Liquidator s Statutory Report to Creditors

Transcription

1 Kitchen Choice Pty Ltd (in Liquidation) ACN: ( the Company ) Prepared pursuant to section of the Insolvency Practice Rules (Corporations) 2016 Dated 12 September 2017 Liquidator Gary Anderson Date of Administration 25 May 2017 Date of Liquidation 27 June 2017 Contact Samantha Morgan Telephone Number ABN Level 3, 35 Outram Street West Perth WA 6005 PO Box 622 West Perth WA 6872 Telephone Fax Website: Liability limited by a scheme approved under Professional Standards Legislation is a member of International. A world-wide network of accounting firms and busines s advisers.

2 CONTENTS 1. Introduction Update on the Progress of the Liquidation Incorporation Officers, shareholders, registered addresses and security interests Registered security interests Director s Report as to Affairs ( RATA ) and Liquidator s Estimates Liquidator s Comments on the Director s RATA and Assets Investigations Undertaken to Date Explanation of Difficulties and Causes of Demise of the Company Further Investigations to be Undertaken Receipts and Payments Likelihood of a Dividend Costs of the External Administration What Happens Next? Where Can You Get More Information? Page 2

3 1. Introduction I, Gary Anderson, was initially appointed as the Administrator of the above Company on 25 May 2017 pursuant to section 436A of the Corporations Act 2001 ( the Act ). At a meeting of creditors held on Tuesday, 27 June 2017, it was resolved that the Company be placed into liquidation. The purpose of this report is to comply with the requirements of section of the Insolvency Practice Rules (Corporations) 2016 as follows: provide creditors with a written account of the winding up the estimated amounts of assets and liabilities of the Company inquiries relating to the winding up of the Company that have been undertaken to date further inquiries relating to the winding up of the Company that may need to be undertaken what happened to the business of the Company the likelihood of creditors receiving a dividend before the affairs of the Company are fully wound up possible recovery actions This report should be read in conjunction with my section 439A report to creditors dated 19 June Update on the Progress of the Liquidation I have set out the information set out below in order to provide creditors with an update regarding the conduct of the liquidation Incorporation A search Australian Securities & Investments Commission ( ASIC ) database revealed that the Company was incorporated and commenced business shortly after the 4 January 2006, trading as a kitchen imports, sales and installation business in Osborne Park, Western Australia Officers, shareholders, registered addresses and security interests Director Appointed Status Gary John Stuart 4 January 2006 Current Kordula Margaret Stuart 4 January 2006 Ceased 17 April 2017 Secretary Appointed Status Gary John Stuart 17 April 2017 Current Kordula Margaret Stuart 4 January 2006 Ceased 17 April 2017 Shareholder No. of Shares Class Brigitte Hoesl-Lindenberg 40 Ordinary Gary John Stuart 80 Ordinary Kordula Margret Stuart 80 Ordinary Registered office: Principal place of business: Tactica Partners Pty Ltd Level 2/323 Cambridge Street Wembley WA Scarborough Beach Road Osbourne Park WA 6017 Page 3

4 2.3. Registered security interests A search of the Personal Property Securities Register ( PPSR ) revealed the following security interests registered against the Company: Secured Party Registration Number Collateral Class PMSI Note Capital Finance Australia Limited All PAP NA Australia and New Zealand Banking Group Ltd All PAP NA Electrical Distributors Australia Pty Ltd Other Goods Yes Electrical Distributors Australia Pty Ltd Other Goods Yes Laminex Group Pty Limited Other Goods Yes 2 BSH Home Appliances Pty Ltd Other Goods Yes Schweigen Pty Ltd Other Goods Yes Miele Australia Pty Ltd Other Goods Yes Mercedes-benz Financial Services Australia P/L Motor Vehicle Yes 1 Crown Equipment Pty Ltd Motor Vehicle Yes 1, 2 Crown Equipment Pty Ltd Other Goods Yes 1, 2 De Lage Landen Pty Ltd Motor Vehicle Yes Winning Appliances Pty Ltd Other Goods Yes Volkswagen Financial Services Australia Pty Ltd Motor Vehicle Yes 1 1. These security registrations relate to financed equipment and vehicles. I have given formal notice to these parties of my intention not to exercise property rights as the respective finance payout figures exceed the estimated realisable value of each item. 2. These security registrations have been discharged since the appointment. THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY Page 4

5 2.4. Director s Report as to Affairs ( RATA ) and Liquidator s Estimates As at 25 May 2017, the assets and liabilities of the Company according to the Director s RATA were estimated to be as follows. I have also included my own initial estimates and details of the assets realised to date. As per Director's RATA Administrator's Estimated Values Assets Realised To Date of this Report Notes $ $ $ ASSETS Cash on Hand Sundry Debtors 51,196 30,000 29,050 1 Term Deposit 38,908 38, Plant and Equipment / Display Kitchens 154,698 70,000 69,941 TOTAL ASSETS 245, ,200 99,191 LIABILITIES Priority Creditors Superannuation 167, ,250 Annual Leave 19,566 20,000 Long Service Leave 17,000 17,000 Termination N/A 20,000 Unsecured Creditors Non-priority Superannuation N/A 54,000 Related Party Loans 25,893 25,893 Credit Cards 46,038 46,038 Bank Overdraft 47,000 47,000 Australian Taxation Office 55,250 60,000 Financed Asset Shortfalls 61,928 64,643 Landlord current rent 98, ,000 Deposits Received 148, ,000 Nobilia 160, ,142 Trade Creditors 213, ,000 Unsecured Loans 264, ,300 Contingent Creditor Landlord future rent 365, ,000 TOTAL LIABILITIES 1,689,410 1,757,266 Page 5

