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CRS helped gentleman clothing chain restructure

Anthony Warner was appointed voluntary administrator by the Scarf family in 2008 to help restructure the business. During the voluntary administration process we kept the business trading and all retail stores remained open. We worked with the Scarf family so they could formulate a deed of company arrangement which we felt comfortable with and could recommend to creditors. The deed of company arrangement was successfully implemented and the business was successfully restructured avoiding a company liquidation. The Rubeun F Scarf business continues to trade today.

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ATO seeks order to wind up Gore

ATO seeks order to wind up Gore

THE Australian Taxation Office plans to seek a Federal Court order to bankrupt failed Gold Coast businessman Craig Gore.

The ATO flagged its intentions yesterday after Mr Gore’s creditors voted overwhelmingly to terminate his personal insolvency agreement to repay a fraction of the $495 million he owed.

Mr Gore’s trustee, accountant Anthony Warner, of insolvency firm CRS Insolvency Services, determined this month that Mr Gore had defaulted on a deal struck in late 2010.

Under that agreement, Mr Gore was required to repay just $3.3 million and deposit 30 per cent of any profits into a trust.

Some of Mr Gore’s biggest creditors, including the Mayfair Group and Trilogy Funds Management, had strongly pushed for Mr Gore to be bankrupted because it would give greater investigative powers to a trustee.

Mr Gore, who was bankrupt in the 1990s, said he had launched Federal Court action to challenge Mayfair’s $152 million debt claim. The next hearing in the matter has been set down for May 9.

“It is my opinion that the matters before the court ought to have been heard prior to any (creditors’) meeting taking place,” Mr Gore said.

But Mayfair chairman Shane Stone said yesterday Mr Gore’s challenge had no basis in fact or law.

He said a bankruptcy trustee could dig deeper in to Mr Gore’s business affairs and search for possible hidden assets.

”There’s more to be done on Gore and his accomplices,” Mr Stone said. ”We’d like to know where the money went. We would like to really understand just what went on.”

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The Rene Rivkin Story

April 28th, 2014

During his lifetime, Rene Rivkin was a well known stockbroker and entrepreneur. His flamboyant nature meant that he was never far
from controversy. After being convicted for insider trading, serving a 9 month sentence of periodic detention and being banned for life from holding a stockbroking licence, Rivkin took his own life on 1 May 2005

The reason for the appointment

After his death, Rivkin’s executors ascertained that his deceased estate was not sufficient to pay his creditors. In particular, the
Australian Taxation Office had recently served a demand for approximately $21 million in respect of unpaid tax and penalties. That
demand arose out of a long running and high profile ATO and ASIC investigation into Rivkin’s business affairs including share trades
made through Swiss bank accounts.

On 7 November 2006, Rivkin’s executors applied to the Federal Court of Australia seeking an order for the administration of the
deceased estate under Part XI of the Bankruptcy Act. The Court made that order and appointed Anthony Warner of CRS Insolvency Services as trustee of the bankrupt deceased estate. From the date of his appointment, Mr Warner took steps to unravel the complex financial and business dealings of the late Rene Rivkin.

There was a particular emphasis on finding undisclosed or concealed assets that could be realised so as to be divided amongst Rivkin’s
creditors.

The administration of the deceased estate under Part XI of the Bankruptcy Act had 4 distinct stages which were as follows:

  1. The sale of Rivkin’s private watch collection.
  2. Recognition of the bankruptcy and litigation in England.
  3. Investigation of secretive share trading through Scottish partnerships.
  4. Investigation of and recovery from concealed offshore companies in Jersey

Sale of extensive private watch collection

During his lifetime, Rivkin maintained an extensive collection of Swiss watches. Many of those watches were purchased during the world famous annual Watch and Jewellery show in Basel, Switzerland. The watch collection was auctioned on-line by CRS Insolvency Services. The auction attracted a high degree of publicity and public interest. So far as we are aware, the auction of the Rivkin watch collection was the first time an Australian Insolvency Practitioner had conducted his or her own on-line auction without the assistance of an auctioneer.

The auction was a great success and generated sales well above valuation prices. All watches put up for auction were sold with the
most expensive watch drawing a bid of $20,200 (a Harry Winston men’s dress watch).

Recognition of the bankruptcy and litigation in England

Another iconic feature of the administration of Rivkin’s estate is its involvement in litigation in the United Kingdom.

In May 2007, Mr Warner, with the assistance of Ashfords LLP in England, applied to the English High Court for an order recognising the Australian bankruptcy proceedings as foreign main proceedings under the UNICTRAL Model Law. In light of the fact that the UNICTRAL Model Law came into effect in England only in April 2006, this was one of the first applications of its kind in the United Kingdom. The English High Court made the order sought, which greatly assisted Mr Warner in unravelling the complex structures that had been put into place by Rivkin and his advisors in the United Kingdom.

