First statutory meeting of creditors

Transcription

1 Dick Smith Holdings Limited, ACN Dick Smith Sub-Holdings Pty Limited, ACN DSE Holdings Pty Limited, ACN Dick Smith (Wholesale) Pty Ltd, ACN Dick Smith Electronics Pty Limited, ACN InterTAN Australia Pty Ltd, ACN Dick Smith Electronics Franchising Pty Ltd, ACN Dick Smith Management Pty Ltd, ACN (Receivers and Managers Appointed) (Administrators Appointed) Dick Smith Electronics Staff Superannuation Fund Pty Limited, ACN (Administrators Appointed) (collectively referred to as the Companies ) I advise that Jason Preston, Jamie Harris, Matt Caddy and I were appointed Joint and Several Voluntary Administrators of the Companies on 4 January First statutory meeting of creditors A first statutory meeting of creditors must be held within eight business days of my appointment. The meeting of the Company has been convened for 14 January The statutory purpose of the first meeting is to allow creditors to determine whether a committee of creditors should be appointed and to appoint an alternative administrator if it is so resolved at the meeting. Details of the meeting The meetings will be held concurrently on Thursday, 14 January :00pm at the Wesley Conference Centre, 220 Pitt Street, Sydney NSW A formal Notice of Meeting is enclosed. Creditors who intend to vote at the meeting are required to lodge a formal proof of debt. A blank proof of debt form is enclosed. Creditors who are unable to attend the meeting and wish to be represented should ensure that either a proxy form, power of attorney, or evidence of appointment of a company representative is completed. A blank proxy form is enclosed. Documents may be lodged with Link Market Services prior to the meeting or may be brought to the meeting. Registration for the meeting will commence at 11:00am on the day of the meeting. Creditors who are unable to attend in person may view the meeting via a webcast subject to providing relevant proof of debt and proxy documents in advance. Please contact Link Market Services on or before 12 January 2016 should you wish view the meeting via a webcast. Report and second meeting All creditors will receive a detailed report from me regarding the Companies affairs before the second statutory meeting of creditors must be held. A decision on the Companies future will be made at the second statutory meeting. D DICKSMITH01-Dick Smith Circular-JPH

2 In accordance with Section 436DA of the Corporations Act 2001 and the Australian Restructuring, Insolvency & Turnaround Association ( ARITA ) Code of Professional Practice, a Declaration of Relevant Relationships is enclosed for your information. This declaration discloses information regarding our independence, any prior personal or professional relationships with the Companies or related parties and any indemnities received in relation to this appointment. McGrathNicol partners have acted as Voluntary Administrators for companies operating small to medium businesses, through to very large public companies. Remuneration The Administrators remuneration can only be fixed by resolution of creditors, a resolution of a committee of creditors or by application to the Court. Approval of our remuneration will be sought at the second meeting of creditors. In accordance with ARITA s Code of Professional Practice, a Schedule of Remuneration Methods and Hourly Rates is enclosed for your information. A Remuneration Report providing details of the remuneration sought will be provided prior to the second meeting of creditors. Other matters A copy of the Insolvency information for directors, employees, creditors and shareholders information sheet issued by the Australian Securities & Investments Commission is enclosed for your information. If you require any further information, please contact Link Market Services on or by dicksmith@linkmarketservices.com.au. Dated: 6 January 2016 Joseph Hayes Joint & Several Administrator Enclosures: Notice of Meeting Information for attendance at meeting Declaration of Schedule of Remuneration Methods and Hourly Rates ASIC Insolvency information for directors, employees, creditors and shareholders Proof of Debt Proxy Page 2

3 FORM 529A Corporations Act 2001 Subregulation (1) NOTICE OF FIRST MEETING OF CREDITORS OF COMPANY UNDER ADMINISTRATION Dick Smith Holdings Limited, ACN Dick Smith Sub-Holdings Pty Limited, ACN DSE Holdings Pty Limited, ACN Dick Smith (Wholesale) Pty Ltd, ACN Dick Smith Electronics Pty Limited, ACN InterTAN Australia Pty Ltd, ACN Dick Smith Electronics Franchising Pty Ltd, ACN Dick Smith Management Pty Ltd, ACN (Receivers and Managers Appointed) (Administrators Appointed) Dick Smith Electronics Staff Superannuation Fund Pty Limited, ACN (Administrators Appointed) (collectively referred to as the Companies ) 1 On 4 January 2016 the Companies, under Section 436A, appointed Jason Preston, Jamie Harris, Matt Caddy and Joseph Hayes of McGrathNicol as Joint & Several Voluntary Administrators. 2 Notice is now given that the first meeting of the creditors of the Companies will be held concurrently on Thursday, 14 January :00pm at the Wesley Conference Centre, 220 Pitt Street, Sydney NSW The purpose of the meeting is to determine: a. whether to appoint a committee of creditors; and b. if so, who are to be the committee's members. 4 At the meeting, creditors may also, by resolution: a. remove the Administrators from office; and b. appoint someone else as Administrator of the Company. Dated: 6 January 2016 Joseph Hayes Joint & Several Administrator Page 3