6 Notes: 1. I have discounted this amount in the Administrator s estimate as I anticipate some accounts receivable being uncollectable. 2. The Company holds a term deposit account in support of various lease obligations for the Osborne Park premises. I expect the landlord has or will draw upon this amount in the near future in relation to unpaid rent along with make good obligations Liquidator s Comments on the Director s RATA and Assets It appears the Director s estimate of the financial position is not materially inaccurate Investigations Undertaken to Date Since my appointment I have made the following inquiries to support my investigation of the past affairs of the Company: Company extract search Personal Property and Securities Register searches Land title searches Vehicle and vessel searches Analysis of vehicle finance shortfalls Director personal name searches Credit file searches Review of Company books and records Communication with the Director s Bankruptcy Trustee A report pursuant to section 533 of the Act was forwarded to the Australian Securities and Investments Commission ( ASIC ) on 31 August 2017 detailing my investigations into the affairs of the Company and possible offences committed by the Company s officers. A reply was received from the ASIC advising the Commission did not propose to conduct an investigation into the affairs of the Company. I have set out below a summary of the investigations I have undertaken to date. Duty to ensure books and records are maintained in accordance with the Corporations Act 2001 (Section 286) a company must keep written financial records that: a) correctly record and explain its transactions and financial position and performance, and b) would enable true and fair financial statements to be prepared and audited. I advise creditors that I have taken possession of the Company s hard copy and electronic books and records. The Company engaged the services of a bookkeeper to maintain a computerised MYOB accounting system. Furthermore, the Company utilised the services of an independent, external taxation accountant for the preparation of annual income tax returns and financial statements. This system enabled the Director to ascertain an accurate perspective of the Company s financial position as required by the Act. It appears that the books and records comply with the requirements of the Act. Page 6

7 Insolvent transactions (Section 588FC) these are unfair preferences or uncommercial transactions entered into when a company was insolvent or became insolvent as a result of entering into the transaction. My investigations into this matter are set out below: Unfair preferences (Section 588FA) these are transactions where a company transacts with a creditor resulting in that creditor receiving more than the creditor would receive if the transaction were set aside and the creditor claimed the same amount in a liquidation. Unfair preferences paid a company within six months of the relation-back day (the day of the liquidator s appointment) are void against the liquidator. This timeframe is extended to four years should a related entity be a party to the transaction (s588fe(4)). My investigations have identified payments totalling approximately $28K made to the Australian Taxation Office that may be considered to be preferential in nature and therefore repayable to a Liquidator. I estimate that the costs to recover this amount may total $2,500 to $5,000. Investigations into this matter are ongoing. I am also investigating the sale of several display kitchens that took place prior to my appointment and the way in which the sale proceeds were disbursed. Uncommercial transactions (Section 588FB) these are transactions entered into that a reasonable person would not have entered, having regard to the benefits and detriment to the company and to the other parties involved in the transaction. Uncommercial transactions entered into by a company are voidable against the Liquidator if they were entered into within two years of the relation-back day. As noted above, I am investigating the sale of several display kitchens that took place prior to my appointment and the way in which the sale proceeds were disbursed. Unfair loans to a company (Section 588FD) these are loans made to a company where interest and other charges on the loan are extortionate. These transactions can be recovered regardless of when they were entered into as long as they were entered into on or before the winding up begun. My investigations have not revealed any unfair loans. Unreasonable director-related transactions (Section 588FDA) these are transactions entered into by a company and a director, close associate of a director, or person on behalf of a director, which a reasonable person would not have entered into. The transaction must be a payment by a company, the transfer of property by a company, or the incurrence of an obligation of a director s by a company. These transactions are voidable if they were entered into within four (4) years of the relation-back day. My investigations have not revealed any related party transactions. Transactions entered into for the purpose of defrauding Creditors (Section 588FE (5)) these are insolvent transactions entered into for the purpose of defeating, delaying or interfering with the rights of creditors and were entered into within a period of ten (10) years prior to the relation-back day. My investigations have not revealed any such transactions. Circulating Security Interest created within six months (Section 588FJ) where a circulating security interest is granted by a company within six months of the relation-back day, the security interest is void against the liquidator unless valuable consideration was given or the company was solvent at the time of granting of the circulating security interest. My search of the PPSR has not revealed any circulating security interests registered against the Company within six months of the relation-back day. Page 7