In August 2007, Mr Warner again applied to the English High Court under the Model Law (Article 21(1)(d)) for an order that Vefides
(a corporate services provider responsible for managing a relevant structure) produce copies of documents relating to the dealings
between Rivkin and various Scottish partnerships. While Verfides did not intend to oppose the application, a Swiss lawyer, Benno
Hafner, and his law firm, Hafner & Hoschstrasser (”the Intervenors”) applied to be joined to the application.

The Intervenors claimed to be interested parties within the meaning of Article 22 of the Model Law on the basis that they had a number of dealings with Verfides on behalf of 60 of its clients, and any disclosure of documents by Verfides to the Court may be in breach of the Intervenors’confidential obligations or an infringement of their clients’ right to respect for private and family life under Article 8 of the European Convention on Human Rights.

At the same time as Mr Warner’s application for the disclosure of documents, the Australian Securities and Investments Commission had brought proceedings seeking disclosure of the same documents (“the Mutual Legal Assistance Proceedings”). The Intervenors had a similar involvement in those roceedings. They eventually sought an order from the Court in Mr Warner’s proceedings that Mr Warner’s application be stayed until after the outcome of the Mutual Legal Assistance Proceedings. After a delay of almost 12 months, in May 2008, the English High Court refused to grant such stay and the matter proceeded to a substantive hearing to determine whether the documents ought to be disclosed.

At the final hearing, Ashfords LLP on behalf of Mr Warner argued that the Intervenors’ and their clients’ rights under Article 8 would not be infringed by disclosure of the documents. In the alternative, if it was found that the disclosure would infringe those rights, Mr Warner as Trustee in Bankruptcy was exercising a statutory function and, accordingly, such interference with the rights under Article 8 rights was justified under subsection (2) of that Article. The English High Court held that the rights under Article 8 would have been interfered with, but agreed with Ashfords LLP’s submission that such interference was justified in the circumstances: Warner v Verfides & Anor [2008] EWHC 2609 (Ch) (29 October 2008. It then made an order for disclosure of all the documents save for 7 pages which had been removed or redacted following confidential submissions to the Court by the Intervenors.

Complex dealings through Switzerland

The disclosure of documents and further investigations indicated that Rivkin used a complex structure of Scottish limited partnerships to trade shares anonymously using bank accounts maintained in Switzerland. A Scottish partnership is a different concept to a general partnership in the sense that the partnership or “firm” is treated as a distinct legal person separate from its members. Further, the liability of partners differs in that a Scottish partnership can consist of general partners who are liable for the debts and obligations of the limited partnership and limited partners whose liability is limited to the extent of their capital contributions. Management functions are exercised by the general partners and a limited partner is unable to take part in or otherwise interfere with the management of the partnership.

The partnership and banking practices were established to conceal Rivkin’s beneficial ownership of the funds and assets within the
structure. The anonymity afforded by the structure allowed Rivkin to trade shares for many years without such trades and resulting
profits being linked to him by the Australian authorities. It was not until the ATO and ASIC conducted their detailed investigation that the full extent of Rivkin’s secretive trades came to light. The tax assessments and penalties that flowed from the investigation was the main impetus for approaching the Court for administration under Part XI.

Mr Warner was able to use his position as trustee of the deceased estate to obtain information that was not available to the regulators during the course of their investigation. CRS appointed Swiss auditors to review Swiss bank accounts linked with Rivkin. CRS also appointed an investigator on the ground in Zurich to conduct discreet inquiries in relation to Rivkin’s affairs. The work on the part of CRS paid off when transcript of a confidential compulsory interview conducted by the District Attorney of the Canton of Zurich came into the hands of Mr Warner. The interview arose out of allegations that a bank manager employed by Bank Leumi (an Israeli bank based in Zurich) embezzled funds held in Bank Leumi accounts or otherwise transferred such funds without authorisation. The banker, Mr Ernst Imfeld, alleged that Rivkin had created documents that were partly forged relating to share and currency transactions.

The interview was conducted in December 2002 and Rivkin soon admitted that he controlled the accounts held in the name of various Scottish partnerships and was the controlling mind of the partnerships themselves. Rivkin testified that the Scottish partnerships maintained accounts with Bank Leumi. When Rivkin wanted to trade shares anonymously, he would purchase shares on the Australian Stock Exchange (and markets around the world) in the name of Bank Leumi and the bank manager. On notification of the purchase, the manager would automatically attribute the shares to the accounts of the Scottish partnerships. The bank manager established portfolios with each of the accounts.

