM on the business day prior to the meeting, being 18 February 2015; In Person: by person with a person attending the meeting; or by to dale.slater@au.gt.com no later than 10:00 AM on the business day prior to the meeting, being 19 February If proxies are lodged by facsimile or , the law requires that the original proxy must be lodged with the Voluntary Administrators within 72 hours of lodging the faxed or ed copy. Contact details Should you have any queries in relation to any matter raised in this report then please do not hesitate to contact Dale Slater on (02) or Danielle Franjic on (02) Yours faithfully Andrew Sallway Joint and Several Administrator 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

63 Appendices A. Notice of second meeting of creditors B. DIRRI C. Proposed for Deed of Company Arrangement D. ASIC Information Sheet Approving Fees: a guide for creditors E. Grant Thornton Hourly Charge Out Rates F. Administrators' Remuneration Report G. G. Proof Formal of Proof Debt form of Debt Form H. Proxy form 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February 2015

64 Appendices A. Notice of Meeting 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

65

66 Appendices B. DIRRI 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

67

68

69

70 Appendices C. Proposed Deed of Company Arrangement 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

71 Proposal for Deed of Company Arrangement Baseline Constructions Pty Limited (Voluntary Administrators Appointed)(Receivers and Managers Appointed) Mr Nicholas Bettar has made the following proposals to creditors of Baseline Constructions Pty Limited (Administrators Appointed)(Receivers and Managers Appointed) (Company): Option 1 (All Creditors participate in the litigation)- Deed of Company Arrangement (DOCA) and Creditors Trust (Creditors Trust); or Option 2 (Secured Creditor only participates in the litigation)- Deed of Company Arrangement (DOCA) only. Subject to the approval of the creditors of the Company at a meeting of creditors held pursuant to section 439A of the Corporations Act 2001 (Cth), the Company will execute a DOCA and Creditors Trust, the material terms of which will be to the following effect: 1 Material terms under Option 1 and Execution and control of the Company a. The DOCA will be executed by the Administrators, the Company, and Mr Bettar. b. The Deed Administrators of the DOCA will be the Voluntary Administrators. c. In exercising the powers conferred by the DOCA and carrying out their duties under the DOCA, the Deed Administrators are taken to act as agents for and on behalf of the Company. d. The Deed Administrators will return control of the Company to Mr Bettar on execution of the DOCA. 1.2 Claims and moratorium a. The DOCA will bind all persons having a Claim (as defined herein). For the purposes of the DOCA, a Claim is a debt payable by, or claim against, the Company (whether present or future, certain or contingent, ascertained or sounding only in damages or by way of fine or penalty) being a debt or claim that arose before the date of the appointment of the Receivers and Managers to the Company (Appointment Date) or out of events or circumstances which occurred before the Appointment Date, and irrespective of whether the debt or claim arose by virtue of contract, at law, by statute, in equity, or otherwise. b. A person having a Claim must not during the period up until the completion of the DOCA: i. Make or proceed with any application to wind up the Company; ii. iii. Begin or continue any court proceedings or enforcement process against the Company or in relation to its property; or Exercise any rights of set-off or cross claim against the Company.

72 1.3 Summary of terms- Option 1 Events prior to and at completion: a. Baron Corporation Pty Ltd (Baron) (or related entity) to place $80,000 into a separate bank account, these funds represent Mr Bettar s contribution and is reflective of an estimate of 2 cents in the dollar on creditors claims capped at $4 million (the Minimum Amount 1). b. Baron (or related entity) to contribute an amount to pay outstanding employee claims (amount TBC). At completion under the DOCA: a. The Deed Administrators, the Company, Mr Bettar and Bettar Holdings Pty Ltd will execute a Creditors Trust Deed. b. The Trustees of the Creditors Trust will be the Deed Administrators. c. The Director s Minimum Amount 1 will constitute the Trust Fund (Trust Fund). d. The Company will be released from all Claims (excluding related partied and Baron and New Bounty Pty Ltd (New Bounty)), which will be extinguished, and all persons having a Claim may lodge a proof of debt with the Creditors Trust. e. The DOCA will be immediately effectuated and will terminate. The Litigation against Amelia Pty Ltd: a. Baron (or related entity) will review the litigation claim and pursue it at its sole discretion and cost. If Baron (or related entity) decides at any time to discontinue the proceedings they are within their rights to cease the proceedings. b. If Baron (or related entity) pursues the litigation claim they agree to finance, subject to a commercially acceptable litigation funding agreement, the litigation against the Amelia Pty Ltd including all costs and any adverse costs orders. c. If successful after repaying all of its costs for funding the litigation the balance of the proceeds will the split equally between Baron (or related entity) and the Creditors Trust. d. Bettar Holdings Pty Ltd will agree to assign 50% of the balance of the proceeds (after costs) to the Creditors Trust. Timing of completion of Creditors Trust a. Creditors will receive the higher of: The distribution of Minimum Amount 1 (excluding related parties, Baron and New Bounty); or The net proceeds of the litigation where all creditors will participate on a pro-rated basis (i.e. Baron and New Bounty will not have priority). b. Completion is to occur immediately once the Trustee determines that the greater of the distribution of Minimum Amount 1 or the funds from the litigation have been received to enable them to make a distribution. Distributions from Creditors Trust a. The Trust Fund will be available for distribution in the following priority: i. From the Trust Fund: A. B. First, to the Creditors Trustees for their costs and expenses, to be capped at $12,500 (plus GST) for the first year plus $5,000 (plus GST) per annum on a pro rata basis thereafter should the litigation not be resolved within 12 months; Next, rateably, to those persons having a Claim that is admitted by the Creditors Trustees in accordance with the terms of the Creditors Trust (Admitted Creditors); and

