After
selling its business to Mercer Group for one million dollars, directors of TSL
Nelson paid out $180,000 to shareholders at a time when TSL was insolvent and
unable to pay its debts in full.
Liquidators took action against shareholders Jonathon and Amanda Eyles,
Sean Marr and Tania Trowbridge.
Mr Marr and Ms
Trowbridge were ordered to repay $70,000; the Eyles $70,000 also.
TSL Nelson Ltd designed
and manufactured industrial meat slicing machinery. Together with related company TSL International
Nelson Ltd, it struggled with plans to push into the North American
market. Both TSL and TSL International
were put into liquidation by shareholders in December 2013. This after a sale of all business assets to
the Mercer Group eighteen months previously for one million dollars.
TSL liquidators sued,
alleging shareholders winkled money out of the company at a time when all
creditors could not be paid. The High
Court was told the one million dollars was paid in tranches. After clearing off bank debt, directors Sean
Marr and Jonathon Eyles arranged for a $180,000 payment to shareholders. These payments were misleadingly coded as
‘subcontractor payments’ and a GST credit claimed. Payments were in fact a repayment of
shareholder current account balances and what Mr Marr called repayment of
shareholder funds. Associate judge
Mathews ruled TSL was insolvent when payment was made. Directors’ assessment of solvency did not
take into account a multitude of trade debts and claims including $27,000 owed
former employee Tony Jackson, $23,400 having to be written back after the
erroneous GST claim and $143,600 claimed by a North American distributor. Adding undisclosed liabilities into TSL’s financial
statements increased creditors’ claims by $353,300 leaving the company
insolvent. Judge Mathews ordered
repayment of money shareholders received in excess of what they should have
received on liquidation.
re
TSL Nelson Ltd- High Court (8.11.17)
17.149