Rivkin would only contact the bank manager if the shares purchased were in fact purchased for or on behalf
of Rivkin’s associates. If that was the case, the bank manager would allot the assets to the relevant portfolios within the account.
Imfeld’s unauthorised transactions affected, amongst others, accounts held in the name of Rivkin controlled Scottish partnerships.
Accordingly, Mr Warner took the view that proceedings should be brought in Switzerland to recover the funds that were misappropriated by Imfeld. The Swiss auditors appointed by Mr Warner were able to establish that approximately AUD$2,780,000 had been misappropriated by Imfeld and he admitted to same. The Swiss auditors also identified further suspected unauthorised transactions amounting to AUD$7,910,000. Imfeld was convicted of the fraud in 2008 and received a sentence of 8 years imprisonment. The Court found that Imfeld had misappropriated at least AUD$175,000,000.

In December 2010, Mr Warner commenced proceedings against Bank Leumi in the Commercial Court of the Canton of Zurich on behalf of the bankrupt estate and the Scottish partnerships maintained by Rivkin. The purpose of the proceedings was to recover monies misappropriated by Imfeld. Mr Warner experienced high barriers of entry to the Commercial Court. For instance, the Court filing fee alone amounted to approximately AUD$240,000. Cases in the Commercial Court are ranked in priority based on the quantum of the claim and the importance of the matters at stake. Cases involving significant amounts of money and issues of high importance are fast tracked through the system notwithstanding the date on which they were filed. The system also involves a number of preliminary hearings where the parties are encouraged to mediate. At such preliminary hearings, the judge will have read the papers and their assistant would have written an advice on the matter. The judge then gives a preliminary opinion and indicates what the likely outcome will be if the matter proceeds to a full hearing. If the matter does proceed to a full hearing, the judge that conducts the preliminary hearing also presides over the full hearing. When the first preliminary hearing is finalised and if the matter is referred to a full hearing, the Commercial Court requires a retainer to progress the matter further. In this case, the Commercial Court required a retainer of between approximately AUD$175,000 and AUD$233,000 to write and issue judgment in the matter. It was estimated that the judgment would be available between 12 to 18 months after payment of the retainer. The Swiss proceedings were settled in December 2012 for an undisclosed sum.

Concealed offshore companies in Jersey

In the course of the administration, Mr Warner conducted public examinations. As a result of the information disclosed in the examinations and further evidence found in the course of his investigation, Mr Warner formed the view that Rivkin was the beneficial owner of funds held by a company known as Thameslink Limited. It was apparent that Thameslink was registered and maintained bank accounts in the Bailiwick of Jersey, a British Crown dependency located off the coast of Normandy, France.

During his investigation into the affairs of Rivkin, Mr Warner interviewed various employees and associates of Equity Trust, a corporate services provider in Jersey responsible for managing Thameslink. Those interviews made it clear that substantial funds were held in Thameslink’s Jersey bank account. Despite requests by Mr Warner, Equity Trust did not confirm that they would freeze the Thameslink accounts of their own volition pending proceedings being brought by Mr Warner to recover the funds. Fearing an imminent risk of dissipation of the Thameslink funds, Mr Warner retained Ashfords LLP (UK law firm) who were assisted by Hanson Renouf (Jersey law firm) to apply for a freezing order and an order for disclosure of all documents relating to Thameslink and its accounts within 24 hours. Those orders were granted.

Jersey is not and never has been a signatory to the UNCITRAL Model Law. Under the laws of Jersey, it is open to the Courts to have
regard to the operation of the Model Law in insolvency proceedings, but the Model Law does not actually apply. The recognition of
foreign bankruptcies and provision of judicial assistance in Jersey is therefore wholly discretionary.

To leap the hurdle posed by the laws of Jersey, Mr Warner applied to the Federal Court of Australia for the issue of a letter of request by the Federal Court to the Royal Court of Jersey seeking that the Royal Court act in aid of and be auxiliary to the Federal Court in relation to the Rivkin bankruptcy. The purpose of the letter of request was to seek recognition of the bankruptcy by the Royal Court and obtain assistance in the recovery of funds held by Thameslink. The letter of request was issued and the Royal Court agreed to act in aid of and auxiliary to the Federal Court (Warner, in the matter of Rivkin [2007] FCA 2020). Subsequent investigations revealed that the Thameslink accounts held AUD$3 million, being the proceeds from the sale of Rivkin’s luxury motor vessel, the Dajoshadita. As Mr Warner was able to demonstrate to the Royal Court of Jersey that Rivkin was in fact the beneficial owner of the funds, the Court ultimately ordered that the funds held by Thameslink be paid over to the bankrupt estate for the benefit of creditors. That was particularly gratifying as the executors were not aware of the existence of Thameslink or the cash at bank following the sale of the vessel until Mr Warner had performed an in depth investigation into the affairs of Rivkin. The administration was a success for creditors and they were paid a dividend of 11 cents in the dollar on claims totalling AUD$26.68m.

