Mining engineering group Forge may have traded insolvent with loss of 1,300 Jobs in Australia The administrators appointed to Forge Group say the mining engineering firm may have been trading insolvent since November. Forge entered voluntary administration last month, after sustaining large write-downs on key projects due to cost blowouts. The firms administrators from Ferrier Hodgson say the company may have been trading without being able to cover payments to creditors for three months before its collapse. Based on our preliminary investigations to date, we are of the opinion that the group may have been insolvent as early as November 2013, the administrators noted in their report to creditors. However, they caution that the date may change on a more detailed examination of Forges books. Trading while insolvent can be a prosecuted as a breach of directors duties under the Corporations Act, however the administrators say Forges board members will not necessarily find themselves in legal trouble. There are a number of defences available to the directors in relation to insolvent trading given the work undertaken to restructure the group and secure further capital, the report added. Accordingly, further work would need to be undertaken by a liquidator to consider the commerciality of a claim against the directors with respect to insolvent trading. Aside from an investigation into the precise date of insolvency, the administrators urge a closer look at the reasons for the groups failure, a review of directors actions with regard to bonuses and other entitlements as well as the CTEC acquisition, and whether there are any voidable transactions. The administrators say Forge likely failed due to the acquisition of CTEC, over-reliance on debt funding and low margins on contracts opening the company up to the risk of cost blowouts. They conclude that, as the company is clearly insolvent, it should be wound up and liquidated.
Posted on: Fri, 14 Mar 2014 08:02:58 +0000
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