brightau capital pty. ltd. (in liquidation) acn 619 685

BrightAU Capital Pty. Ltd. (In Liquidation) ACN 619 685 120 Trading as TradeFred

Statutory Report by Liquidators

10 June 2020

Level 38 Tower Three, 300 Barangaroo Avenue, SYDNEY NSW 2000

PO Box H67 Australia Square SYDNEY NSW 1215

P. +61 2 9335 7000 F. +61 2 9335 7001 W. kpmg.com.au

Section Page

Introduction 2

Return to creditors 2

Current position 2

Investigation into the Company’s affairs 5

DIRRI 8

Liquidators’ remuneration and internal disbursements 8

Conclusion 9

Glossary 10

Annexures 11

A – Updated Declaration of Independence, Relevant Relationships and Indemnities 12

B – Remuneration approval request 17

C – Information sheets 30

D – Forms for completion 41

Please return the forms at Annexure D to our office by 3 July 2020 via:

Email: [email protected]

Post: ATT: Mary Arguelles, C/- KPMG, PO Box H67, Australia Square, Sydney NSW 1215

Contents

BrightAU Capital Pty. Ltd. (In Liquidation) – Statutory Report by Liquidators - 10 June 2020 2

Introduction

We refer to our appointment as Liquidators of the Company on 10 March 2020 pursuant to a resolution by the Company’s members.

This report should be read with reference to our initial notice to creditors dated 20 March 2020 (Initial Notice). If you require a copy of the Initial Notice, please contact our office.

We now take this opportunity to report to you on:

– the progress of the liquidation;

– the current position in relation to the realisation of assets;

– the results of our investigations into the Company's affairs; and

– The likelihood of a dividend being paid in the liquidation.

This report also includes:

– Our updated Declaration of Independence, Relevant Relationships and Indemnities (DIRRI) at Annexure A. A

copy of our updated DIRRI was lodged with the Australian Securities & Investments Commission (ASIC) on 10

June 2020 and supersedes the DIRRI previously provided to creditors in our Initial Notice.

– Information to enable you to consider and approve our remuneration by way of proposals without holding a

meeting. Please refer to the Remuneration Approval Request at Annexure B for further information.

Due to current COVID-19 restrictions, this report will be issued to creditors only on an electronic basis. Only creditors whose email addresses are not known to us will receive a physical copy of this report. A copy of this report will also be uploaded to the KPMG website (kpmg.com/au/BrightAU).

Return to creditors

A dividend may be paid to creditors. The timing and quantum of the dividend is contingent on:

– The realisation of the Company’s assets (discussed further at Section 3.3.1);

– The total quantum of creditor claims submitted in the liquidation;

– The identification of any voidable transaction or insolvent trading claims (discussed further at Sections 4.3 and

4.4).

A further update on the timing and likelihood of a return to creditors will be provided in our future reports to creditors.

Current position

Matters addressed during the liquidation

Since our appointment, the following matters have been attended to:

– Communications with the Company’s director, Mr John Martin (the Director), and his representatives;

– Communications with creditors of the Company, including its former customers;

– Communications with ASIC regarding its proceedings against the Company;

– Attendances in the Federal Court proceedings by ASIC against the Company;

– Collection and review of the Company’s books and records (as have been identified and made available to us);

– Tasks associated with the location and realisation of the Company’s assets, including working with our appointed

legal advisers;

– Investigations into the recovery of potential unfair preference payments and other antecedent transactions; and

– Attendance to statutory requirements.

ASIC proceedings

In December 2019, ASIC commenced proceedings against Union Standard International Group Pty Limited (USG), and its Corporate Authorised Representatives being the Company and Maxi EFX Global AU Pty Limited (Maxi EFX) together with the directors of the Company (Mr John Martin) and Maxi EFX (Mr Pedro Sasso).


The Proceedings were commenced in the Federal Court of Australia and resulted in Orders being granted against the Company restraining the transfer, movement or application of Property (Freezing Orders). Following our appointment as Liquidators, we entered into discussions with ASIC regarding the removal of these Freezing Orders in order that we could secure the Company’s assets.

On 30 March 2020, we provided an undertaking to the Court and to ASIC that we would;

– not declare, determine or pay a dividend to creditors without providing ASIC with 21 days’ notice;

– provide ASIC with (advanced) copies of any proposals or resolutions which would result in the payment of our

remuneration; and

– provide ASIC with monthly work in progress reports in respect of our remuneration and any out of pocket costs

we have paid or incurred.

Upon providing the above undertaking, the Freezing Orders were removed against the Company.

We note that ASIC’s proceedings against USG, Maxi EFX and the directors are still continuing. Whilst the Company remains as a defendant to the Proceedings, our role at this time is limited and ancillary.

Further details regarding the progress of these Proceedings will be provided in our future reports to creditors. In the interim, creditors are referred ASIC website (https://asic.gov.au/about-asic/news-centre/find-a-media-release/) to view media releases issued by ASIC in respect of the Proceedings.

Financial position of the Company

The Director has provided a Report on Company Activities and Property (ROCAP) as at 10 March 2020. A copy of Part A of the ROCAP has been lodged with ASIC.

Set out below is the financial position of the Company known to us as at the date of this report:

Estimated Realisable Value – ROCAP $

Liquidators’ Actual / Estimated Realisable Value $

Assets

Cash at bank 694,826 706,994

Funds held by Union Standard International Group Pty Ltd (USG)

1,171,569 To be confirmed

Merchant facility balance 33,785 33,785

Shareholder loan account - To be confirmed

Total assets 1,900,180 740,779

Unsecured creditors

Related party creditors 4,124,230 6,816,507

Contingent creditors

Trade creditors 223,709 To be confirmed

Claims from former customers Not disclosed 1,548,049

Total contingent creditors 223,709 1,548,049

Total liabilities 4,347,939 8,364,556

Estimated (deficiency) / surplus (2,447,759) (7,623,777)


Assets

3.3.1.1 Cash at bank

We have realised:

– $656,994 from the Company’s pre-appointment bank accounts held with the Commonwealth Bank of Australia

(CBA); and

– $50,000 from the Company’s former solicitor’s trust account.

As Liquidators we have commenced our investigation into the pre-appointment accounts held with the CBA. Based on information available to us, we understand that Mr Pedro Sasso (the Company’s former director) was the sole signatory on these accounts. We have received confirmation from the CBA that the Director was not a signatory to the Company’s accounts.

Our investigations into this matter are continuing.

3.3.1.2 Funds held by USG

On our appointment, USG held the following funds on behalf of the Company pursuant to Corporate Authorised Representative (CAR) and White Label agreements:

Nature of funds Estimated Realisable Value –

ROCAP $ Liquidators’ Estimated

Realisable Value $

Margin collateral 360,000 To be confirmed

Surplus funds held on trust 811,569 To be confirmed

Total 1,171,569 To be confirmed

We have written to USG requesting they return the Company’s funds to us; however, USG has claimed they are entitled to retain the funds under an indemnity from the Company.

We are obtaining legal advice as to the Company’s entitlement to the funds and the options for recovery of those funds against USG. An update on the recovery of these funds, if any, will be provided in our future reports to creditors.

3.3.1.3 Merchant facility balance

The Director’s ROCAP disclosed a balance of $33,785 held by Skrill Ltd (Skrill) under a merchant facility agreement with the Company. We understand that Skrill are based in London, United Kingdom.

We have written to Skrill requesting they remit the facility balance to the liquidation account; however, they have not complied with our request. We have instructed our solicitors to progress the recovery of the merchant facility balance and will provide creditors with an update on the recovery of these funds in due course.

3.3.1.4 Shareholder loan account

The Director’s ROCAP disclosed a loan owed to the Company by its sole shareholder, TradeFred Holdings Limited (TradeFred Holdings) with a balance of $2,692,277, which was offset against a debt owed by the Company to TradeMagnet UK Limited (TradeMagnet), a related entity.

Our investigations into the recoverability of the shareholder loan account are ongoing.

3.3.1.5 Other asset enquiries

We have not identified any other assets registered in the name of the Company.

If you are aware of other assets of the Company not discussed above, please notify our office.


Unsecured creditors – Related parties

We are aware of the following claims from related party creditors:

Nature of claim Amount advised / claimed $

Martin Consulting Services Director fees 13,200

TradeMagnet Marketing services 6,630,192

USG Commission payable 173,115

Total 6,816,507

As at the date of writing, no related party creditor has submitted a formal proof of debt in the liquidation providing evidence in support of their claim. As a result, we have not yet determined whether these claims are admissible.

Please refer to Section 4.1.2 for a chart summarising the relationships between the Company and the related party creditors.

Contingent creditors

3.3.3.1 Trade creditors

We are aware of one contingent creditor claim for $223,709, in relation to a debt guaranteed by the Company.

3.3.3.2 Claims from purported former customers

We are aware of the following claims from the Company’s purported former customers:

Number of Claims Amount advised / claimed $

Claims for refunds or account balances 7 840,173

Claims for compensation 16 707,876

Total 23 1,548,049

Our investigations into the entitlements of the purported former customers to lodge a claim against the Company are continuing.

If you are aware of the details of any creditors not included above, please contact our office.