 

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Retravision NSW Pty Ltd – Voluntary Administration and Deed of Company

Retravision NSW Pty Ltd – Voluntary Administration and Deed of Company Administration

Industry – Retail distribution

Trevor was appointed Joint VA and DOCA Administrator over the Retravision Buying group in NSW which franchised and distributed to 120 stores.

The DOCA enabled the franchisees to be sold off to the Retravision buying groups in South Australia and Qld with the support of the groups major suppliers.

Click here to read the Sydney Morning Herald article

Click here to read the Port News article

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Who Gets Paid First When a Company Goes into Liquidation?

Who Gets Paid First When a Company Goes into Liquidation?
When a company goes into liquidation, the most common question is what will happen to the assets of the company and in what order do people get paid.

If you are owed money by company which CRS is handling you will be able to keep up to date with the liquidation process by using our creditor portal. We load all reports we issue to creditors onto our website portal so you can view them at a time which is convenient to you.

CRS can handle all types of company liquidations:
1) Creditors’ Voluntary Liquidation;
2) Members’ Voluntary Liquidation; and
2) Court Appointed.

The process to start a liquidation
If your company is insolvent it can be wound up through a Creditors’ Voluntary Liquidation or by the Court. If a creditor is owed money it can apply to the court for a Court appointed liquidator to be appointed. Whilst a Creditors’ Voluntary Liquidation (CVL) sounds like a creditor will initiate the winding up, it is actually initiated by the directors and members of the company.

Who gets paid in a liquidation and in what order?

Secured creditors who hold security over all of the company’s assets are paid first and if there is any surplus after the secured creditor is paid, then the order of payment for the other stakeholders is as follows:

The costs of liquidation;
Priority unsecured creditors (employees); and then
Unsecured creditors.

If you are considering a company liquidation, you need to consult with an insolvency specialist. At CRS Insolvency Services, our consultants are all highly trained in corporate insolvency assignments. We will provide professional advice to help you make the best decision for your company while avoiding personal liabilities. Contact CRS Insolvency Services on 1800 210 073 for 24/7 free expert advice now.

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Tips for Managing Business Tax Debt

Tips for Managing Business Tax Debt

As a company owner, it is essential to be proactive in managing your business tax debt. If you neglect your business tax obligations, it may lead to dire legal consequences. The ATO can issue you with a statutory demand, garnishee order or a director penalty notice. Read below for some tips on managing your business tax debt.

Maintain your financial records
If you are struggling with business tax debt, it is important to maintain accurate financial records. Make sure your cash flow statements and profit and loss statements are updated to reflect your company’s position. This is essential to gain a true understanding, and to plan how to move forward accordingly.

2) Prioritise your business tax debt
Ignoring your unpaid business tax debt will only cause more stress and it will also exposure you to personal liability. Make sure that you continue to lodge your business activity statements on time. Failure to lodge your business activity statements within 3 months of their due date will result in personal liability of the company director.

3) Organise a payment plan
Once you know how much you can afford to pay back on a consistent basis, contact the ATO and organise a payment plan.

4) Consult an expert
If you are still unsure, we assist businesses who are concerned about their solvency and provide professional advice here at CRS Insolvency Services. We are not biased towards an insolvency appointment if that can be avoided. If you would like more information, please call our 24 hour insolvency advice line on 1800 210 073. We offer FREE initial advice.

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What is a statutory demand?

A Creditors’ Statutory Demand is a formal demand served by a creditor against a debtor company, requiring the debt to be paid within 21 days of service. A creditors’ statutory demand can be served under s459E of the Corporations Act (Cth).

Although it was not designed to be a debt recovery tool, there are dire consequences if a company ignores a statutory demand, as it will trigger the ability for the creditor to commence winding up proceedings against your company.

There are several strict requirements in which a statutory demand must abide by.

The minimum value of a debt to be demanded must be more than (as at the date of publication). This includes any interest on the debt.

The statutory demand must be in the approved form (Form 509H), as per Section 459E of The Corporations Act 2001. This means it must:

  • Be in writing;
  • Be signed by or on behalf of the creditor; and
  • By served at the debtor company’s registered office.

