By way of brief background:-
- The Corporations Act requires a liquidator to convene a physical meeting of creditors.
- The Company operated entirely online in a format where the director provided recommendations in relation to investing, and in particular investing in the foreign exchange market (FOREX).
- Customers of the Company purchased memberships, which allowed them access to the Company’s website for life, business coaching and other tutorials – they are referred to as Members.
- Once a membership was purchased, Members were introduced to persons who could facilitate them investing funds in a third party investment platform, whereby their investment was to be traded by professional FOREX traders at their discretion. The minimum investment for those Investors was US$10,000 or £10,000.
- The platform was only accessible to Investors online through the Company’s website, and any communication in relation to the investment was communicated through the Company.
- Ultimately on what was reported as one bad day’s trade, Investors lost approximately 60% of their investment. The Company’s assets were frozen after complaints were made to ASIC in Australia and the SEC/CFTC in the US. As a result of freezing orders obtained by ASIC, the Company’s website was shut down and it was prevented from continuing to trade.
- Investigations are currently being undertaken in the United States (by the SEC/CFTC) and Australia (by ASIC) as to alleged fraudulent activity surrounding the platform. There are also criminal proceedings on foot in the Netherlands against third parties in relation to the platform.
- To date, Investors have lodged proofs of debt for their losses, totalling approximately $18 million. Members have lodged proofs of debt for refunds of their membership fees, totalling approximately $1 million. The liquidator, prior to the Court’s determination, had classified the Members and Investors as contingent creditors.
- The Court concluded that the liquidator was justified in making this determination.
- The Company also had general trade creditors in excess of $2.7 million.
- Due to the Company’s online operating model, Members and Investors are located around the world in over 35 different countries across 5 continents.
With creditors in such varied locations it was not obvious where the most convenient location was for the meeting. It was also logistically impossible to hold a meeting by teleconference and have all overseas creditors being able to dial in. Accordingly, the Liquidator sought directions from the Court in relation to how a meeting of creditors ought be conducted which allowed creditors the opportunity to participate in any meaningful way.
The directions sought in relation to the meeting were to enable an online webcast of the meeting and either online or email voting to ensure that the meeting was accessible to a majority of creditors. The Court was aware of an earlier decision in Accommodation Clearing House – where the Supreme Court in NSW was not prepared to make such an order. As with Accommodation Clearing House, as the Company is in liquidation, the Liquidator did not have available to him the “magic wand” of section 447A which in voluntary administrations would have been a more common means of conducting the meeting in that manner.
The liquidator recommended to the Court, and the Court so directed, briefly as follows:-
- Notices for a meeting of creditors can be sent by email, posted on various websites established by the liquidator and the receiver appointed to the Company in the United States, and mailed to the 20 largest creditors.
- The meeting of creditors is to be held in the following way:-
2.1 Holding the physical meeting at Brisbane (where the Company is based);
2.2 Broadcasting the meeting live via webcast;
- attendance by creditors;
- votes by creditors;
- requests for a poll;
- questions for the Chair;
- the putting of resolutions that may validly be put,
to be notified by way of either:-
- email address; or
- other electronic means.
It was determined by the Court that this application was a kind in which assurance should be provided to the Liquidator pursuant to section 473(3) of the Act. Further, the Court was satisfied that it was appropriate to give the directions sought.
Such an order permitted: -
- A much more cost-effective method of convening the meeting (with over 3000 creditors, it permitted notice to be given by email and not postage – a more cost-effective method).
- Creditors (be they Member or Investors) in any country to attend the meeting by online webinar.
- Voting to be conducted efficiently in an online manner.
The decision was a common sense one and perhaps reflective of the need for reform of the Corporations Act and Regulations to be more reflective of the practical realities of modern commercial practices.
A meeting was held in accordance with these orders held on 19 December 2013, and broadcast live via webinar across the world. Hundreds of creditors from around the world logged on and participated, That webinar is also available to creditors to view for a set period of time in the future. The meeting was held without issue and all resolutions tabled during the meeting were able to be voted on by attending creditors by using online polling and email. Ultimately, it appears that the meeting was successful, and allowed as many creditors as possible access to the meeting, while also being convenient and cost effective.