The Federal Court in Adelaide has disqualified three former directors of Astra Resources Limited (Astra Resources) from managing corporations. Founders Jaydeep Biswas and Silvana De Cianni have been disqualified for 12 years and lawyer Barrie Meerkin for nine years.
Justice White made the disqualification orders in a judgment delivered on 20 May 2016. This follows his Honour's judgment on 24 July 2015, finding that Astra Resources raised more than $6.5 million illegally from 281 investors during 2011 and 2012, in contravention of the fundraising provisions of the Corporations Act.
The Court found that Dr Biswas, Ms De Cianni and Mr Meerkin failed to take reasonable steps to prevent these contraventions, in circumstances that justified their disqualification as company directors.
Astra Resources is a public company incorporated in the United Kingdom and was formerly known as Astra Resources PLC. Following its incorporation in 2011, it adopted a fundraising strategy to sell shares to investors through an Australian company Astra Consolidated Nominees Pty Ltd (Astra Nominees). It did so without a prospectus or similar disclosure document as required by the law.
Justice White observed that investment in Astra Resources was speculative and the "provision of a prospectus to investors in relation to investments of this kind was especially important". In imposing a disqualification period of 12 years upon each of Dr Biswas and Ms De Cianni, his Honour took into account "their apparent lack of insight into the obligations of a director of a publicly listed company".
The Court did not accept the contention by Dr Biswas and Ms De Cianni that their disqualification would be detrimental to the future plans of the "Astra Group" of companies, in which their involvement remains central. Justice White referred to evidence that there were plans involving an associated Hong Kong company Incept Holdings Limited, to list Astra Group projects on the Hong Kong, Canadian and Frankfurt Stock Exchanges. His Honour concluded that these projects "may not be illusory but there is no basis on which the Court could conclude that they are viable, or have real prospects of coming to fruition".
In imposing a lesser disqualification period of nine years upon Mr Meerkin, Justice White referred to his culpability in allowing his independence as a legal adviser to be compromised, but gave him credit for his early cooperation.
A copy of the full judgment delivered on 20 May 2016 is available here.
The Court declined to make further orders sought by ASIC, which would have entitled the 281 investors to whom shares were sold illegally to elect to return their shares and receive a refund of their purchase price. Justice White had regard to the recent appointment of liquidators to Astra Resources in the United Kingdom. His Honour found that in those circumstances he could not be satisfied that the orders sought by ASIC would have any utility, or that they would not unfairly prejudice the interests of other shareholders and creditors of the company.
However, his Honour did order that Astra Resources and Astra Nominees write to the 281 affected investors and notify them of the companies' breaches of the law and investors' potential right to claim refunds or damages.
ASIC launched its legal action in May 2014 (refer: 14-108MR).
Justice White delivered a judgment on 24 July 2015, upholding ASIC's claims that Astra Resources and Astra Nominees had breached the fundraising provisions of the Corporations Act (refer: 15-197MR). A copy of the full judgment is available here.
Following upon this judgment, on 14 September 2015 the Court made declarations that Astra Resources and Astra Nominees breached the Corporations Act by raising funds from investors without a prospectus or other disclosure document, as required by the law (refer: 15-255MR). 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 Court then convened further hearings between October and December 2015, to determine ASIC's remaining claims against the companies and their former directors.
On 2 November 2015, Astra Resources Ltd was placed into liquidation in the UK. The liquidators, Grant Thornton UK LLP, were given leave to appear at the final hearing of ASIC's remaining claims on 21 December 2016.
On 22 January 2016, Justice Besanko granted an application by ASIC for a stay of an appeal brought by Astra Resources, Dr Biswas and Ms De Cianni from the declarations made by Justice White on 14 September 2015.
A copy of Justice Besanko's judgment is available here.