The nature of the debt must not be in respect of unliquidated damages or prospective liabilities.

If you have received a Creditors’ Statutory Demand and you cannot pay the debt you need to consult with an insolvency specialist immediately. At CRS Insolvency Services, our consultants are all highly trained in corporate insolvency assignments. We will provide professional advice to help you make the best decision for your company. Contact CRS Insolvency Services on 1800 210 073 for 24/7 free expert advice now.

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What is the difference between Liquidation, VA & Receivership?

What is the difference between receivership, administration, and liquidation?

 

As a company director, you may have heard of the words receivership, administration, and liquidation but you are not sure about the differences.

There are significant differences between each type of insolvency appointments and they have different consequences for creditors and other stakeholders.

 

Receivership

Normally, Receivers are appointed by a secured creditor who holds security over some or all of the company’s assets. The Receiver will collect and sell company assets to repay the secured creditor. Their responsibility is to the secured creditor who appointed them and not general unsecured creditors who may also be owed money.

 

Voluntary Administration

Usually a Voluntary Administrator is appointed by the directors of the company.  This type of appointment is chosen when the company is still trading but has unpaid debts which it cannot pay. The administrator will act for all creditors (even a secured creditor) and will carry out detailed investigations and prepare a report to all creditors.  At the end of the administration process, creditors will be asked to vote on 3 possible outcomes which are explained below:

 

  1. Enter into a Deed of Company Arrangement (DOCA):
    A director can propose a Deed of Company Arrangement which is a formal agreement between the creditors and company to compromise the debts of the company.  The primary goal is for creditors to receive a better return compared to if the company was wound up and placed into liquidation.

 

  1. Enter into Liquidation:
    If no DOCA is proposed and the company is insolvent then the most likely outcome is liquidation.

 

  1. Return control of the company to the directors:
    If none of the above options are passed at the meeting, creditors can resolve to return the control of the company back to the directors.

 

Liquidation

If a company is placed into liquidation the liquidator will take immediate steps to stop the company from trading and will also sell off any assets. Once the assets have been sold, the liquidator will disburse the surplus funds in accordance with the priorities as set out under the Corporations Act.

 

If you want to enquire about receivership, voluntary administration or liquidation, please call our 24 Hour insolvency advice line on 1800 210 073.  We offer FREE initial advice.

 

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How do I close my business if I’m insolvent

How do I close my business if it is insolvent?

 

If you’ve recently become insolvent, closing your business can be a complicated and emotional time. All directors should understand the options and make a decision as soon as possible. Directors have a duty to prevent their company from trading while insolvent as you need to take the interests of your creditors into account. We’ve listed some of those key options if you’re looking to close your business as a result of it being insolvent.

 

Liquidation

Liquidation is the most direct and efficient way to wind up your company if it has ceased to trade or you want to cease trading. Once you appoint a liquidator, the liquidator will take steps to make sure the business has ceased trading and will then sell the remaining assets. Once the assets have been sold the liquidator will distribute the surplus funds in accordance with the priorities as set out under the Corporations Act.

 

Voluntary administration

If your company is still trading but it is insolvent (or likely to become insolvent) and you want to try and save it then you may wish to consider a voluntary administration. A voluntary administration is easy to initiate if the majority of the company’s directors pass a resolution to appoint a voluntary administrator.  Once appointed the voluntary administrator will take control of the company and the director’s powers will be suspended.  The voluntary administrator will investigate the company’s affairs and report to creditors on the future of the company.  At this point the directors can put a proposal to creditors for a Deed of Company Arrangement. Usually a Deed of Company Arrangement will set out a proposal to restructure the debts of the company which may involve asking creditors to accept something less than what they are owed. The voluntary administrator will call a meeting of creditors, at which time creditors will be asked to vote on 3 possible outcomes:

  1. For the administration to end and pass control back to the directors;
  2. For the company to enter into a Deed of Company Arrangement; or
  3. For the company to be wound up and placed into liquidation

 

Receivership

This process can exist simultaneously with voluntary administration or liquidation and it is not a direct pathway to closing an insolvent business. Only a secured creditor or a Court can appoint a Receiver. The Receiver will only protect the interests of the secured creditor who appointed them.

 

Things to consider

Your company will only officially be closed after it has been deregistered with ASIC.  If you have more than $1,000 owing to creditors or your company has assets you cannot apply to ASIC for it to be deregistered and instead you must appoint a liquidator. After the liquidation has finalised the liquidator, they will apply to ASIC for it to be deregistered.

 

At CRS we are here to help you and we operate a toll FREE 24 hour advice line. Call now on 1800 210 073 to receive free and impartial insolvency advice today.

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