Creditors of collapsed kitchen and laundry appliance company Kleenmaid have been told that the company may have traded while insolvent for two years before it finally collapsed in early April with debts of more than $82 million.
A leaked copy of the report to creditors from administrators at accounting firm Deloitte has confirmed that the problems at Kleenmaid are much worse than originally thought.
“Unfortunately there is no good news for employees, customers, suppliers or creditors of the Kleenmaid Group. The financial position … is worse than we initially expected,” administrator John Greig said in a statement.
An investigation by administrators has revealed Kleenmaid creditors were owed $102 million, including $3 million owed to the company’s employees.
But the most explosive revelations involve claims that Kleenmaid directors Andrew and Brad Young may be investigated for trading while insolvent since June 2007.
“Kleenmaid’s most recent financial statements indicate a significant net asset deficiency in excess of $82 million. This deficiency was evident from June 2007, if not before, at which time the net asset deficiency was approximately $20 million,” Greig says in the report.
“Our investigations have revealed evidence of Kleenmaid’s cashflow difficulties since at least June 2007, which confirms our initial view expressed at the first meeting of creditors that the group could not possibly have such a significant deficiency by reason of events that occurred in the weeks preceding our appointment as administrators.
“If it can be proven that the directors have breached their duty to prevent the Kleenmaid Group from continuing to trade whilst insolvent, they may be held to be personally liable for the unpaid debts of the Kleenmaid Group,” Greig says.
“However our investigations are only preliminary at this stage, and we are not in a position to form a view regarding the likely recovery by liquidators for a claim for insolvent trading as this would require further investigation if appointed by creditors at the forthcoming meeting.”
Andrew Young, who recently travelled to the United States to look for potential investors for Kleenmaid, is yet to comment on the director’s report.
A second creditors meeting will take place on 25 May in Brisbane.
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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.
