The Australian Securities and Investments Commission has won its battle to have collapsed financial planning group Storm Financial officially wound up after the Federal Court appointed liquidators to the group.
The corporate watchdog applied to the Federal Court to have the company wound up after founders Emmanuel and Julie Cassimatis asked creditors to consider a deed of company arrangement that would have allowed them to regain control of the company and launch legal action against Commonwealth Bank, Storm’s main lender.
The deed of company arrangement would have required creditors to waive their rights to take legal action against the Cassmitises.
But ASIC described an information memorandum explaining the DOCA as “misleading” and moved to kill off the company.
Federal Court judge Justice John Logan was scathing of the Cassimatis’s DOCA, declaring it “is not correct to describe the DOCA as a ‘simple solution’,” and “neither, objectively, is it correct to describe the DOCA proposal as ‘generous’”.
“Storm Financial has not just failed. It has spectacularly failed,” Logan wrote in his judgement.
“That it did so against the background of a wider malaise in the sharemarket and the financial system does not detract from a need for it to be wound up; it emphasises that need.”
Now that the company has been placed in liquidation, liquidators Ivor Worrell and Raj Khatri will be able to start investigating whether the company traded while insolvent, the state of a number of unsecured loans, and a $2 million dividend paid to the Cassimatises in the middle of December 2008, just weeks before the company collapsed.
That means Emmanuel and Julie Cassimatis’s role in the Storm collapse is likely to be under the spotlight, although the couple is believed to be considering an appeal against the Federal Court decision.
The liquidators said yesterday it is “necessary for a comprehensive public examination of all relevant parties to be carried out as soon as possible”.
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James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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