THE liquidators appointed for the liquidation of Level Solomons Limited (LSL) said they will legally oppose the reported new LSL land sale deal if the Solomon Islands Government fails to honour existing sale agreement.
The liquidators Richard Albarran and Kathleen Vouris who were appointed Administrators of Orbis Commodities Pty Ltd and Pacific Investment Holding Pty Ltd (collectively known as “the Companies”) on 16 April 2021 announced their intention in a Media Statement issued last Friday.
The statement was issued in response to recent media articles published in Solomon Star which suggested that Solomon Islands Government is contemplating a transaction, which according to the liquidators appear to be targeted at the LSL level (“Alternative Transaction”).
“An Administration is designed to maximise the chances of a company or as much as possible of its business continuing in existence; or if this is not possible, to achieve a better result for the company’s creditors than that which would result if the company was immediately wound up,” the statement said.
It said the Companies only assets are their indirect 37.55 percent shareholding in LSL, an entity incorporated in the Solomon Islands that holds interests in land in the Russell Islands and Guadalcanal.
The statement said during the Administration, numerous telephone conferences were held with representatives of SIG who committed to entering into a Deed of Company Arrangement (DOCA), which is a mechanism to compromise the claims of creditors of the Companies.
“That DOCA Transaction would see the SIG take control of the land interests held by LSL via the Companies’ indirect shareholdings in LSL and would remove once and for all any challenge to the ownership of these land holdings.
“The Administrators sought a number of extensions in the Administration in both the Supreme Court of New South Wales and the Federal Court of Australia to allow sufficient time for SIG to secure Cabinet approval of and proceed with the DOCA Transaction as an Administration is only generally for a short period of time.
“Despite the time afforded, the SIG encountered a number of issues which delayed the above.
“Unfortunately, it appeared unlikely that a further extension of time was going to be granted by the Australian Courts and as such, the Companies were placed into Liquidation on 30 August 2022 with Richard Albarran and Kathleen Vouris appointed a s Liquidators.
“Notwithstanding the liquidation of the Companies, discussions with the SIG continued and once again assurances were provided by representatives of SIG that they were committed to proceeding with the DOCA Transaction. Even though the Companies are in Liquidation, a DOCA can still proceed with consent of either the creditors of the Companies or the Court,” it said.
The statement said as Administrators and subsequently Liquidators, Albarran and Vouris have afforded SIG with every accommodation available to enable the DOCA Transaction to proceed.
“The accommodations provided were on the basis of numerous assurances, both verbal and in writing, that the SIG was committed to the DOCA Transaction.
“This has caused detriment to the winding up of the Companies and their creditors and potentially allowed a dissipation of the underlying assets, being the landholdings,” it said.
The statement said the recent media articles in Solomon Star regarding the matter suggest that SIG is contemplating a transaction and appears to be targeted at the LSL level (“Alternative Transaction”).
It said those reports are inconsistent with the numerous and repeated assurances made by representatives of SIG to the Liquidators that SIG was committed to completing the DOCA Transaction.
“This purported Alternative Transaction would significantly prejudice the interests of the Companies and its creditors. The Alternative Transaction would constitute an undervalued transaction capable of being injuncted or overturned. In particular, the Alternative Transaction would not result in any flow of funds to the Companies (and their creditors) notwithstanding the significant value of their 37.55% interest in LSL. The Liquidators have put SIG and LSL on notice of their position,” the statement added.
The statement said the Alternative Transaction, as an undervalue transaction, would also constitute a breach of the following provisions of the Companies Act 2009:
- section 64 – which requires the directors of LSL to act in good faith and in the interests of LSL; and
- section 69 – which requires the directors of LSL to exercise the care, diligence and skill that a reasonable person would exercise in LSL’s circumstances.
It said the statutory duty in section 64 of the Act to act in the best interests of LSL naturally extends to the interests of the shareholders of LSL, including the Companies as the ultimate owners of 37.55 percent of LSL.
“The Liquidators consider the undervalue issue referred to above to be fatal to the Alternative Transaction. In contrast, the undervalue issue does not impact the DOCA Transaction as it would result in all creditors of the Companies being paid in full. In other words, the DOCA Transaction would not operate in a manner prejudicial to the interests of creditors of the Companies.
“The Liquidators have put SIG and LSL on notice that they will oppose the Alternative Transaction (or any other transaction) that is at an undervalue and/or prejudices the creditors of the Companies and that they will apply for an injunction to prevent any such transaction from proceeding.
“SIG has represented to the Liquidators on numerous occasions that it wishes to acquire or otherwise take control of the land holdings held by LSL for the benefit of the people of the Solomon Islands. The DOCA Transaction is the only feasible and practical transaction available to SIG to achieve that outcome.
“Whilst the Liquidators are committed to continuing to work with SIG to complete the DOCA transaction to return control of the LSL land holdings to the people pf the Solomon Islands, they will take all available legal action to ensure that the interests of the Companies (and their creditors) are not prejudiced,” the statement said.