Summary of receipts and payments

A summary of the receipts and payments in the liquidation to date is attached at Part 6 of Annexure B.

Investigation into the Company’s affairs

Our report pursuant to section 533 of the Corporations Act 2001 (the Act) on the outcome of our investigation into the Company’s affairs was filed with ASIC on 10 June 2020.

Key information, Company history and reasons for failure

Key information

The Company was incorporated on 12 June 2017 and operated from premises in Hornsby NSW.


The following persons were officers of the Company:

Office held Name Date appointed Date ceased

Director John Carlton Martin 20 September 2018 Not applicable

Secretary Pedro Eduardo Sasso 12 June 2017 Not applicable

Former director Pedro Eduardo Sasso 12 June 2017 20 September 2018

As indicated earlier within this report, we have been advised by the CBA that Mr Sasso remained as the sole signatory to the Company’s bank accounts despite resigning as a director in September 2018. Our investigations into this matter are continuing.

Organisational structure

History of the Company

The Company previously operated the “TradeFred” foreign exchange trading platform in its capacity as USG’s CAR.

On 3 March 2020, USG terminated the Company’s CAR agreement effective from 10 March 2020.

Upon the termination of the CAR agreement, the Company ceased trading and TradeFred Holdings appointed us as Liquidators.

Reasons for failure

The Director has attributed the failure of the Company to:

– The termination of the CAR agreement;

– ASIC’s investigations into the Company’s affairs; and

– Under capitalisation.

We believe the Company’s failure is due to:

– Poor financial control;

– Poor strategic management of business; and

– The Company’s inability to continue trading as a result of the termination of the CAR agreement.

TradeFred Holdings Limited

UK Company Number: 09917834

TradeMagnet UK Limited

UK Company Number: 10000363

BrightAU Capital Pty Ltd(In Liquidation)

ACN 619 685 120

Union Standard InternationalGroup Pty Ltd

ACN 117 658 349Australian Financial Service Licence

Holder

75% ownership 100% ownership

John Carlton Martin (Director)


Books and records

Section 286 of the Act requires a company to keep written financial records that correctly record and explain the company’s transactions, financial position and performance and would enable true and fair financial statements to be prepared. The financial records must be retained for a period of seven years after the transactions covered by the records are completed.

The failure to maintain books and records in accordance with section 286 provides a rebuttable presumption of insolvency which might be relied upon by a Liquidator in an application for compensation for insolvent trading.

We have received a limited set of the Company’s books and records, comprised of:

– Online management accounts;

– Bank statements;

– Certain supplier invoices and account statements; and

– Certain documents in relation to the Company’s former customers.

Just prior to the lodgement of this report, we were provided with approximately 106 gigabytes of information from Mr David Britton, a solicitor based in Israel in response to our requests for information from third parties based overseas. Given the large quantity of this information, we are yet to conduct a thorough review of all data provided, nor are we able to determine whether the information remains relevant to our investigations.

Until we are able to thoroughly review all information provided, we are not in a position to determine whether there are other Company books and records held by third parties and or whether the Company has complied with section 286 of the Act to maintain adequate books and records.

Voidable transactions

Please refer to the information sheet at Annexure C for details of the voidable transactions which may be recovered in a liquidation.

From the records available to us, we have identified a number of transactions between the Company and its related entities that may be categorised as:

– Unfair preference payments;

– Uncommercial transactions; and or

– Voidable related party transactions.

Our investigations into the recoverability of those transactions are ongoing. We will provide creditors with further details on these investigations within our future reports to creditors.

Insolvent trading

Section 588G of the Act provides that directors are obliged to prevent a company from:

– Incurring a debt whilst insolvent; or

– Becoming insolvent by incurring a debt.

If a contravention of section 588G can be established, then section 588M empowers a Liquidator (or a creditor under certain circumstances) to recover compensation from a director for any loss or damage suffered as a consequence of any such contravention.

Given the nature of the Company’s operations and the fact that the Company’s creditors are predominantly comprised of related parties, it is necessary for us to fully understand and analyse the Company’s dealings with its related entities in order to determine the date the Company became insolvent.

As indicated earlier, we have received limited books and records of the Company and understand that various third parties may hold additional information which is critical to our further investigations. Upon receipt of this additional information we will be able to further our investigations into this matter.

Should creditors have any further information that may assist our investigations into the Company’s affairs, they should communicate details in writing to our office within 14 days from the date of this report.


DIRRI

A copy of our DIRRI was previously provided to creditors in our Initial Notice to Creditors dated 20 March 2020.

Subsequent to the lodgement of our DIRRI, as Liquidators we have become aware that KPMG Israel had previously been engaged by TradeMagnet, a related party creditor of the Company, to provide tax and transfer pricing advice to TradeMagnet in respect of its operations in Australia and globally. We are advised that this advice was provided in August 2019 and did not relate to the Company’s affairs.

Creditors are advised KMPG Israel is a separate legal entity to KPMG Australia and that we have no direct financial interest in KPMG Israel. Furthermore, we are not able to access any records relating to the TradeMagnet engagement, nor is it likely that any advice provided by KPMG Israel would be reviewable by us as Liquidators.

Given the above, we do not believe that this additional information would preclude us from remaining as Liquidators of the Company. Notwithstanding this point and in the interests of full disclosure, we have updated our DIRRI and have lodged a copy with ASIC on 10 June 2020. A copy of this updated DIRRI is attached as Annexure A.

Liquidators’ remuneration and internal disbursements

In our Initial Notice, we estimated that our total remuneration for the liquidation would be $117,139, plus applicable GST.

We also requested that creditors approve our proposed remuneration in the amount of $117,139, plus applicable GST. We did not receive any responses from creditors to those proposals.

Pursuant to Section 75-40 of Schedule 2 to the Act, we propose to have our remuneration approved by a proposal without holding a meeting. This method allows us to reduce the costs of the liquidation associated with convening a meeting of creditors when it is not necessary to do so.

A summary of our proposed remuneration and internal disbursements is set out below:

Resolution

1 That the remuneration of the Liquidators, as set out in the Remuneration Approval Request dated 10 June 2020, for the period from 10 March 2020 to 5 June 2020 be fixed in the amount of $95,378.50, plus any applicable GST, and may be paid.

2

That the remuneration of the Liquidators, as set out in the Remuneration Approval Request dated 10 June 2020, for the period from 6 June 2020 to completion be fixed up to a maximum amount of $78,000.00, plus any applicable GST, but subject to upward revision by resolution of creditors, and that the Liquidators be authorised to make periodic payments on account of such accruing remuneration as incurred.

3

That the internal disbursements of the Liquidators, as set out in the Remuneration Approval Request dated 10 June 2020, for the period from 10 March 2020 to completion be fixed up to a maximum amount of $3,500.00, plus any applicable GST, but subject to upward revision by resolution of creditors, and that the Liquidators be authorised to make periodic payments on account of such accruing disbursements as incurred.

Further details of our proposed remuneration and internal disbursements are contained in the attached Remuneration Approval Request (Annexure B). Also attached at Annexure D are Notices of a Proposal to Creditors and a Form 535 – Proof of Debt for the purposes of making particulars of your claim known to the Liquidators.

Creditors have the option of approving, not approving and/or objecting to the proposals being resolved without a meeting of creditors.

You are invited to either:

– vote YES or NO on the enclosed Notices of Proposal to Creditors; or

– object to the proposal being resolved upon without a meeting of creditors.

If your vote or objection to the proposal being resolved upon without a meeting is to be considered, your completed Notices of Proposal to Creditors must be received at this office by close of business 3 July 2020.


If more than 25% in value of creditors responding to the proposal object to the proposal being resolved without a meeting, the proposal will not pass even if the required majority vote yes. In this case, the proposal cannot be put to creditors again without a meeting. In this instance, there will be additional costs associated with convening a meeting of creditors or the Liquidator seeking the approval of the Court. These costs will normally be paid from the available assets in the liquidation.

We do not propose to hold a meeting of creditors at this stage unless a creditor specifically requests us to do so pursuant to Section 75-15 of Schedule 2 to the Act.

Conclusion

The following matters will continue to be progressed:

– Realising the remaining assets;

– Recovering the remainder of the Company’s books and records;

– Completing our investigations into the Company’s affairs;

– Recovering any voidable transaction or insolvent trading claims, if it is in creditors’ interests to do so; and

– Attending to statutory obligations.

We will write to you once a further update regarding the liquidation is available.

We expect to have completed this liquidation within 12 months.

Should you have any questions, please contact Mary Arguelles on [email protected] or 02 9273 5377.

Dated this 10th day of June 2020

Glenn Livingstone and Phil Quinlan Liquidators


Glossary

Abbreviation Description

ACN Australian Company Number

Act The Corporations Act 2001

ARITA Australian Restructuring Insolvency & Turnaround Association

ASIC Australian Securities & Investments Commission

ATO Australian Taxation Office

CAR Corporate Authorised Representative

CBA Commonwealth Bank of Australia

Company BrightAU Capital Pty. Ltd. (In Liquidation)

Department Department of Jobs and Small Business

Director John Martin, the Company’s sole director

DIRRI Declaration of Independence, Relevant Relationships and Indemnities

ERV Estimated Realisable Value

FEG Fair Entitlements Guarantee

Freezing Orders

The Orders granted against the Company restraining the transfer, movement or application of Property by the Company as a result of ASIC’s proceedings.