73 C. 1.4 Summary of Terms- Option 2 Events prior to and at completion Next, in the event of any surplus remaining after all Admitted Creditors have been paid 100 cents in the dollar (excluding interest), to the Company. a. Baron Corporation Pty Ltd (Baron) (or related entity) to place $120,000 into a separate bank account, these funds represent Mr Bettar s contribution and is reflective of an estimate of 3 cents in the dollar on creditors claims capped at $4 million (the Minimum Amount 2) which will be distributed to unsecured creditors. b. Baron (or related entity) to contribute an amount to pay outstanding employee claims (amount TBC). At completion under the DOCA: a. The Deed Administrators will adjudicate on all claims. b. The Director s Minimum Amount 2 of 3 cents in the dollar of creditors claims will be distributed. c. The Company will be released from all Claims (excluding related parties, Baron and New Bounty Pty Ltd (New Bounty)), which will be extinguished. d. The DOCA will be immediately effectuated and will terminate. e. For clarity purposes in Option 2 the creditors will not participate in the above litigation. Distributions from the DOCA a. The Fund will be available for distribution in the following priority: A. B. First, to the Deed Administrators for their costs, and expenses; Next, rateably, to those persons having a Claim that is admitted by the Deed Administrators in accordance with the terms of the DOCA (Admitted Creditors); and b. The Deed Administrators will adjudicate Claims in accordance with the manner of adjudication of claims in a liquidation, to which end the relevant provisions of the Corporations Regulations 2001 (Cth) will be incorporated into the DOCA. c. All persons with Claims must accept that their right to prove under the DOCA in full satisfaction and complete discharge of their Claims. 1.5 Powers and entitlements of Deed Administrators and Creditors Trustees a. The Deed Administrators and or Creditors Trustees will have the powers set out in Schedule 8A of the Corporations Regulations 2001 (Cth), except as set out at rr 3(c), 4, and 11. b. The Creditors Trustees will have all of the powers of trustees under the Trustees Act 1925 (Cth) and all other powers necessary or convenient for the Creditors Trustees to administer the Creditors Trust and do all things a deed administrator is empowered to do under a deed of company arrangement which incorporates the prescribed provisions in schedule 8A of the Corporations Regulations 2001 (Cth). 1.6 Other provisions a. The DOCA and the Creditors Trust Deed will contain other provisions that are necessary to give effect to this proposal or that are usually included in such documents.

74 Appendices D. ASIC Information Sheet Approving Fees: A guide for creditors 2015 Grant Thornton Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) 12 February

75 INFORMATION SHEET 85 Approving fees: a guide for creditors If a company is in financial difficulty, it can be put under the control of an independent external administrator. This information sheet gives general information for creditors on the approval of an external administrator s fees in a liquidation of an insolvent company, voluntary administration or deed of company arrangement (other forms of external administration are not discussed in this information sheet). It outlines the rights that creditors have in the approval process. Entitlement to fees and costs A liquidator, voluntary administrator or deed administrator (i.e. an external administrator ) is entitled to be: paid reasonable fees, or remuneration, for the work they perform, once these fees have been approved by a creditors committee, creditors or a court, and reimbursed for out-of-pocket costs incurred in performing their role (these costs do not need creditors committee, creditor or court approval). External administrators are only entitled to an amount of fees that is reasonable for the work that they and their staff properly perform in the external administration. What is reasonable will depend on the type of external administration and the issues that need to be resolved. Some are straightforward, while others are more complex. External administrators must undertake some tasks that may not directly benefit creditors. These include reporting potential breaches of the law and lodging a detailed listing of receipts and payments with ASIC every six months. The external administrator is entitled to be paid for completing these statutory tasks. For more on the tasks involved, see ASIC s information sheets INFO 45 Liquidation: a guide for creditors and INFO 74 Voluntary administration: a guide for creditors. Out-of-pocket costs that are commonly reimbursed include: 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. You will need a qualified professional adviser to take into account your particular circumstances and to tell you how the law applies to you. Australian Securities & Investments Commission, December 2008 Page 1 of 5