Written on the 30 July 2013


THE directors of LM Investment Management Ltd could be in the firing line to face charges over unspecified offences, according to administrators of the Gold Coast funds manager who have recommended the company be wound up.

Administrators John Park and Ginette Muller, of FTI Consulting, say that “various offences” occurred in the lead-up to the collapse of LMIM, the company founded by Peter Drake and which, until earlier this year, controlled investor funds totalling $750 million.

The administrators also reveal that they have found some evidence that LMIM had traded while insolvent “for a period and entered into certain transaction (sic) that may be voidable against a liquidator”.

The administrators’ report, which was sent to LMIM’s creditors on July 25, will be presented to the second meeting of creditors due to be held in Surfers Paradise this Thursday, August 1.

The administrators will be recommending to the meeting that LMIM be wound up, although they give no immediate indication the size of their potential dividend.

The administrators say a dividend is possible from a liquidation, with the book value of LMIM’s assets at $7.934 million.

“In our view, the winding up of the company is the best option for creditors,” the administrators say in a joint statement.

“If creditors resolve to wind up the company, liquidators will be appointed to realise the company’s assets for the benefit of creditors.

“This option also allows voidable transactions, insolvent trading, breaches of director duties and other offences to be investigated more thoroughly.

“If the company is wound up, creditors with guarantees from the company’s director(s) could pursue the director for those debts immediately.

“We anticipate a dividend to creditors may be distributed in liquidation, however at this stage we are unable to quantify the amount of such a dividend due to the commercially sensitive nature of the property-related assets of the company and the unknown recoveries in relation to voidable transactions.”

The administrators say in their statement that their investigations “revealed that some LMIM directors may be guilty of various offences committed prior to the appointment of the administrators”.

They do not specify their areas of concern.

Park and Muller were appointed voluntary administrators to LMIM on March 19.

They say the full creditors’ report will be made public only after this Thursday’s creditors’ meeting and after “a number of ongoing legal matters have been resolved”.






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