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ASIC is taking Rex and four of its directors to the NSW Supreme Court, alleging the company misled the ASX over its financial performance.
The corporate watchdog says the company – now in voluntary administration – released a misleading ASX statement on 28 February 2023 saying it was “optimistic the Group will have positive operating profits for the full FY23 barring any further external shocks”, despite not having any reasonable basis for such a claim.
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According to ASIC, Rex had seen operating losses in the year to date before issuing that statement and had not prepared a financial forecast for FY23 beforehand. The airline later forecasted a $35 million loss for that financial year and ultimately posted a loss of $31.7 million.
The regulator also alleges that former executive chair Lim Kim Hai, as well as directors John Sharp, Lincoln Pan and Siddharth Khotkar, breached their duties as directors: Lim by drafting and approving the statement and then failing to take steps to make sure Rex met continuous disclosure obligations, and the other three by failing to ensure Rex updated the market in line with those obligations before its downgrade in June.
“Our case will allege serious governance failures at Rex. Rex’s directors had a responsibility to take reasonable steps to ensure the company complied with the law and we will seek to hold them to account,” ASIC chair Joe Longo said.
“We will allege four of Rex’s directors breached their duties because they failed to take steps to ensure the market had accurate information about the company’s financial performance.”
As Rex is in voluntary administration, ASIC is seeking leave to bring proceedings against the carrier. It will seek a declaration of contravention against Rex, but no financial penalties for the company; however, the watchdog is seeking financial penalties, as well as declarations and disqualification orders, against the four directors.
“Continuous disclosure of market-sensitive information is fundamental to upholding the integrity of our public markets and supporting a fair and efficient financial system,” Longo said.
“Directors of listed entities play a critical role in ensuring companies comply with their continuous disclosure obligations. Failing to take reasonable steps to ensure a company is compliant is not acceptable.”
Rex administrator EY Australia could not comment, as the matter is before the courts.
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says:Just how many more months must we watch the REX debacle on life support continue. Time to move on and up so switch the power off.