8 Directors duty to prevent insolvent trading (Section 588G) a director of a company has a duty to prevent a company from incurring a debt when the company is insolvent or there are reasonable grounds to suspect that the company is or would become insolvent. A director would fail to fulfil that duty if the director was aware of the grounds for suspecting the company is or would become insolvent or a reasonable person in a like position would be aware of such grounds. The defences available to a director are as follows; (i) (ii) (iii) (iv) The director had reasonable grounds to expect, and did expect, that the company was solvent and would remain so; or The director had reasonable grounds to believe, and did believe, that a competent and reliable person was providing adequate information to the Director and based on that information the director expected the company to be solvent and to remain so; or The director did not take part in the management of the company at the time due to illness or other good reason; or The director took reasonable steps to prevent the company from incurring the debt. My investigations have revealed the following indicators of insolvency: Financial statements that disclose a history of serious shortage of working capital and unprofitable trading Difficulties paying debts when they fell due Non-payment of statutory debts (e.g. PAYG-w, Superannuation Guarantee Charge, GST) Deteriorating working capital Evidence of creditors attempting to obtain payment of outstanding debts Accordingly, I have formed the view that the Director may have traded whilst insolvent because at the time transactions were entered, there were reasonable grounds to believe the Company may not have been able to pay its debts as and when they fell due. I have reported the matter to ASIC as part of my statutory reporting obligations. Having said this, as mentioned in my report dated 19 June 2017, I do not foresee achieving a meaningful recovery for the Director or ex-director for the benefit of creditors due to the Director possessing minimal personal assets Explanation of Difficulties and Causes of Demise of the Company As outlined in his Director s questionnaire, the Director advised that he first realised the Company may have had to be placed into external administration on 10 May 2017 when their main kitchen supplier withdrew support. The Director subsequently sought advice from his accountant and was directed to seek advice from an insolvency practitioner. Below is an extract from the Director s questionnaire outlining what were, in his opinion, the causes of the demise of the Company: When we lost our ability to supply we looked into the financials and realized we had always put more of our own money into the company, but this time we were unable. The Director s reason for the cause of failure of the Company is partially correct, however there would also appear to have been an underlying lack of profitability of Company operations over the past three years. Page 8

9 2.8. Further Investigations to be Undertaken The investigations listed below remain outstanding as at the date of this report: Finalisation of preference claim recovery actions 3. Receipts and Payments Attached at Appendix A are details of all receipts and payments in the liquidation to date. 4. Likelihood of a Dividend The Act specifies that if there are funds left over after the payment of the costs of the liquidation, the Liquidator will pay these to creditors as a dividend. Generally, the order in which funds are distributed are as follows: 1. Costs and expenses of the liquidation, including Liquidator s approved fees; 2. Outstanding employee wages and superannuation (equal ranking); 3. Outstanding employee leave of absence payments including annual leave, sick leave (if applicable) and long service leave; 4. Employee retrenchment pay (redundancy payments or pay in lieu of notice as the case may be); and 5. Ordinary unsecured creditors. Each category is paid in full before the next category is paid. If there are insufficient funds to pay a category in full, the available funds are paid on a pro-rata basis. The next category or categories will not receive a dividend. The likelihood of a dividend being paid to creditors will be affected by a number of factors including: the size and complexity of the liquidation the amount of assets realisable and the costs of realising those assets the statutory priority of certain claims and costs the value of various classes of claims including secured, priority and unsecured creditor claims the volume of enquiries by creditors and other stakeholders Accordingly, given the asset position of the Company, potential recoveries that may be achieved and the costs involved with the liquidation, I anticipate that there may be a modest return to priority creditors in respect of unpaid Superannuation Guarantee Charge. If this position changes, I will advise creditors via future circulars. To the extent there are any outstanding priority employee entitlements (not including superannuation) these may be satisfied under the Fair Entitlements Guarantee regime. Page 9

10 5. Costs of the External Administration My remuneration was approved by creditors in the total amount of $59, at a meeting of creditors held on 27 June I have set out below a summary of the resolutions that were approved: Remuneration Amount (Exc GST) Current remuneration approvals sought: Resolution from 25 May 17 to 14 June 17 $23, Resolution from 15 June 17 to 27 June 17 $12, Resolution from 28 June 2017 to finalisation $23, Total remuneration sought $59, To date, $35, has been drawn on Administrator s approved remuneration, leaving a balance of $23, left to draw for the Liquidator s remuneration. 6. What Happens Next? I will proceed with the liquidation, including: Conduct further investigations into preference claim recovery actions Upon conclusion of the above I will convene the final meeting of creditors and members of the Company If I receive a request for a meeting that complies with the guidelines set out in the initial information provided to you, I will hold a meeting of creditors. I may write to you again with further information on the progress of the liquidation. I expect to have completed this liquidation within 8 months. 7. Where Can You Get More Information? You can access information which may assist you on the following websites: ARITA at ASIC at (search for insolvency information sheets ) You can contact my office and speak with Samantha Morgan on 08) or via on smorgan@hlbinsol.com.au. There is also information about this liquidation on my firm s website: Yours faithfully, Gary Anderson Liquidator of Kitchen Choice Pty Ltd (In Liquidation) ACN Page 10