4 Dick Smith Holdings Limited (ACN ); Dick Smith Sub-Holdings Pty Limited (ACN ); DSE Holdings Pty Limited (ACN ); Dick Smith (Wholesale) Pty Ltd (ACN ); Dick Smith Electronics Pty Limited (ACN ); Dick Smith Electronics Staff Superannuation Fund Pty Limited (ACN ); InterTAN Australia Pty Ltd (ACN ); Dick Smith Electronics Franchising Pty Ltd (ACN ); Dick Smith Management Pty Ltd (ACN ); Mac 1 Pty Limited (ACN ); and DSE (NZ) Limited (NZ company number 37602) (Administrators Appointed to all) ( the Companies ) The Corporations Act 2001 and professional standards require the Practitioner/s appointed to an insolvent entity to make a declaration as to: 1 2 Their independence generally; Relationships, including a. b. c. d. the circumstances of the appointment; any relationships with the company and others within the previous 24 months; any prior professional services for the company within the previous 24 months; that there are no other relationships to declare; and 3 Any indemnities given or up-front payments made to the Practitioner. This declaration is made in respect of ourselves, our partners and McGrathNicol, including but not limited to the McGrathNicol Partnership, the McGrathNicol Advisory Partnership and their related entities. A. Independence We, Joseph Hayes, Jason Preston, William Harris and Matthew Caddy, of the firm McGrathNicol have undertaken a proper assessment of the risks to our independence prior to accepting the appointment as administrators of the

5 Companies in accordance with the law and applicable professional standards. This assessment identified no real or potential risks to our independence. We are not aware of any reasons that would prevent us from accepting these appointments. B. Declaration of Relationships a. Circumstances of appointment We were introduced to the Companies by Mr Michael Hughes of the firm Minter Ellison on 22 December Minter Ellison provides legal advice to the Companies and in some cases their Directors. We have had numerous meetings with the Companies and the Directors during the period from 24 December 2015 to 4 January 2016 ( the Period ) for the purposes of: understanding at a high level the financial position and cash forecast of the Companies for the purposes of providing the Companies with a review of the solvency position; and, (latterly) preparing for our appointment as Administrators including understanding creditor and supplier information in anticipation of continuing the trading operations of the business on commencement of the Administrations. We have also attended on several calls with the Companies' financiers (National Australia Bank, HSBC Bank and Macquarie Bank) and their advisors during the Period to enable us to advise the Companies on the solvency position of the Companies. We have not received any payment for this advice and have confirmed to the Companies that no fee will be payable under the engagement letter entered into retaining us to provide this advice. As such, we are not creditors of the Companies. In our opinion, these matters do not give rise to our having a conflict of interest or duty for the following reasons: They were limited to discussions pertaining to the solvency of the Companies and the options available to the Companies. They did not involve any advice to any secured or any other creditor. The limited nature and scope of this engagement will not influence our ability to be able to fully comply with the statutory and fiduciary obligations associated with the voluntary administrations of the Companies in an objective and impartial manner. These meetings do not result in a conflict of interest or duty as the advice provided only related to the possible or potential insolvency of the Companies and alternative courses of action and their consequences for the Companies and, as noted in the Australian Restructuring, Insolvency & Turnaround Association (ARITA) Code of Professional Practice (CoPP), such advice does not compromise our independence.

6 In particular: It is recognised by the Courts and the ARITA Code of Professional Practice that pre-appointment advice on solvency and the insolvency process and available options is necessary and does not amount to an impediment to accepting an appointment; and The nature of the advice provided was such that it would not be subject to review and challenge during the course of the administration. Nor would the advice influence our ability to be able to fully comply with the statutory and fiduciary obligations associated with the administration in an objective and impartial manner. We have provided no other information or advice to the Companies or their Directors prior to our appointments beyond that outlined in this DIRRI. b. (excluding Professional Services to the Companies) We or a member of our firm, have or have had within the preceding 24 months, a relationship with: Name National Australia Bank Limited ( NAB ) Nature of relationship NAB holds a charge on the whole or substantially the whole of the property of the Companies. McGrathNicol undertakes corporate recovery and advisory work from time to time on instructions from NAB. Reasons for believing this relationship does not give rise to a conflict of interest or duty Each professional engagement undertaken for NAB in relation to a particular entity or group of entities is conducted on an entirely separate basis which has no connection with these appointments. These engagements are only commenced after full regard is given to potential conflicts of interest in relation to all interested stakeholders. McGrathNicol has not undertaken an engagement for NAB in respect of the Companies. HSBC Bank ( HSBC ) HSBC is a secured lender and through a security trustee hold a charge on the whole or substantially the whole of the property of the Companies. Each professional engagement undertaken for HSBC in relation to a particular entity or group of entities is conducted on an entirely separate basis which has no connection with these appointments. These engagements are only commenced after full regard is given to potential conflicts of interest in relation to all interested stakeholders.

