Object Consulting appears to have traded while insolvent for around 18 months, according to the company’s administrator.
“Based on our investigations ... we have concluded that the company traded whilst insolvent since at least 31 January 2018,” says a new document released by the company’s administrators yesterday to the Australian Securities & Investments Commission.
“Our investigations to date indicate that the financial position of the company was poorly managed. It is our view the director was receiving adequate financial information to understand the deteriorating financial position of the company,” the document says.
The document goes on to say that Object “did not keep separate records for all its subsidiaries.” The result was a confusing financial position that meant Object “has historically been unable to determine and compare the profitability of the services business compared to the product business.”
The administrator concludes, tentatively, that “the profits of the services business were used to fund the ongoing losses of the product business.”
Those losses came about in part because Object entered into "a fixed price contract in the product business, which ran significantly over budget". Combined with Object being "unable to adjust costs in line with the decline in revenue", things went pear-shaped.
Object Consulting therefore entered voluntary administration in early September 2019 and at the time CRN learned a sale may be in prospect.
The new document reveals that seven entities appear to be seriously considering a purchase: the attempt to sell the company resulted in 20 expressions of interest, 14 of which led to the signing of non-disclosure agreements permitting a deeper investigation of the company. Seven entities accessed a data room containing sensitive documents. The administrator has even received “indicative offers” to buy Object, and those are being considered.
But for now the administrator feels bound to recommend the company be wound up, because no deed of company arrangement has been proposed, the company “maybe[sic] insolvent, subject to the estimated realisable value of company assets” and going into liquidation creates some new ways to meet creditors’ claims.
Which is why a sale is an option - the document filed with ASIC adds “The likelihood of a dividend to unsecured creditors is subject to the realisation of company assets, the quantum of creditor claims and the costs of the external administration. At this stage a dividend to unsecured ordinary creditors is unlikely".
More detail will emerge at a creditor’s meeting scheduled for 25 September. That meeting will likely attract the attention of employees, 89 of whom are together owed $4,815,148. The Australian Taxation office is also a significant creditor, as is American Express.