The Freezing Orders were lifted on 30 March 2020 following the provision of an undertaking to the Court and ASIC by the Liquidators as discussed in Section 3.2 of the report.

FY Financial Year

GST Goods and Services Tax

Maxi EFX Maxi EFX Global AU Pty Limited

RBA Running Balance Account

ROCAP Report on Company Activities and Property

Skrill Skrill Ltd

TradeFred Holdings TradeFred Holdings Limited, the Company’s sole shareholder

TradeMagnet TradeMagnet UK Limited, a related entity

USG Union Standard International Group Pty Ltd

Annexures


Corporations Act 2001 Section 506A

BrightAU Capital Pty. Ltd. (In Liquidation) (the Company) ACN 619 685 120 Trading as TradeFred

Declaration of Independence, Relevant Relationships and Indemnities

Practitioners appointed to an insolvent entity are required to make declarations as to: A. Their independence generally; B. Relationships, including

(i) The circumstances of the appointment; (ii) Any relationships with the Company and others within the previous 24 months; (iii) Any prior professional services for the Company within the previous 24 months; (iv) That there are no other relationships to declare; and

C. Any indemnities given or upfront payments made to the practitioner(s). This declaration is made in respect of us, our partners, KPMG Australia and related parties covered by the extended definition of the firm (collectively KPMG).

Declaration of independence

We, Glenn Livingstone and Phil Quinlan, and KPMG, have undertaken a proper assessment of the risks to our independence prior to accepting the appointment as Liquidators of the Company in accordance with the Corporations Act 2001 (Cth) (the Act), the Australian Restructuring Insolvency & Turnaround Association (ARITA) Code of Professional Practice (the Code) and applicable professional standards. This assessment identified no real or potential risks to our independence. We are not aware of any reasons that would prevent us from accepting this appointment. If any conflict arises, we will seek independent legal advice or court directions if appropriate. If this declaration needs to be updated we will issue written notice to all known creditors as set out in the records of the Company or as otherwise known to us.

Declaration of relationships

(i) Circumstances of appointment This appointment was referred to us by both Arnold Bloch Leibler (ABL) and William James Lawyers (William James), who act for the Company and the Company’s director, Mr John Carlton Martin (the Director) respectively. Both ABL and William James are known to us on a professional basis. We believe that these relationships does not result in a conflict of interest or duty because:

– Referrals from solicitors are commonplace and do not impact on our independence in carrying out our duties as

Liquidators;

– KPMG has never undertaken any work for ABL or William James in respect of the Company;

– The work that we, or KPMG, undertake for ABL or William James will not influence our ability to fully comply with

the statutory and fiduciary obligations associated with the Company’s liquidation in an objective and impartial

manner.

A – Updated Declaration of Independence, Relevant Relationships and Indemnities


On 18 February 2020, Glenn Livingstone received a telephone call from Brendan Wyhoon from William James regarding a possible referral of new matter and the availability of KPMG to undertake a formal insolvency appointment. No further details regarding the Company were provided in this initial call. On 25 February 2020, Mr Livingstone received a telephone call from Stephen Lloyd from ABL. Mr Lloyd provided some background information on the Company’s affairs and advised that he acted for the Company and its ultimate holding Company, TradeFred Holdings Limited, an entity incorporated in the United Kingdom. In this telephone conversation, Mr Livingstone explained the various options available to the Company and the nature and consequences of an insolvency appointment. On 4 March 2020, Mr Lloyd contacted Mr Livingstone via email and provided a general update on the timing of a possible insolvency appointment.

On 9 March 2020, Mr Livingstone held meetings with the Director together with both Mr Wyhoon of William James and Mr Lloyd of ABL. The purpose of these meetings were to:

– Physically meet with the Director and confirm his identity;

– Obtain sufficient information about the financial position of the Company to advise the Company, its officers and

its advisors on the Company’s solvency; and

– Provide a consent to act.

We did not receive any remuneration for any of the prior meetings with the director of his advisors. Each of the telephone conversations and communications with the Director and his advisors do not affect our independence for the following reasons:

– The advice was limited to assessing the Company’s financial position, the consequences of insolvency, and

restructuring options;

– Advice was given to the Company only about the possible options available in respect of a formal insolvency

appointment. We did not advise the Director or other persons in their personal capacities;

– The Courts and the Code specifically recognise the need for practitioners to provide advice on the insolvency

process and the options available, and do not consider that such advice results in a conflict or an impediment to

accepting the appointment;

– The nature of the advice is such that it would not be subject to review and challenge during the liquidation;

– The pre-appointment advice will not influence our ability to fully comply with the statutory and fiduciary

obligations associated with the liquidation in an objective and impartial manner.

We have provided no other information or advice to the Company, the Director, or the Company’s advisors prior to our appointment beyond that outlined in this DIRRI. (ii) Relevant relationships (excluding professional services to the Company) We, or KPMG, have, or have had within the preceding 24 months, a relationship with: William James Lawyers (William James)

Nature of relationship Reasons why no impediment or conflict of interest or duty

William James act for the Director and referred this matter to us.

We and KPMG have had previous professional relationships with William James’ staff for a number of years. We have previously undertaken formal and informal assignments on companies referred to us by William James.

We believe that this relationship does not result in a conflict of interest or duty because:

– Our previous relationship with William James was

not in relation to the Company’s and/or the

Director’s affairs, or related parties of the

Company and/or the Director;



– We have a wide referral base and William James

is one of many referrers of work in the past 24

months;

– Referrals from solicitors, business advisors or

accountants are commonplace and do not impact

on our independence in carrying out our duties as

Liquidators.

Arnold Bloch Leibler (ABL)


ABL act for the Company.

We and KPMG have had previous professional relationships with ABL’s staff for a number of years. We have previously undertaken formal and informal assignments on companies referred to us by ABL.


– Our previous relationship with ABL was not in

relation to the Company’s and/or the Director’s

affairs, or related parties of the Company and/or

the Director;

– We have a wide referral base and ABL is one of

many referrers of work in the past 24 months;




Liquidators.

O’Loughlin Westhoff Lawyers (OWL)

Nature of relationship Reasons why no impediement or conflict of interest or duty

OWL act for Union Standard International Group Pty Ltd (USG), a related party creditor of the Company.

We and KPMG have had previous professional relationships with OWL’s staff for a number of years.


– Our previous relationship with OWL was not in

relation to the Company’s, USG’s and/or the

Director’s affairs, or related parties of the

Company and/or the Director;

– We have a wide referral base and OWL is one of

many law firms and or referrers with whom we

have worked in the past 24 months;




Liquidators.


TradeMagnet UK Limited (TradeMagnet)


TradeMagnet is a related party creditor.

In August 2019, KPMG Israel provided tax and transfer pricing advice to TradeMagnet in respect of its operations in Australia and other locations globally.


– Our previous relationship with TradeMagnet is

only in relation to the affairs of TradeMagnet, and

was not in relation to the Company’s or the

Director’s affairs;

– The subject of the advice provided to

TradeMagnet is not relevant to the conduct of the

liquidation.

Deputy Commissioner of Taxation, iCare, and major banks (unsecured creditors)


Various Practitioners at KPMG are members of panels for appointments as liquidators and bankruptcy trustees.

We believe that these relationships do not result in a conflict of interest or duty. Our previous relationship with the unsecured creditors has not been and is not in relation to the Company’s affairs and/or the Director’s affairs, or related parties of the Company and/or the Director.

(iii) Prior professional services to the Company Neither we nor KPMG have provided any professional services to the Company in the previous 24 months.

(iv) No other relevant relationships to disclose There are no other known relevant relationships, including personal, business and professional relationships, within the previous 24 months with the Company, an associate of the Company, a former insolvency practitioner appointed to the Company or any person or entity that has a security interest over the whole or substantially the whole of the Company’s property that should be disclosed.

Indemnities and up-front payments

We have not been indemnified in relation to this liquidation, other than any indemnities that we may be entitled to under statute. We have not received any upfront payments in respect of our remuneration or disbursements.

Dated this 10th day of June 2020

Glenn Livingstone Phil Quinlan Liquidator Liquidator


Note:

If circumstances change, or new information is identified, we are required under Subsection 506A(5) of the Act and the Code to update this declaration and provide a copy to creditors with our next communication as well as table a copy of any replacement declaration at the next meeting of the Company’s creditors.

Any relationships, indemnities or up-front payments disclosed in the declaration must not be such that the practitioner is no longer independent. The purpose of components B and C of the declaration is to disclose relationships that, while they do not result in the practitioner having a conflict of interest or duty, ensure that creditors are aware of those relationships and understand why the practitioner nevertheless remains independent.


Schedule 2 to the Corporations Act 2001, Section 60-10 Insolvency Practice Rules (Corporations) 2016, Section 70-45 BrightAU Capital Pty. Ltd. (In Liquidation) (the Company) ACN 619 685 120 Trading as TradeFred Remuneration Approval Request This report contains the following information:

– Part 1: Declaration

– Part 2: Executive summary

– Part 3: Remuneration

– Part 4: Disbursements

– Part 5: Report on progress of the administration

– Part 6: Summary of receipts and payments

– Part 7: Questions

– Part 8: Approval of remuneration and internal disbursements

– Schedule A: Resolution 1 details

– Schedule B: Resolution 2 details.

