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Wednesday 16 September 2015

15-255MR Astra Resources breaches fundraising provisions

The Federal Court has found that Astra Resources PLC (Astra Resources) and its subsidiary, Astra Consolidated Nominees Pty Ltd (Astra Nominees), breached the fundraising provisions of the Corporations Act.

On Monday, 14 September 2015, Justice White made declarations in civil proceedings brought by ASIC that Astra Resources and Astra Nominees breached the Corporations Act by raising funds from investors without a prospectus or similar disclosure document, as required by the law. His Honour found that:

  •  Astra Nominees breached the law by offering shares to 281 investors, who paid a total of more than $6.5 million for their shares between September 2011 and August 2012;
  • Astra Resources breached the law by distributing share application forms to those investors, through its agents or in a number of cases directly itself.

The making of these declarations means the Court will now proceed to determine ASIC's remaining claims against the companies and former directors Jaydeep Biswas, Barrie Meerkin and Silvana De Cianni.

ASIC has applied to the Court for orders requiring Astra Resources and Astra Nominees to inform affected shareholders that they may elect to have their share purchase contracts set aside and claim a refund or damages.

ASIC has also alleged that the former directors failed to take reasonable steps to prevent the illegal fundraising. ASIC is seeking orders that they be disqualified from managing corporations.

These remaining claims will be determined by the Court following further hearing commencing 28 October 2015.  

Background

ASIC launched its legal action in May 2014 (refer: 14-108MR).

Justice White delivered judgment on 24 July 2015, upholding ASIC's claims that Astra Resources and Astra Nominees had breached the fundraising provisions of the Corporations Act. His Honour indicated the Court would make declarations of contravention against those companies, as sought by ASIC, and listed the matter on 14 September 2015 to hear from the parties as to the precise terms of the declarations to be made (refer: 15-197MR).

In concluding that declarations are appropriate in this case, Justice White said, 'They will constitute a clear finding of the contravening conduct of the defendants and will mark the Court's disapproval of their behaviour. It is appropriate that those involved in making offers of shares to the public and in distributing applications for the offer of shares comply with the requirements of the Act, and the making of the declarations should reinforce that obligation'. 

A copy of the full judgment is available here.

Editor's note 1:

At the hearing on 28 and 29 October 2015, an application by Astra Resources, Mr Biswas and Ms De Cianni for a stay of ASIC's proceeding pending an appeal from the declarations made by Justice White on 14 September 2015 was refused. The hearing of ASIC's remaining claims will resume on 30 November 2015.

Editor's note 2:

On 2 November 2015 Astra Resources Ltd was placed into liquidation in the UK. The hearing of ASIC's remaining claims against Astra Resources has been adjourned to 21 December 2015 to enable the liquidators (Grant Thornton UK LLP) time to consider their position in relation to ASIC's proceedings.

The appeal by Astra Resources, Mr Biswas and Ms De Cianni from the declarations made by Justice White on 14 September 2015 has been listed for hearing on 3 and 4 March 2016.

The hearing of ASIC's remaining claims against Astra Consolidated Nominees, Biswas and De Cianni resumed on 30 November 2015, and concluded on 1 December 2015. Judgement has been reserved.

Editor's note 3:

At the hearing on 21 December 2015, the UK liquidator of Astra Resources Ltd (Grant Thornton UK LLP) was given leave to intervene. The hearing of ASIC's remaining claims against Astra Resources was concluded, and judgment has been reserved.

Editor's note 4:

On 22 January 2016, Justice Besanko granted an application by ASIC for a stay of the appeal by Astra Resources, Mr Biswas and Ms De Cianni from the declarations made by Justice White on 14 September 2015, which had been listed for hearing on 3 and 4 March 2016. Those hearing dates have now been vacated.

A copy of Justice Besanko's judgment is available here.

The hearing of ASIC's remaining claims has concluded and judgment has been reserved.

Last updated: 28/01/2016 12:00