7 Name Macquarie Bank Limited ( MBL ) Nature of relationship McGrathNicol undertakes corporate recovery and advisory work from time to time on instructions from HSBC. MBL is an unsecured lender to the Companies. McGrathNicol undertakes corporate recovery and advisory work from time to time on instructions from MBL. Reasons for believing this relationship does not give rise to a conflict of interest or duty McGrathNicol has not undertaken an engagement for HSBC in respect of the Companies. Each professional engagement undertaken for MBL in relation to a particular entity or group of entities is conducted on an entirely separate basis which has no connection with these appointments. These engagements are only commenced after full regard is given to potential conflicts of interest in relation to all interested stakeholders. McGrathNicol has not undertaken an engagement for MBL in respect of the Companies. Minter Ellison Minter Ellison acts as Solicitors for the Companies and, as noted above, that firm introduced us to the Companies. Minter Ellison periodically refers engagements to McGrathNicol. Minter Ellison also undertakes legal work from time to time on various corporate Each professional engagement undertaken after referral by and/or on instructions from Minter Ellison is conducted on an entirely separate basis, which has no connection with these appointments. These engagements are only commenced after full regard is given to potential conflicts of interest in relation to all interested stakeholders. McGrathNicol has not undertaken any engagement for the Companies (other than that referred to in Part B (a) above), subject of this recent instruction, and the introduction itself is entirely unconditional. The legal work conducted by Minter Ellison on instructions from McGrathNicol is also conducted on an entirely separate

8 Name Nature of relationship advisory and recovery engagements under McGrathNicol s instructions. Reasons for believing this relationship does not give rise to a conflict of interest or duty basis, and has no connection with this appointment, and is itself only commenced after full regard is given to potential conflicts of interest. Given these reasons, our independence in acting as administrators of the Companies has not been affected. c. Prior professional services to the Companies We or a member of our firm, have provided the following professional services to the Companies, in the 24 months prior to acceptance of this appointment. Nature of Professional Service Immediately prior to our appointment as Voluntary Administrators, McGrathNicol Advisory was engaged by Dick Smith Holdings Limited We were introduced to the Companies by Mr Michael Hughes of the firm Minter Ellison on 22 December Minter Ellison provides legal advice to the Companies and in some cases their Directors. We had numerous meetings with the Companies and the Directors during the period from 24 December 2015 to 4 January 2016 ( the Period ) for the purposes of: understanding at a high level the financial position and cash forecast of the Companies for the purposes of providing the Companies with a review of the solvency position; and, (latterly) preparing for our appointment as Administrators including understanding creditor and supplier information in anticipation of Reasons We believe this relationship does not result in a conflict of interest or duty because: The work undertaken during the review engagement has assisted us in developing an understanding of the Companies and their activities. Much of the investigatory work done during the review engagement is work that would have been done by us in order to be able to report to creditors under s439a of the Corporations Act. As such, this information will be made available to creditors when we report to them in due course. The nature of the draft report provided to the Companies is such that it would not be subject to review and challenge during the course of the voluntary administrations. The review engagement will not influence our ability to be able to fully comply with the statutory and fiduciary obligations associated with the voluntary administrations of the Companies in an objective and impartial manner.