Next steps for creditors:

– Please review the contents of this report, which sets out the proposals to be approved by creditors without a

meeting

– Refer to section 6 of the report to creditors dated 10 June 2020 (Statutory Report) for details as to how you can

submit your vote on the proposals contained in this report.

Declaration

We, Glenn Livingstone and Phil Quinlan of KPMG, have undertaken a proper assessment of this remuneration claim for our appointment as Liquidators of the Company in accordance with the Corporations Act 2001 (the Act), the Australian Restructuring Insolvency & Turnaround Association (ARITA) Code of Professional Practice (the Code) and applicable professional standards.

We are satisfied that the remuneration claimed is in respect of necessary work, properly performed, or to be properly performed, in the conduct of the liquidation.

Executive summary

Summary of remuneration approval sought for the Company

To date, no remuneration has been approved or paid in the liquidation of the Company.

This report details approval sought for the following remuneration:

Period Amount (ex GST)

$

Current remuneration approval sought: Resolution 1: 10 March 2020 to 5 June 2020 95,378.50 Resolution 2: 6 June 2020 to completion* 78,000.00 Total current remuneration approval sought 173,378.50

B – Remuneration approval request



$

* Approval for the future remuneration sought is based on an estimate of the work necessary to the completion of the liquidation. Should additional work be necessary beyond what is contemplated, further approval may be sought from creditors.

Please refer to Part 3 for full details of the calculation and composition of the remuneration approval being sought.

Summary of internal disbursements approval sought for the Company

To date, no internal disbursements have been approved or paid in the liquidation of the Company. This report details approval sought for the following internal disbursements:


$

Current internal disbursements approval sought: Resolution 3: 10 March 2020 to completion* 3,500.00 * Approval for the future internal disbursements sought is based on an estimate of the internal disbursements necessary to the completion of the liquidation. Should additional internal disbursements be necessary beyond what is contemplated, further approval may be sought from creditors.

Please refer to Part 4 for full details of the calculation and composition of the internal disbursements approval being sought.

Comparison to estimate of costs provided to creditors in the Initial Remuneration Notice

The remuneration approval sought differs to the estimate of costs provided to creditors in the Initial Remuneration Notice included in our initial notice dated 20 March 2020 (Initial Notice).

Our revised estimate of costs for the liquidation is discussed further at Part 3.3.

Remuneration

Remuneration claim resolutions

We are seeking approval of the following resolutions with respect to remuneration. Details to support these resolutions are included in Part .3.2

Resolution 1:

That the remuneration of the Liquidators, as set out in the Remuneration Approval Request dated 10 June 2020, for the period from 10 March 2020 to 5 June 2020 be fixed in the amount of $95,378.50, plus any applicable GST, and may be paid.

Resolution 2:


Details of remuneration

The basis of calculating the remuneration claims are set out below, including the details of the major tasks performed and the costs associated with each of those major tasks.

BrightAU Capital Pty. Ltd. (In Liquidation) – Statutory Report by Liquidators – 10 June 2020 19

Resolution 1: 10 March 2020 to 5 June 2020

The below table sets out time charged to each major task area performed by us and our staff for the above period. Please refer to Schedule A for further details with respect to the tasks performed.

Hrs $ Hrs $ Hrs $ Hrs $ Hrs $

Livingstone Glenn Partner / Appointee 695 70.60 49,067.00 1.30 903.50 5.50 3,822.50 60.90 42,325.50 2.90 2,015.50

Quinlan Philip Partner / Appointee 695 4.20 2,919.00 0.60 417.00 0.60 417.00 3.00 2,085.00 - -

Ho Ben Associate Director 575 24.30 13,972.50 1.10 632.50 4.20 2,415.00 16.30 9,372.50 2.70 1,552.50

Arguelles Mary Executive 450 64.00 28,800.00 2.30 1,035.00 15.60 7,020.00 42.70 19,215.00 3.40 1,530.00

Le Roux Astrid Executive 450 0.10 45.00 0.10 45.00 - - - - - -

Lee Tommy Analyst 375 1.00 375.00 - - - - - - 1.00 375.00

Delaguiado Astra Bookkeeper 250 0.80 200.00 - - - - - - 0.80 200.00

Total (excluding GST) 165.00 95,378.50 5.40 3,033.00 25.90 13,674.50 122.90 72,998.00 10.80 5,673.00

GST 9,537.85 1,367.45 7,299.80 567.30

Total (including GST) 104,916.35 15,041.95 80,297.80 6,240.30

Average Hourly Rate (exc GST) 578.05 527.97 593.96 525.28

Employee Position

Rate(ex GST)$/Hour

Total

Task Area

Assets Creditors Investigation Administration


Resolution 2: 6 June 2020 to completion

The below table sets out the expected costs for the major tasks likely to be performed by us and our staff for the above period. Please refer to Schedule B for further details with respect to the tasks likely to be performed.

Task Hours Amount

(ex GST) $ Assets 30 15,000 Creditors 30 15,000 Investigation 60 30,000 Dividend 20 10,000 Administration 16 8,000 Total 156 78,000.00

Total remuneration reconciliation

Comparison between current total and previous estimates

At this point in time we estimate that the total remuneration for this liquidation will be $162,378.50 (excluding GST). This includes the current approval amount being sought.

The above estimate differs to the estimate of costs provided to creditors in the Initial Remuneration Notice included in our Initial Notice for the following reasons:

– The process for the collection and review of the Company’s records is more complex than originally anticipated;

– More complex investigations are required into the Company’s affairs and dealings with related parties than

originally anticipated;

– We may be required to commence proceedings in respect of assets recoverable from related entities.

Comparison between current and previous prospective approvals

In the following table we compare, on a task basis, our estimate from our report dated 20 March 2020 to our revised estimate in this report and provide an explanation for the difference in cost.

Task

Previous estimate

(ex GST) $

Revised estimate

(ex GST) $ Reasons for differences

Assets 15,208.50 18,033.00

Slight increase due to an increase in the number of assets available for realisation; however, it is likely that we will have to commence proceedings for the recovery of same

Creditors 20,695.00 28,674.50 Increase due to a greater number of queries from persons claiming to be creditors of the Company than anticipated.

Investigation 59,197.00 102,998.00

Large increase is to reflect: – The possibility of proceedings being

commenced to recover assets or claims from the Company’s related entities;


Task

Previous estimate

(ex GST) $

Revised estimate

(ex GST) $ Reasons for differences – Increased volume of tasks in complying with

notices issued by the Australian Securities & Investments Commission in relation to the production of the Company’s records.

Creditors are reminded that this is an estimate only, and our remuneration is based on time that we incur.

Dividend 10,000.00 10,000.00 No difference

Administration 12,038.50 13,673.00 Slight increase to reflect a more complex liquidation process than originally anticipated.

Total 117,139.00 173,378.50 We have provided an explanation of tasks remaining to be completed, including our estimated costs to complete those tasks, to support our current remuneration approval request, at Part 3.2.2 of the report and in Schedule B.

Future remuneration requests

In preparing this report, we have made our best estimate at what we believe the liquidation will cost to complete. However, should the liquidation not proceed as expected, we may seek approval of further remuneration and provide details on why the remuneration has changed. Matters that may affect the progress and the cost of the liquidation are discussed include:

– Whether we are required to commence proceedings to recover the remainder of the Company’s assets or books

and records; and

– Whether we identify any claims that are commercial to pursue.

Creditors are advised that it is difficult to accurately predict the costs of any legal proceedings that we may be required to commence or respond to, as is the case with the proceedings by the Australian Securities & Investments Commission. We reserve our rights to revise our remuneration estimate and seek further remuneration approval in appropriate circumstances.

Likely impact on dividends

Our remuneration and disbursements are treated as a priority payment in the liquidation. They have the effect of reducing the funds available (if any) to distribute to creditors as a dividend unless there are sufficient funds to pay a dividend of 100 cents in the dollar.

Disbursements

Types of disbursements

Disbursements are divided into three types:

– Externally provided professional services. These are recovered at cost. An example is legal fees.

– Externally provided non-professional costs such as travel, accommodation and search fees. These disbursements

are recovered at cost.

– Internal disbursements such as photocopying, printing and postage. These disbursements, if charged to the

liquidation, would generally be charged at cost; although if a data room is utilised, the fee will comprise an initial


setup fee and then a fee based on the duration and size of the data room or the number of users per month.

Certain services provided by KPMG may require the processing of electronically stored information into specialist

review platforms. Where these specialist resources are utilised, the fee will be based on units (e.g. number of

computers), size (e.g. per gigabyte) and/or period of time (e.g. period of hosting). The relevant rates for internal

disbursements are set out below:

Disbursement type Charges (excl GST)

Advertising At cost ASIC industry funding model levy – metric events At prescribed ASIC rates Couriers At cost Data room set-up $450.00 Data room hosting – Option A Variable – see separate table below Data room hosting – Option B (incl 100GB of data) $84.95 per user per month eDiscovery services Variable Photocopying / printing (colour) $0.50 per page Photocopying / printing (mono) $0.20 per page Photocopying / printing (outsourced) At cost Postage At cost Searches At cost Staff travel reimbursement Up to $100/day Staff vehicle use At prescribed ATO rates Storage and storage transit At cost Telephone calls At cost

Note: Above rates are applicable for the financial year ending 30 June 2020. Disbursements charged at cost do not

require creditor approval.

