On 20 September 2019, and following a successful ob体育 application, the Federal Court of Australia ordered the appointment of provisional liquidators to ASX-listed Merlin Diamonds Limited (Merlin).
The application arose from ob体育鈥檚 concerns, which included:
- Merlin advancing, since 2012,听substantial funds to Axis Consultants Pty Ltd (Axis), a related management services company, without shareholder approval and that $13,752,124听was owed by Axis to Merlin as at 30 June 2018;
- the advances to Axis having been used to fund private companies听associated with Mr听Joseph Gutnick, a current and former director of听Merlin and Axis respectively, and provided no discernible benefit听to Merlin;
- the advances to Axis appearing to be unreasonable,听uncommercial and non-arm's length;
- no security for the advances to Axis having been provided听by it or any third party;
- the advances to Axis having been fully impaired by Merlin in each financial year;
- Merlin鈥檚 auditors being unable to obtain sufficient appropriate evidence to be satisfied that Axis is听likely to be able to repay the advances;
- Merlin receiving, in October 2016, $900,000听from Chabad Properties Pty Ltd (Chabad) for convertible notes and options issued by Merlin to Chabad鈥攈owever, the ultimate source of the money paid听by Chabad (of which Mr Gutnick is a former director) was, in fact, Merlin.
- Merlin鈥檚 audited accounts for the听half-year ended 31听December 2018 (due 18听March听2019) having听not been lodged with ob体育;
- the financial position of Merlin Diamonds as at 30听June 2018 raising questions over the company鈥檚 solvency; and
- Merlin听having no company secretary since 8听January 2019.
Justice O鈥橞ryan appointed Mr听Salvatore Algeri and Mr听Timothy Norman, of Deloitte Financial Advisory Pty Ltd, as joint and several provisional liquidators to Merlin. Justice O鈥橞ryan also ordered, among other things, that the provisional liquidators shall, within 42 days, provide to the Court a report that includes:
- the identification of Merlin鈥檚 assets and liabilities;
- an opinion as to the solvency of Merlin, the value of its assets and whether it has kept proper financial records;
- an opinion as to whether Merlin has contravened any provision of the Corporations Act and whether there have been any suspected contraventions by Merlin鈥檚 current or former directors or officers;
- the likely return to creditors; and
- any other information necessary to enable the financial position of Merlin to be assessed.
The matter will be listed by the Court for a further hearing on a date to be fixed.
A copy of his Honour鈥檚 judgment can be downloaded .
ob体育鈥檚 investigation into the affairs of Merlin is continuing.
Background
Merlin, a Melbourne-based company listed on ASX, engages in the exploration and development of diamond mining projects. Its flagship project is the Merlin diamond mine in the Northern Territory.听
Merlin鈥檚 shares have been suspended from trading since 1 October 2018.听Merlin has 3.3听billion ordinary shares issued, and last traded at $0.006 per share 鈥� resulting in a market capitalisation of approximately $20听million.
A provisional liquidator is appointed by the court to preserve a company鈥檚 assets until a wind-up application is decided and to attend to any other matters as ordered. ob体育 currently has before the Federal Court an application to wind up Merlin which will be determined at a later time.
Editor's note:
On 17 October 2019, the Federal Court made a number of orders including that the hearing of ob体育鈥檚 application for the appointment of a liquidator to Merlin be listed for hearing on 10 March 2020 for three days and a further case management hearing be listed for 31 January 2020. A copy of the Court鈥檚 orders can be downloaded .
Editor's note 2:
On 14 November 2019, the Federal Court listed the matter for a directions hearing at 10:15am on 6 December 2019.
Editor's note 3:
On 17 December 2019, the Federal Court made a number of orders including that ob体育 have leave to amend its originating process to have Merlin wound up on the additional ground of insolvency; that by 4pm on 21 January 2020 the Interested Parties who have sought leave to be heard in the proceeding file and serve a notice stating whether they oppose the wind up of Merlin; and if there is no opposition to the winding up of Merlin the matter be listed for final hearing on 4 February 2020. A copy of the Court鈥檚 orders can be downloaded .
Editor's note 4:
On 31 January 2020, the Federal Court varied the orders made on 17 December 2019.听 A copy of the Court鈥檚 orders can be downloaded . ob体育's application for the appointment of a liquidator to Merlin is listed for hearing on 10 March 2020 (refer Editor's note above).
Editor's note 5:
ob体育's application for the appointment of a liquidator to Merlin was heard by the Federal Court on 10 March 2020. The Court reserved its decision.
Editor's note 6:
On 16 March 2020, the ASX announced that Merlin Diamonds has been removed from the ASX Official List by the ASX with effect from the commencement of trading on 16 March 2020.
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