9 Nature of Professional Service Reasons continuing the trading operations of the business on commencement of the Administrations. We also attended on several calls with the Companies' financiers (National Australia Bank, HSBC Bank and Macquarie Bank) and their advisors during the Period to enable us to advise the Companies on the solvency position of the Companies. We have not received any payment for this advice and have confirmed to the Companies that no fee will be payable under the engagement letter entered into retaining us to provide this advice. As such, we are not creditors of the Companies. Prior to our appointment as Voluntary Administrators, McGrathNicol Advisory was engaged by Dick Smith Holdings Limited to provide financial due diligence services in relation to the acquisition by Dick Smith of Mac 1 Pty Limited. The engagement, undertaken in July and August 2014, was to advise on matters that could have a material impact on or be significant in the assessment of the proposed transaction. McGrathNicol Advisory was paid $35,000 in respect of those services by Dick Smith Holdings Pty Limited. Some time was written off in the process of completing the review but that time is not material relative to the fees billed We believe this relationship does not result in a conflict of interest or duty because: The scope of our review was narrow, concerning preparation of financial material to understand the business Dick Smith was acquiring, explaining the key drivers of profitability, sales analytics, cash and working capital and balance sheet metrics. As such, much of this information will be made available to creditors when we report to them in due course. Our report did not comment or advise on the key aspects of the transaction including purchase price and terms. We also note the relative immateriality of the transaction in the context of the Dick Smith group. The nature of the advice provided to the company is such that it would not be subject to review and challenge during the course of the voluntary administration and the advice will not influence our ability to be able to fully comply with the statutory and fiduciary obligations associated with the voluntary administration of the company in an objective and impartial manner.

10 d. Concurrent Appointments to related parties Nature of Professional Service We were concurrently appointed Voluntary Administrators of the Companies, being Dick Smith Holdings Limited and its wholly owned Australian and New Zealand subsidiaries. Reasons We believe this relationship does not result in a conflict of interest or duty because: The Companies collectively operate the retail and commercial electronics business together. The nature of the business operations mean that the administrations can be conducted more efficiently by one practitioner. Following discussions with management, we have not identified any conflicts of interests caused from real dispute as to the facts, or as to the validity of transactions between Companies. Notwithstanding that we have made enquiries regarding threats to independence from group appointment, if a conflict does arise, we will keep creditors informed and take appropriate action to resolve the conflict. e. No other relevant relationships to disclose There are no other known relevant relationships, including personal, business and professional relationships, from the previous 24 months with the Companies, an associate of the Companies, a former insolvency practitioner appointed to the Companies or any person or entity that has security over the whole or substantially whole of the Companies property that should be disclosed. C. Indemnities and Up-front Payments We have not been indemnified in relation to the administrations, other than any indemnities that we may be entitled to under statute and we have not received any up-front payments in respect of our remuneration or disbursements.

11 Dated: 4 January Joseph Hayes Jason Preston William Harris Matthew Caddy Note: 1 2 If the circumstances change or new information is identified, we are required under the Corporations Act 2001 and the ARITA Code of Professional Practice to update this Declaration and provide a copy to the creditors/committee with our next communication, as well as table a copy of any replacement Declaration at the next meeting of the insolvent s creditors/committee. Any relationships, indemnities or up-front payments disclosed in the Declaration of Relevant Relationships (DIRRI) must not be such that the Practitioner is no longer independent. The purpose of components B and C of the DIRRI is to disclose relationships that, while they do not result in the Practitioner having a conflict of interest or duty, ensure that creditors are aware of those relationships and understand why the Practitioner nevertheless remains independent. Please note that the presentation of the above information is in accordance with the standard format suggested by ARITA.

12 Schedule of Remuneration Methods and Hourly Rates 1 Remuneration Methods There are four basic methods that can be used to calculate the remuneration charged by an insolvency practitioner. They are: 1.1 Time based/hourly rates This is the most common method. The total fee charged is based on the hourly rate charged for each person who carried out the work, multiplied by the number of hours spent by each person on each of the tasks performed. 1.2 Fixed Fee The total fee charged is normally quoted at the commencement of the administration and is the total cost for the administration. Sometimes a practitioner will finalise an administration for a fixed fee. 1.3 Percentage The total fee charged is based on a percentage of a particular variable, such as the gross proceeds of asset realisations. 1.4 Contingency The practitioners fee is structured to be contingent on a particular outcome being achieved. 2 Method Proposed Given the nature of this administration we propose that our remuneration will be calculated on a time basis which will be recorded in six minute increments. Details of the hourly rates for different levels of staff are included below. The complexity and demands of the administration will determine the staff to be utilised for this appointment We have chosen this method because this method is considered to be most suitable for this appointment as it ensures creditors are only charged for work that is performed in the external administration, which can be difficult to accurately estimate at the date of appointment. Creditors will be advised of the proposed basis of remuneration in our initial remuneration advice to them. 3 Explanation of Hourly Rates The rates for our remuneration calculation are set out in the following table, together with a general guide showing the qualifications and experience of staff who will be engaged in the administration and the role they take. The hourly rates charged encompass the total cost of providing professional services and should not be compared to an hourly wage. Page 1