Data room hosting fees by size (MB) Charges per month (excl GST)

0-300 $950 300-1000 $950 + $2.50/MB 1000-5000 $2,500 + $1.25/MB 5000+ $7,500 + $0.60/MB

Disbursements paid from the liquidation to KPMG to date

There have been no disbursements paid from the liquidation to KPMG to date. Future disbursements provided by KPMG will be charged to the liquidation on the same basis as the table in Part 4.1.


Disbursement claim resolutions

We are seeking approval of the following resolutions with respect to disbursements. Details to support these resolutions are included in Part 4.4.

Resolution 3:


Details of internal disbursements claim

Our internal disbursements claim is broken down as follows:

Internal disbursements Total (excl GST) $

Data room hosting 1,000.00

eDiscovery services 2,500.00

Total 3,500.00

Report on progress of the liquidation

The Remuneration Approval Request must be read in conjunction with the Statutory Report which outlines the progress of the liquidation.

Summary of receipts and payments

A summary of receipts and payments for the period 10 March 2020 to 9 June 2020 is set out in the table below:

Receipts and payments Total (incl GST)

$ Receipts Cash at bank held in legal trust 50,000.00 Cash at bank on appointment 656,993.53 Total receipts 706,993.53 Payments Bank charges 0.60 Data consultant fees 4,125.00 Legal fees retainer 100,000.00 Total payments 104,125.60 Closing cash at bank 602,867.93

Approval of remuneration and internal disbursements

For information about how approval of the resolutions for remuneration and internal disbursements will be sought, refer to section 7 of the report to creditors dated 10 June 2020.


Questions

If you require further information in respect of the above, or have other questions, please contact Mary Arguelles of this office on [email protected]

The restructuring partners of KPMG are members of ARITA. KPMG follows the Code. A copy of the Code may be found on the ARITA website at www.arita.com.au.

An information sheet concerning approval of remuneration in external administrations can also be obtained from the Australian Securities & Investments Commission website at www.asic.gov.au.

Dated this 10th day of June 2020 Glenn Livingstone and Phil Quinlan Liquidators


Schedule A – Resolution 1: 10 March 2020 to 5 June 2020

The below table contains more detailed descriptions of the tasks performed within each task area performed by the Liquidators and their staff for the above period.

Task area General description Includes

Assets

5.4 hours $3,033.00 (excl GST)

Other assets

– Tasks associated with realising cash at bank on

appointment and cash at bank held on legal

trust, including liaising with the Australian

Securities & Investments Commission

regarding asset restraint orders

– Tasks associated with dealing with intellectual

property (eg, website)

– Tasks associated with realising the balance of

the merchant facility held with Skrill Ltd

– Correspondence with related entities regarding

the Company’s assets.

Creditors

25.9 hours $13,674.50 (excl GST)

Creditor enquiries, requests and directions

– Receive and respond to creditor enquiries

– Maintaining creditor request log

– Review and prepare initial correspondence to

creditors and their representatives

– Documenting

– Considering reasonableness of creditor

requests

– Documenting reasons for complying or not

complying with requests or directions

– Compiling information requested by creditors

Creditor reports

– Preparing reports on results of investigation

(including statutory reports)

– General reports to creditors

Dealing with proofs of debt – Receipting and filing proofs of debt when not

related to a dividend

Proposals to creditors – Preparing proposal notices and voting forms

Investigation

122.9 hours $72,998.00 (excl GST)

Conducting investigation

– Collection of Company books and records

– Reviewing Company’s books and records

– Review and preparation of Company nature

and history

– Conducting and summarising statutory

searches

– Preparation of comparative financial statements

– Preparation of deficiency statement


Task area General description Includes – Review of specific transactions

– Preparation of investigation file

– Lodgement of investigation with ASIC

Litigation / recoveries

– Internal meetings to discuss status of litigation

– Preparing brief to solicitors

– Liaising with solicitors regarding recovery

actions

ASIC reporting

– Preparing statutory investigation reports

– Liaising with ASIC in respect of proceedings

commenced prior to our appointment and

outstanding requests for records and

information

Administration

10.8 hours $5,673.00 (excl GST)

Correspondence – General correspondence

Document maintenance / file review / checklist

– Administration reviews

– Filing of documents

– File reviews

– Updating checklists

Insurance

– Identification of potential issues requiring

attention of insurance specialists

– Correspondence with insurer regarding initial

and ongoing insurance requirements

Bank account administration

– Preparing correspondence opening accounts

– Requesting bank statements

– Bank account reconciliations

– Correspondence with bank regarding specific

transfers

ASIC forms

– Preparing and lodging ASIC forms

– Correspondence with ASIC regarding statutory

forms

ATO and other statutory reporting – Notification of appointment

– Preparing BASs

Planning / review – Discussions regarding status / strategy of

administration

Books and records / storage – Dealing with records

– Electronic file management


Schedule B – Resolution 2: 6 June 2020 to completion

The below table contains more detailed descriptions of the tasks performed within each task area likely to be performed by the Liquidators and their staff for the above period

Task area General description Includes

Assets

30.0 hours $15,000.00 (excl GST)

Shareholder loan account – Tasks associated with realising the shareholder

loan account

Other assets

– Tasks associated with dealing with intellectual

property (eg, website)

– Tasks associated with realising the balance of

the merchant facility held with Skrill Ltd

– Correspondence with related entities regarding

the Company’s assets

Creditors

30.0 hours $15,000.00 (excl GST)

Creditor enquiries, requests and directions

– Receive and respond to creditor enquiries

– Maintaining creditor request log

– Review and prepare initial correspondence to

creditors and their representatives

– Documenting

– Considering reasonableness of creditor

requests

– Obtaining legal advice on requests

– Documenting reasons for complying or not

complying with requests or directions

– Compiling information requested by creditors

Creditor reports – General reports to creditors

Dealing with proofs of debt

– Receipting and filing proofs of debt when not

related to a dividend

– Corresponding with OSR and ATO regarding

proofs of debt when not related to a dividend

Proposals to creditors – Preparing proposal notices and voting forms

Investigation

60.0 hours $30,000.00 (excl GST)

Conducting investigation

– Collection of remaining Company books and

records

– Correspondence with ASIC to receive

assistance in obtaining the remainder of the

Company’s books and records

– Reviewing Company’s books and records

– Review of specific transactions and liaising with

directors regarding certain transactions

– Preparation and lodgement of supplementary

report if required

Litigation / recoveries – Internal meetings to discuss status of litigation

– Preparing brief to solicitors


Task area General description Includes – Liaising with solicitors regarding recovery

actions

– Attending to negotiations

– Attending to settlement matters

ASIC reporting

– Liaising with ASIC in respect of proceedings

commenced prior to our appointment and

outstanding requests for records and

information

Dividend

20.0 hours $10,000.00 (excl GST)

Processing proofs of debt

– Preparation of correspondence to potential

creditors inviting lodgement of proofs of debt

– Receipt of proofs of debt

– Maintain proof of debt register

– Adjudicating proofs of debt

– Request further information from claimants

regarding proofs of debt

– Preparation of correspondence to claimant

advising outcome of adjudication

Dividend procedures

– Preparation of correspondence to creditors

advising of intention to declare dividend

– Advertisement of intention to declare dividend

– Obtain clearance from ATO to allow distribution

of Company’s assets

– Preparation of dividend calculations


announcing declaration of dividend

– Advertise announcement of dividend

– Preparation of distribution

– Preparation of dividend file

– Preparation of payment vouchers to pay

dividend


enclosing payment of dividend

Administration

16.0 hours $8,000.00 (excl GST)

Correspondence – General correspondence

Document maintenance / file review / checklist

– Administration reviews

– Filing of documents

– File reviews

– Updating checklists

Bank account administration

– Preparing correspondence closing accounts

– Requesting bank statements

– Bank account reconciliations


Task area General description Includes – Correspondence with bank regarding specific

transfers

ASIC forms

– Preparing and lodging ASIC forms

– Correspondence with ASIC regarding statutory

forms

ATO and other statutory reporting – Preparing BASs

Finalisation

– Notifying ATO of finalisation

– Cancelling ABN / GST / PAYG registration

– Completing checklists

– Finalising WIP

Planning / review – Discussions regarding status / strategy of

administration

Books and records / storage – Dealing with records in storage

– Sending job files to storage

C – Information sheets

Creditor Information Sheet Offences, Recoverable Transactions and Insolvent Trading

AUSTRALIAN RESTRUCTURING INSOLVENCY & TURNAROUND ASSOCIATION

A summary of offences under the Corporations Act that may be identified by the administrator:

180 Failure by company officers to exercise a reasonable degree of care and diligence in the exercise of their powers and the discharge of their duties.

