Two of Perth’s largest professional service firms are owed more than $170,000 for their work with Consolidated Business Media regarding an inquiry from the Australian Securities and Investments Commission just months before the company went into liquidation.
ASIC’s National Insolvency Coordination Unit concluded a three-month inquiry into CBM’s affairs in February.
According to a list of CBM’s unsecured creditors, Freehills is owed almost $96,000 and Ernst & Young is owed nearly $85,000 from the collapse of the media and events business in the middle of last year.
In an unexpected move, the Ernst & Young partner giving advice to CBM at the time, Brian McMaster, was last month appointed receiver and manager of the failed company, along with Korda Mentha colleague Jack James.
The appointment was made by Denise Webb, the wife of CBM’s former director John Webb.
Mr Webb confirmed that the debts the firm had with those two companies were mostly due to the inquiries by the NICU.
The unit was created to investigate companies that were considered potentially at risk of insolvency or failure and its operations have been linked to several high-profile collapses, such as that of Feature Tours.
The role of the unit was to examine a business’s operations, highlight concerns to directors (including the possibility of personal liability in the case of insolvent trading) and, in some cases, obtain undertakings from directors.
NICU national director Stefan Dopking told WA Business News that undertakings CBM’s directors had made to its inquiries had satisfied the unit’s concerns.
CBM undertook to ASIC that it would improve its financial reporting, sell a division of its business, and auction a property owned by Mr Webb’s wife and inject the proceeds into the business.
Mr Webb said the company sold Webfirm and its magazine division and also made new payment arrangements with its creditors.
He said the auction of his wife’s City Beach property “did not draw any bids”.
CBM collapsed about three months after the undertakings were made.
“The key thing to this is that they went and got some professional advice,” Mr Dopking said. “Normally that advice is from accountants but this firm went to a further stage to involve a large law firm.”
He said ASIC started looking into CBM in late December and its involvement ended in February.
CBM liquidator Gary Anderson said questions had been asked about this process.
“People have been asking why ASIC didn’t do something,” he said.
Mr Dopking said companies the NICU became involved with sometimes went into liquidation or voluntary administration anyway.
“Of the 649 companies we looked at last financial year, about 10 per cent of them went into voluntary administration or liquidation,” he said.
