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17-323MR ASIC obtains orders to wind up investment and technology companies
The Supreme Court of Queensland in Brisbane has appointed Mr Michael Hill and Mr William Harris, of McGrathNicol, as joint and several liquidators of Gognos Holdings Ltd (Gognos) and Dynamic Agri Tech Ltd (DAT) (companies). The court has ordered that the liquidators' appointment be stayed until 10 am on Friday, 29 September 2017, in order that the companies' rights of appeal be preserved.
After a trial in the Supreme Court of Queensland, the court found that both Gognos and DAT had committed, and were continuing to commit, numerous contraventions of the Corporations Act 2001 (Cth) (Act).
The past and continuing contraventions include a failure by the companies to lodge audited reports with ASIC, a failure to report to members annually, a failure to hold Annual General Meetings and a failure to keep and produce accounting records. The court stated that the companies have contravened 'important provisions, aimed at ensuring the affairs of companies are appropriately regulated for the protection of shareholders and the public.'
The court also found that misleading representations were made to investors in Gognos by Mr Manasseh Showa Manasseh (also known as Maurice Showa Manasseh).
The court concluded that it was in the public interest for the affairs of the companies to be placed into liquidation and be wound up because there is a well-founded and justified lack of confidence in the conduct and management of the companies' affairs which gives rise to a risk to the public that warrants protection, as well as to prevent and condemn the repeated and continuing breaches of the Act. The court stated:
'It is inappropriate that the [companies] be allowed to continue on the basis of what could be put no higher than an 'unknowable' prospect of potential commercial success … and where those now presenting as the 'new management' are not 'new' at all, but have long-term associations with the companies and the principal offender in terms of the misleading conduct of the past, Mr Manasseh, who remains in the shadows of these companies.'
Download a copy of the Court's judgment here.
Gognos' sole business activity was raising funds from members of the public through the issue of its shares. Those funds were on-lent to Dynamic and related entities to fund their business operations, which included the development of technology to manufacture animal fodder in container modules.
Gognos raised more than $7 million from more than 100 shareholders since 2008. ASIC filed its application to wind up the companies on 21 September 2016. See 16-2013MR (24 October 2016).
Upon undertakings being given by the companies, their office holders and Dynamic Fodder Pty Ltd, ASIC and the companies have agreed to stay the liquidators' appointment until 4 pm on 9 October 2017.
Unless the companies file a notice of appeal and an application for a further stay by 9 October 2017, the stay of the liquidators' appointment will automatically lapse.
The companies and their office holders have undertaken not to issue, sell or otherwise deal with any shares of the companies nor to raise any additional funds by way of equity or debt. Additionally, the companies, their office holders and subsidiary company Dynamic Fodder Pty Ltd have undertaken not to dispose of, use or otherwise deal with any of their assets other than in the usual course of business and not to accept payment of any sums from any entity for any purpose.
Editor's note 2:
On 9 October 2017, the companies filed notices of appeal against the orders appointing liquidators and applied to the Queensland Court of Appeal for a further stay of those orders pending appeal. Accordingly, the stay and undertakings outlined above will remain in place until the companies' application to the Court of Appeal is decided.
Editor's note 3:
On 13 November 2017, the Queensland Court of Appeal ordered that the stay and undertakings outlined above shall remain in place until the resolution of the companies' appeal against the judgment and orders appointing liquidators to the companies. The hearing of the appeal is scheduled for 20 February 2018. The companies were also ordered to provide security for ASIC's costs of the appeal by payment of $30,000 into court within 28 days.
Editor's note 4:
On 20 February 2018, the Queensland Court of Appeal heard the companies' appeal against the orders appointing liquidators to the companies. The Court has reserved its judgment.