181 Failure to act in good faith.

182 Making improper use of their position as an officer or employee, to gain, directly or indirectly, an advantage.

183 Making improper use of information acquired by virtue of the officer’s position.

184 Reckless or intentional dishonesty in failing to exercise duties in good faith for a proper purpose. Use of position or information dishonestly to gain advantage or cause detriment. This can be a criminal offence.

198G Performing or exercising a function or power as an officer while a company is under administration.

206A Contravening a court order against taking part in the management of a corporation.

206A, B Taking part in the management of corporation while being an insolvent, for example, while bankrupt.

206A, B Acting as a director or promoter or taking part in the management of a company within five years after conviction or imprisonment for various offences.

209(3) Dishonest failure to observe requirements on making loans to directors or related companies.

254T Paying dividends except out of profits.

286 Failure to keep proper accounting records.

312 Obstruction of an auditor.

314-7 Failure to comply with requirements for the preparation of financial statements.

437D(5) Unauthorised dealing with company's property during administration.

438B(4) Failure by directors to assist administrator, deliver records and provide information.

438C(5) Failure to deliver up books and records to the administrator.

590 Failure to disclose property, concealed or removed property, concealed a debt due to the company, altered books of the company, fraudulently obtained credit on behalf of the company, material omission from Report as to Affairs or false representation to creditors.

Preferences

A preference is a transaction, such as a payment by the company to a creditor, in which the creditor receiving the payment is preferred over the general body of creditors. The relevant period for the payment commences six months before the commencement of the liquidation. The company must have been insolvent at the time of the transaction, or become insolvent because of the transaction.

Where a creditor receives a preference, the payment is voidable as against a liquidator and is liable to be paid back to the liquidator subject to the creditor being able to successfully maintain any of the defences available to the creditor under the Corporations Act.

Uncommercial Transaction

An uncommercial transaction is one that it may be expected that a reasonable person in the company's circumstances would not have entered into, having regard to:

• the benefit or detriment to the company;

• the respective benefits to other parties; and,

• any other relevant matter.

Offences

Recoverable Transactions

AUSTRALIAN RESTRUCTURING INSOLVENCY & TURNAROUND ASSOCIATION PAGE 2

Version: August 2017 22143 (VA) - INFO - Offences recoverable transactions and insolvent trading v1_1.docx1

To be voidable, an uncommercial transaction must have occurred during the two years before the liquidation. However, if a related entity is a party to the transaction, the period is four years and if the intention of the transaction is to defeat creditors, the period is ten years.

The company must have been insolvent at the time of the transaction, or become insolvent because of the transaction.

Unfair Loan

A loan is unfair if and only if the interest was extortionate when the loan was made or has since become extortionate. There is no time limit on unfair loans – they only must be entered into before the winding up began.

Arrangements to avoid employee entitlements

If an employee suffers loss because a person (including a director) enters into an arrangement or transaction to avoid the payment of employee entitlements, the liquidator or the employee may seek to recover compensation from that person. It will only be necessary to satisfy the court that there was a breach on the balance of probabilities. There is no time limit on when the transaction occurred.

Unreasonable payments to directors

Liquidators have the power to reclaim ‘unreasonable payments’ made to directors by companies prior to liquidation. The provision relates to payments made to or on behalf of a director or close associate of a director. The transaction must have been unreasonable, and have been entered into during the 4 years leading up to a company's liquidation, regardless of its solvency at the time the transaction occurred.

Voidable charges

Certain charges over company property are voidable by a liquidator:

• circulating security interest created within six months of the liquidation, unless it secures a subsequent advance;

• unregistered security interests;

• security interests in favour of related parties who attempt to enforce the security within six months of its creation.

In the following circumstances, directors may be personally liable for insolvent trading by the company:

• a person is a director at the time a company incurs a debt;

• the company is insolvent at the time of incurring the debt or becomes insolvent because of incurring the debt;

• at the time the debt was incurred, there were reasonable grounds to suspect that the company was insolvent;

• the director was aware such grounds for suspicion existed; and

• a reasonable person in a like position would have been so aware.

The law provides that the liquidator, and in certain circumstances the creditor who suffered the loss, may recover from the director, an amount equal to the loss or damage suffered. Similar provisions exist to pursue holding companies for debts incurred by their subsidiaries.

A defence is available under the law where the director can establish:

• there were reasonable grounds to expect that the company was solvent and they did so expect;

• they did not take part in management for illness or some other good reason; or

• they took all reasonable steps to prevent the company incurring the debt.

The proceeds of any recovery for insolvent trading by a liquidator are available for distribution to the unsecured creditors before the secured creditors.

Important note: This information sheet contains a summary of basic information on the topic. It is not a substitute for legal advice. Some provisions of the law referred to may have important exceptions or qualifications. This document may not contain all of the information about the law or the exceptions and qualifications that are relevant to your circumstances.

Insolvent trading

ARITA ACN 002 472 362

Level 5, 191 Clarence Street, Sydney NSW 2000 Australia | GPO Box 4340, Sydney NSW 2001 t +61 2 8004 4344 | e [email protected] | arita.com.au


Information sheet: Approving remuneration of an

external administrator

If you are a creditor in a liquidation, voluntary administration or deed of company arrangement you may be asked to approve the external administrator’s remuneration. An external administrator can be a liquidator, voluntary administrator or deed administrator. The process for approving the remuneration for each of these is the same.

This information sheet gives general information to help you understand the process of approving an external administrator’s remuneration and your rights in this process. The following topics are covered in this information sheet:

• About external administrations

• External administrator’s remuneration and costs

• Calculating remuneration

• Information you will receive

• Approving remuneration

• Who may approve remuneration

• Deciding if remuneration is reasonable

• What can you do if you decide the remuneration is unreasonable?

• Reimbursement of out of pocket costs

• Queries and complaints

• More information.

If a company goes into liquidation, voluntary administration or enters into a deed of company arrangement, an independent person is appointed to oversee the administration. They are called an external administrator and include a liquidator, voluntary administrator and deed administrator, depending on the type of administration involved. In this information sheet they are simply referred to as an external administrator.

The duties of an external administrator are specified in legislation and they must adhere to certain standards while conducting the administration.

All external administrators are required by law to undertake certain tasks which may not benefit creditors directly (e.g. investigating whether any offences have been committed and reporting to the Australian Securities and Investments Commission (ASIC)).

External administrators are entitled to be paid for the necessary work they properly perform in the administration.

An external administrator is entitled:

• to be paid reasonable remuneration, for the work they perform, once this remuneration has been approved,

• to be paid for internal disbursements they incur in performing their role (these costs do need approval), and

• to be reimbursed for out-of-pocket costs incurred in performing their role (these costs do not need approval).

About external administrations

External administrator’s remuneration and costs


INFO remuneration external administrator.docx Version: August 2017

Common internal disbursements are stationery, photocopying and telephone costs.

Commonly reimbursed out-of-pocket costs include:

• legal fees

• a valuer’s, real administration agent’s and auctioneer’s fees

• postage costs

• retrieval costs for recovering the company’s computer records, and

• storage costs for the company’s books and records.

Creditors have a direct interest in the amount of an external administrator’s remuneration and costs, as these will generally be paid from the administration before any payments are made to creditors.

Remuneration and internal disbursements must be approved in accordance with the Corporations Act and Insolvency Practice Rules (Corporations) before it can be paid.

If there is a shortfall between the external administrator’s remuneration and the assets available from the administration, in certain circumstances the external administrator may arrange for a third party to pay the shortfall. As a creditor, you will be provided details of any such arrangement.

If there are not enough assets to pay the external administrator’s remuneration and costs, and there is no third party payment arrangement, the external administrator remains unpaid.

An external administrator may calculate their remuneration using one (or a combination) of a number of methods, such as:

• on the basis of time spent working on the administration, according to hourly rates

• a quoted fixed fee, based on an estimate of the costs

• a percentage (usually of asset realisations), or

• a contingent basis on a particular outcome being achieved.

Charging on the basis of time spent is the most common method used. External administrators have a set of hourly rates that they will seek to charge. These rates are set to reflect the seniority, skills and experience of staff and, where applicable, the complexity and risks of the bankruptcy. They cover staff costs and overheads.

If remuneration is being charged on a time basis, the external administrator must keep time sheets noting the number of hours spent on the tasks performed.

Creditors have a right to question the external administrator about the remuneration and the rates to be charged. They also have a right to question the external administrator about the fee calculation method used and how the calculation was made. The external administrator must justify why the chosen fee calculation method is appropriate for the administration.

There are different types of remuneration reports that you may receive during the course of an external administration. The following table details the reports and when you might receive them.

Calculating remuneration

Information you will receive



The meeting of creditors (or committee of inspection) gives a chance for those participating to ask questions about the external administrator’s remuneration. Fees are then approved by a vote of the creditors. Alternatively, the external administrator may seek approval of remuneration via a proposal without a meeting. Whichever method is used, the external administrator must provide the same report to creditors about their remuneration (Remuneration Approval Report).

Creditors may be asked to approve remuneration for work already performed and/or remuneration estimate for work not yet carried out. If the work is yet to be carried out, the external administrator must set a maximum limit (cap) on the future remuneration approval. For example, ‘future remuneration is approved, calculated on hours worked at the rates charged (as set out in the provided rate scale) up to a cap of $X’.

