Sharechat Logo

High Court orders Forestlands IRD debt can be paid from $18M funds in trust; liquidation sought by FMA

Monday 23rd April 2018

Text too small?

The Financial Markets Authority has applied to the High Court for 18 Forestlands companies to be put into liquidation, with the court having ordered that the companies' tax debts can be paid from money held in trust.

 

The FMA began investigating Forestlands in March last year, with concerns about fair distribution to investors across the companies, and the companies having failed to file financial statements. It referred the issue to the Serious Fraud Office and investigations by both agencies are ongoing. When the FMA began investigating it identified funds worth $18 million - the net proceeds from asset sales minus some deductions to repay loans from entities associated with director Rowan Kearns - which were placed in trust to protect investors' interests.

 

Last week, the High Court in Auckland granted a request from 10 of the Forestlands companies for $1.6 million in Inland Revenue debt and interest to be paid from that $18 million, after the FMA declined to consent. The FMA had already applied for the companies to be put into liquidation in late March, which will be heard in the Nelson High Court on April 26.

 

In his judgment, Justice Matthew Muir said allowing the payment to be made would avoid $157,300 in IRD penalties, and it was "demonstrably in the interests of the shareholders of the tax paying entities that such penalty payments not be incurred."

 

The judge considered the FMA's submission that the tax debt could be paid by other companies related to Kearns, but said insolvency experts KordaMentha were still reviewing the appropriateness of those repayments, and he was "not therefore in a position to direct payment of the IRD debts from any source other than the sum on deposit."

 

Justice Muir said an affidavit from the Forestlands companies' accountant, Wayne Anderson, confirmed that the 10 businesses had "substantial net asset positions after payment of core tax liabilities and interest" and could pay their debts in full, so there was no evidence of insolvency or that the IRD would be treated as preferential creditors by the order being made.

 

The FMA's liquidation application was brought on multiple grounds, the court said, including "delay on the part of the companies’ director Mr Kearns in notification to the shareholders of the sale of the companies’ forestry assets, lack of progress with regard to distribution of the proceeds, failure to maintain an accurate share register, failure to keep adequate accounting records and what is alleged to be persistent failure to comply with the relevant reporting requirements."

 

The application does not cover Forestlands NZ Limited and Forestlands Marketing, which are also in the Forestlands group of companies, but are not financial markets participants, the FMA said. 

 

"The FMA is bringing this application because at this point it has no confidence in the director to manage the relevant interests appropriately between the director, the entities associated with him, ‘B’ shareholders and creditors of the Forestlands companies," the regulator said in a statement. "The application to appoint a liquidator will bring independence and certainty to the process and enable the liquidator to determine the appropriate way forward for releasing Forestlands funds to investors."

 

(BusinessDesk)

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

MARKET CLOSE: NZ shares fall as investor uncertainty weighs on exporters; F&P Health, A2 drop
NZ dollar drops below US68c on plan to up bank capital
Noel Leeming fined $200,000 for misleading consumers
Big four banks face stiffer capital requirements from RBNZ
Infratil signals A$50m investment in Canberra Data Centres
Govt provides $2.5 mln to develop Opotiki aquaculture
Labour co-ordinator role may alleviate kiwifruit labour shortage
NZ manufacturing activity chugs along in November
Australia's GWA lobs in $118M bid for Methven
Govt leaves door open for higher emissions price cap

IRG See IRG research reports