13 Title Appointee/Partner Director 1 Director Senior Manager Manager 1 Manager Assistant Manager Senior Accountant 1 Senior Accountant Accountant 1 Guide to qualifications and role Registered liquidator, Chartered Accountant or equivalent and generally degree qualified with more than twelve years of experience. Leads assignments with full accountability for strategy and execution. Generally, Chartered Accountant or comparable qualification and degree qualified with more than ten years of experience, including four years of Director or equivalent experience. Autonomously leads complex insolvency appointments reporting to Appointee/Partner. Generally, Chartered Accountant or comparable relevant qualification and degree qualified with more than nine years of experience. Autonomously leads insolvency appointments reporting to Appointee/Partner. Generally, Chartered Accountant or comparable relevant qualification and degree qualified with more than seven years of experience. Self-sufficiently conducts small to medium insolvency appointments and leads major workstreams in larger matters. Generally, Chartered Accountant or comparable relevant qualification and degree qualified with more than six years of experience, including two years of Manager or equivalent experience. Self-sufficiently conducts small to medium insolvency appointments and takes a supervisory role on workstreams in larger matters. Generally, Chartered Accountant or comparable relevant qualification and degree qualified with more than five years of experience. Self-sufficiently conducts small insolvency appointments and takes a supervisory role on workstreams in larger matters. Generally, Chartered Accountant or comparable relevant qualification and degree qualified with more than three years of experience. Autonomously manages workstream activity within appointments. Generally, degree qualified and undertaking Chartered Accountant s qualification or comparable relevant qualification with more than two years of experience, including one year of Senior Accountant or equivalent experience. Completes multiple tasks within workstreams and appointments. Generally, degree qualified and undertaking Chartered Accountant s qualification or comparable relevant qualification with more than 16 months of experience. Completes tasks within workstreams and appointments under supervision. Generally, degree qualified and undertaking Chartered Accountant s qualification or comparable relevant qualification with at least one year of Accountant or equivalent experience. Assists with tasks within workstreams and appointments under supervision. Hourly rate (excl GST) $650 $595 $550 $500 $490 $475 $430 $395 $375 $325 Page 2

14 Title Accountant Undergraduate/ Cadet Practice Services Director Senior Practice Services Senior Client Administration and Senior Treasury Client Administration and Treasury Guide to qualifications and role Generally, degree qualified and undertaking or about to undertake Chartered Accountant s qualification or comparable relevant qualification with less than one year of experience. Assists with tasks within workstreams and appointments under supervision. Undertaking relevant degree. Assists with tasks within workstreams and appointments under supervision. National Practice Service leaders, generally degree qualified with more than ten years of experience and reporting directly to partners. Technical experts in their specific areas and have team management responsibilities. Senior technical, professional or functional expert in national Practice Services. Generally degree qualified with more than seven years of experience. Reports to Practice Service leader and may be responsible for team management. Appropriately experienced and undertakes senior level administrative support activities or senior Treasury activities. May be responsible for day to day management of projects or operations and may have supervisory responsibility for junior staff. Appropriately experienced and undertakes support activities, including but not limited to Client administration, Treasury and document management functions. Hourly rate (excl GST) $275 $190 $580 $410 $210 $160 Page 3

15 Insolvency information for directors, employees, creditors and shareholders ASIC has 11 insolvency information sheets to assist you if you re affected by a company s insolvency and have little or no knowledge of what s involved. These plain language information sheets give directors, employees, creditors and shareholders a basic understanding of the three most common company insolvency procedures liquidation, voluntary administration and receivership. There is an information sheet on the independence of external administrators and one that explains the process for approving the fees of external administrators. A glossary of commonly used insolvency terms is also provided. The Insolvency Practitioners Association (IPA), the leading professional organisation in Australia for insolvency practitioners, endorses these publications and encourages its members to make their availability known to affected people. List of information sheets INFO 41 Insolvency: a glossary of terms INFO 74 Voluntary administration: a guide for creditors INFO 75 Voluntary administration: a guide for employees INFO 45 Liquidation: a guide for creditors INFO 46 Liquidation: a guide for employees INFO 54 Receivership: a guide for creditors INFO 55 Receivership: a guide for employees INFO 43 Insolvency: a guide for shareholders INFO 42 Insolvency: a guide for directors INFO 84 Independence of external administrators: a guide for creditors INFO 85 Approving fees: a guide for creditors Getting copies of the information sheets To get copies of the information sheets, visit ASIC s website at The information sheets are also available from the IPA website at The IPA website also contains the IPA s Code of Professional Practice for Insolvency Professionals, which applies to IPA members. Important note: The information sheets contain 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. These documents 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 1