Document Information it contains When you will receive it

Initial Remuneration Notice (IRN)

• A brief explanation of the types of methods that may be used to calculate fees.

• The external administrator’s chosen fee calculation method(s) and why it is appropriate.

• Details of the external administrator’s rates, including hourly rates if time spent basis is used.

• An estimate of the external administrator’s remuneration.

• The method that will be used to calculate disbursements.

Voluntary Administration – with the notice of first meeting.

Creditors’ voluntary liquidation – within 10 business days of appointment.

Court liquidation – within 20 business days of appointment.

Remuneration Approval Report (RAR)

• A summary description of the major tasks performed, or likely to be performed.

• The costs associated with each of those major tasks and the method of calculation.

• The periods at which the external administrator proposes to withdraw funds from the administration for remuneration.

• An estimated total amount, or range of total amounts, of the external administrator’s remuneration.

• An explanation of the likely impact of that remuneration on the dividends (if any) to creditors.

• Where internal disbursements are being claimed, the external administrator will report to creditors on the amount and method of calculation of these disbursements.

Sent at the same time as:

• the notice to creditors of the meeting at which approval of remuneration will be sought; or

• the notice to creditors of the proposal without a meeting by which approval of remuneration will be sought

If approval of remuneration is not being sought, a RAR will not be provided.

Approving remuneration



If the remuneration for work done then exceeds this figure, the external administrator will have to ask the creditors to approve a further amount of remuneration, after accounting for the amount already incurred.

If an external administrator can’t get the creditors’ approval, an application can be made to the Court to determine their remuneration.

When there are limited funds available in the administration, or the external administrator’s remuneration is below a statutory threshold, an external administrator is entitled to draw a one-off amount of up to that threshold plus GST, without creditor approval. This amount is currently $5,000 (indexed).

Committee of inspection approval

A committee of inspection will generally only be established where there are a large number of creditors and/or complex matters which make having a committee desirable. Committee members are chosen by a vote of all creditors and work with the external administrator to represent the creditors’ interests.

If there is a committee, the external administrator will ask it to approve the remuneration. A committee makes its decision by a majority in number of its members present in person at a meeting, but it can only vote if a majority of its members attend.

In approving the remuneration, it is important that committee members understand that they represent all the creditors, not just their own individual interests.

Creditors’ approval

Creditors approve remuneration by passing a resolution at a creditors’ meeting. Creditors may vote according to their individual interests.

To approve an external administrator’s remuneration, a resolution is put to the meeting to be decided on the voices or by a ‘poll’ (if requested by the external administrator or a person participating and entitled to vote at the meeting). A poll requires a count of each vote and its value to be taken and recorded for each creditor present and voting.

A proxy is a document whereby a creditor appoints someone else to represent them at a creditors’ meeting and to vote on their behalf. A proxy can be either a general proxy or a special proxy. A general proxy allows the person holding the proxy to vote how they want on a resolution, while a special proxy directs the proxy holder to vote in a particular way.

A creditor will sometimes appoint the external administrator as a proxy to vote on the creditor’s behalf. An external administrator is only able to vote on remuneration if they hold a special proxy.

There are provisions for a resolution to be passed by creditors without a meeting. This still requires a majority in value and number of creditors voting to vote in favour of the resolution. Creditors representing at least 25% in value of those responding to the external administrator’s proposal can object to the proposal being resolved without a meeting of creditors.

Who may approve remuneration?



If you are asked to approve an external administrator’s remuneration, your task is to decide if the amount of remuneration is reasonable, given the work carried out in the administration and the results of that work.

You may find the following information from the external administrator useful in deciding if the remuneration claimed is reasonable:

• the method used to calculate remuneration

• the major tasks that have been performed, or are likely to be performed, for the remuneration

• the remuneration/estimated remuneration (as applicable) for each of the major tasks

• the size and complexity (or otherwise) of the administration

• the amount of remuneration (if any) that has previously been approved

• if the remuneration is calculated, in whole or in part, on a time basis: o the period over which the work was, or is likely to be performed o if the remuneration is for work that has already been carried out, the time spent by

each level of staff on each of the major tasks o if the remuneration is for work that is yet to be carried out, whether the

remuneration is capped.

ARITA’s Code of Professional Practice (‘the Code’) outlines the steps external administrators should take to make sure they fulfil their responsibilities to creditors when asking creditors to approve remuneration, including when those creditors are acting in their capacity as committee members. The Code is available on the ARITA website at www.arita.com.au.

If you need more information about remuneration than is provided in the external administrator’s report, you should let them know before the meeting at which remuneration will be voted on.

If you think the remuneration being claimed is unreasonable, you should raise your concerns with the external administrator. It is your decision whether to vote in favour of, or against, a resolution to approve remuneration. You may also choose to not vote on the resolution (abstain).

You also have the power to put a resolution to the meeting. For example, you could put forward a resolution to change the way the external administrator charges for remuneration, or the periods at which the external administrator may withdraw funds. Any amending resolution must occur before the vote being taken on the resolution to approve remuneration. If the amended proposal is passed, the resolution is binding on the external administrator. However, such an amendment may result in the external administrator seeking to be replaced by another external administrator.

If the external administrator is seeking approval of remuneration via a resolution without a meeting and more than 25% in value of the creditors responding object using the form provided by the external administrator, the proposal will not pass. If the external administrator wants the proposal passed, a meeting will need to be convened and any creditor entitled to participate in the meeting has the right, before the vote is taken, to put a resolution to the meeting as mentioned above.

What can you do if you think the remuneration is unreasonable?

Deciding if remuneration is reasonable

http://www.arita.com.au/



A creditor may apply to Court for a review of an external administrator’s remuneration. Creditors also have the power to appoint, by resolution, a reviewing liquidator to review any remuneration approved within the six months and any disbursements incurred in the 12 months before the reviewing liquidator’s appointment. The cost of a reviewing liquidator is paid from the assets of the external administration. An individual creditor may also appoint a reviewing liquidator with the external administrator’s consent. An individual creditor seeking the appointment of a reviewing liquidator must pay the cost of the reviewing liquidator.

An external administrator should be very careful incurring costs that must be paid from the administration; as careful as if they were incurring the expenses on their own behalf. Their report on remuneration sent to creditors must also include information on the out-of-pocket costs of the administration (disbursements).

Where these out-of-pocket costs are internal disbursements paid to the external administrator’s firm (for example photocopying and phone calls) the external administrator must request creditor approval of these amounts. The external administrator may also ask for approval of internal disbursements in advance. If they do so, they will set the rates for those disbursements and a cap on the maximum amount that can be drawn.

If you have questions about any of these costs, you should ask the external administrator and, if necessary, bring it up at a creditors’ or committee meeting. If you are still concerned, you have the right to seek the appointment of a reviewing liquidator (refer above).

You should first raise any queries or complaints with the external administrator or their firm.

If this fails to resolve your concerns, including any concerns about their conduct, you can lodge a complaint with ARITA at www.arita.com.au or with ASIC at www.asic.gov.au. ARITA is only able to deal with complaints in respect of their members.

The ARITA website contains the ARITA Code of Professional Practice which is applicable to all its members. ARITA also provides general information to assist creditors at www.arita.com.au/creditors.

ASIC includes information on its website which may assist creditors. Go to www.asic.gov.au and search for ‘insolvency information sheets’.

Important note: This information sheet contains a summary of basic information on the topic. It is not a substitute for legal advice. Some provisions of the law referred to may have important exceptions or qualifications. This document may not contain all of the information about the law or the exceptions and qualifications that are relevant to your circumstances.

Reimbursement of out-of-pocket costs

Queries and complaints

More information


http://www.asic.gov.au/


http://www.arita.com.au/creditors

http://www.asic.gov.au/

ARITA ACN 002 472 362

Level 5, 191 Clarence Street, Sydney NSW 2000 Australia | GPO Box 4340, Sydney NSW 2001 t +61 2 8004 4344 | e [email protected] | arita.com.au


Information sheet: Proposals without meetings

You may be a creditor in a liquidation, voluntary administration or deed of company arrangement

(collectively referred to as an external administration).

You have been asked by the liquidator, voluntary administrator or deed administrator (collectively

referred to as an external administrator) to consider passing a proposal without a meeting.

This information sheet is to assist you with understanding what a proposal without a meeting is and

what your rights as a creditor are.

Meetings of creditors were previously the only way that external administrators could obtain the views

of the body of creditors. However, meetings can be very expensive to hold.

A proposal without a meeting is a cost effective way for the external administrator to obtain the consent

of creditors to a particular course of action.

The external administrator is able to put a range of proposals to creditors by giving notice in writing to

the creditors. There is a restriction under the law that each notice can only contain a single proposal.

However, the external administrator can send more than one notice at any single time.

The notice must:

• include a statement of the reasons for the proposal and the likely impact it will have on creditors

if it is passed

• invite the creditor to either:

o vote yes or no to the proposal, or

o object to the proposal being resolved without a meeting, and

• specify a period of at least 15 business days for replies to be received by the external

administrator.

If you wish to vote or object, you will also need to lodge a Proof of Debt (POD) to substantiate your

claim in the external administration. The external administrator will provide you with a POD to complete.

You should ensure that you also provide documentation to support your claim.

If you have already lodged a POD in this external administration, you do not need to lodge another one.

The external administrator must also provide you with enough information for you to be able to make an

informed decision on how to cast your vote on the proposal. With some types of proposals, the law or

ARITA’s Code of Professional Practice sets requirements for the information that you must be provided.

What types of proposals can be put to creditors?

What information must the notice contain?

What is a proposal without a meeting?


22302 - INFO - Proposals information sheet v1_0.docx Version: July 2017

For example, if the external administrator is asking you to approve remuneration, you will be provided

with a Remuneration Approval Report, which will provide you with detailed information about how the

external administrator’s remuneration for undertaking the external administration has been calculated.

You can choose to vote yes, no or object to the proposal being resolved without a meeting.

A resolution will be passed if more than 50% in number and 50% in value (of those creditors who did

vote) voted in favour of the proposal, but only so long as not more than 25% in value objected to the

proposal being resolved without a meeting.

If the proposal doesn’t pass and an objection is not received, the external administrator can choose to

amend the proposal and ask creditors to consider it again or the external administrator can choose to

hold a meeting of creditors to consider the proposal.

The external administrator may also be able to go to Court to seek approval.

If more than 25% in value of creditors responding to the proposal object to the proposal being resolved

without a meeting, the proposal will not pass even if the required majority vote yes. The external

administrator will also be unable to put the proposal to creditors again without a meeting.

You should be aware that if you choose to object, there will be additional costs associated with

convening a meeting of creditors or the external administrator seeking the approval of the Court. This

cost will normally be paid from the available assets in the external administration.

This is an important power and you should ensure that it is used appropriately.

The Australian Restructuring Insolvency and Turnaround Association (ARITA) provides information to

assist creditors with understanding external administrations and insolvency.

This information is available from ARITA’s website at artia.com.au/creditors.

ASIC also provides information sheets on a range of insolvency topics. These information sheets can

be accessed on ASIC’s website at asic.gov.au (search for “insolvency information sheets”).

What are your options if you are asked to vote on a proposal without a meeting?

What happens if the proposal doesn’t pass?

What happens if I object to the proposal being resolved without a meeting?

Where can I get more information?

How is a resolution passed?

D – Forms for completion

Form 535 Formal Proof of Debt or Claim Form Corporations Act 2001, Regulation 5.6.49(2)

Return to: KPMG PO Box H67, Australia Square, SYDNEY NSW 1215 Email: [email protected]

Indebted Company: BrightAU Capital Pty. Ltd. (In Liquidation) ACN 619 685 120 Date of Appointment: 10 March 2020

A. Name and Contact Details of Creditor 1 (the Creditor)

(if in a personal capacity, given name and surname; if a corporate entity, full name of company, etc) 2 of (insert address) 3 Tel: 4 Email:

Tick this box to elect to receive electronic notification of notices or documents, in accordance with Section 600G of the Corporations Act 2001, at the email address specified above.

B. Details of Debt or Claim

1 Amount owing: (insert dollars and cents, inclusive of GST if applicable) 2 Nature of Debt or Claim: (insert description of debt and/or reference any supporting documentation) 3 Select one of the following options:

The Creditor is an unsecured creditor of the indebted Company

The Creditor is a secured creditor of the indebted Company

The Creditor is an employee / former employee of the indebted Company

The Creditor is a related party (please indicate: secured / unsecured) For all claims:

4 I have attached supporting documentation to substantiate the Creditor’s claim (secured creditors must attach evidence of security)

5 To my knowledge or belief the creditor has not, nor has any person by the creditor's order had or received any satisfaction or security for the sum or any part of it except for the following:

(insert details and value of security where relevant)

C. Signature 1 Dated: 2 Signature: 3 Name / Capacity:

Proof of debt

Creditor Assistance Sheet: Completing a Proof of Debt Form Section A – Name and Contact Details of Creditor 1. Insert the full name of the employee, individual, sole trader, partnership or company that the debt is owed to. 2. Insert the address of the employee, individual, sole trader, partnership or company that the debt is owed to. 3. Insert the telephone number of the employee, individual, sole trader, partnership or company that the debt is owed to. 4. Insert the email address of the employee, individual, sole trader, partnership or company that the debt is owed to. Section B – Details of Debt or Claim 1. The amount owing should only include debts or claims which arose prior to the date of appointment. 2. Insert the currency if not Australian dollars. 3. Type of creditor: tick one of the options only. 4. For all claims, ensure supporting documentation is attached, such as invoices, statements, agreements. 5. For secured creditors, insert particulars of all securities held. If the securities are on the property of the company,

assess the value of those securities. If any bills or other negotiable securities are held, indicate “refer attached” above and show them in a schedule in the following form:

Date Drawer Acceptor Amount ($) Due Date

Section C – Signature Instructions 1. Insert the date that the proof of debt form is being signed. 2. The form should be signed by one of the following persons:

If the debt is owed to an employee/individual, then the individual that the debt is owed to; or If the debt is owed to a sole trader, then the sole trader that the debt is owed to; or If the debt is owed to a partnership, then one of the partners of the partnership; or If the debt is owed to a company, then a duly authorised office of the company (normally a director or secretary of

the company). 3. Insert the name of the person signing the form, and note their capacity (that is, their role):

If the debt is owed to a sole trader, note their capacity as proprietor, eg: “[Full name], proprietor”; or If the debt is owed to a partnership, note their capacity as partner, eg: “[Full name], partner of the firm named in

Section A above”; or If the debt is owed to a company, note their capacity as director or secretary, eg: “[Full name], director/secretary of

the company named in Section A above”]

Resolution 1 Notice of Proposal to Creditors Date: 10 June 2020 Corporations Act 2001 Insolvency Practice Schedule 75-40

Return to no later than 3 July 2020 to: KPMG, PO Box H67, Australia Square, SYDNEY NSW 1215 Email: [email protected]





5 Select one of the following options:

I am not a related creditor of the Company

I am a related party creditor of the Company, relationship: _____________________________________________

B. Details of Debt or Claim 1 Select one of the following options:

I have previously submitted a proof of debt form and supporting documents

I have enclosed a proof of debt form and supporting documents with this proposal form

C. Proposal for creditor approval

That the remuneration of the Liquidators, as set out in the Remuneration Approval Request dated 10 June 2020, for the period from 10 March 2020 to 5 June 2020 be fixed in the amount of $95,378.50, plus any applicable GST, and may be paid.

D. Reasons for the proposal and the likely impact it will have on creditors if it is passed Approval via a proposal without a meeting reduces the costs of the liquidation. The Liquidators’ remuneration and disbursements are treated as a priority payment in the liquidation. They have the effect of reducing the funds available (if any) to distribute to creditors as a dividend unless there are sufficient funds to pay a dividend of 100 cents in the dollar.

E. Vote on proposal Creditors are given the option of approving, not approving or objecting to the proposed resolution being resolved without a meeting of creditors. Please place an “X” in one (only) of the following options to indicate your vote1:

Yes – I approve the proposal No – I do not approve the proposal I object to the proposal being

resolved without a meeting

F. Signature 1 Dated: 2 Signature: 3 Name / Capacity:

Notice of proposal to creditors

Creditor Assistance Sheet: Completing a Proposal Form

Section A – Name and Contact Details of Person or Entity

5. Insert the full name of the employee, individual, sole trader, partnership or company that the debt is owed to. 6. Insert the address of the employee, individual, sole trader, partnership or company that the debt is owed to. 7. Insert the telephone number of the employee, individual, sole trader, partnership or company that the debt is owed to. 8. Insert the email address of the employee, individual, sole trader, partnership or company that the debt is owed to. 9. Indicate whether or not you are a related party creditor of the Company (including its directors and officers). Provide

details of your relationship to the Company (if applicable)

Section B – Details of Debt or Claim

1. Ensure that you have previously completed a Form 535 – Proof of Debt or Claim. If you have not previously done so, please complete the Form 535 which is attached to this letter and submit it to the Liquidator with this proposal form.

Section E – Voting Instructions

1. Insert an ‘X’ in one (only) of the boxes to indicate your vote – i.e. ‘Yes – I approve the proposal’, ‘No – I do not approve the proposal’ or ‘I object to the proposal being resolved without a meeting’.

Section D – Signature Instructions

1. Insert the date that the proposal form is being signed. 2. The form should be signed by one of the following persons:

If the debt is owed to an employee/individual, then the individual that the debt is owed to; or If the debt is owed to a sole trader, then the sole trader that the debt is owed to; or If the debt is owed to a partnership, then one of the partners of the partnership; or If the debt is owed to a company, then a duly authorised office of the company (normally a director or secretary of

the company). 3. Insert the name of the person signing the form, and note their capacity (that is, their role):

If the debt is owed to a sole trader, note their capacity as proprietor, eg: “[Full name], proprietor”; or If the debt is owed to a partnership, note their capacity as partner, eg: “[Full name], partner of the firm named in

Section A above”; or If the debt is owed to a company, note their capacity as director or secretary, eg: “[Full name], director/secretary of

the company named in Section A above”]

brightau capital pty. ltd. (in liquidation) acn 619 685

Documents