Originally Posted by
Section28- BE
I'll very happily be corrected here but having had the time now to read the various submissions, applications and affidavits relating to VAH Newco 2 and, by connection, VARA, this whole thing appears to be the corporate equivalent of shutting down the wrong engine when confronted with an engine fire. In effect, VARA had been placed into liquidation
by mistake.
The sequence of events seems to have been along the following lines. When the Board decided to place Virgin Australia Holdings Limited, the parent company, into administration and Deloitte stepped in, decisions needed to be made regarding each of the vast array of companies and trusts controlled by VAH. There were about 55-odd such companies and five trusts. On the basis that some of those entities were likely set up for special purposes that may now have lapsed you'd routinely expect that some of those companies were dormant - no assets or liabilities, essentially just a corporate shell. However, being registered companies each had to have one or more directors.
First thing that the administrator wants to do is clear the decks of extraneous work - they need to decide what's going to be administered by them, what doesn't need to go into administration and what can be wound up to get it off the books. So Strawbridge
et al would have asked management, Scurrah and Co, to identify the operational businesses. We know from the initial affidavits that were filed that of the 55-odd companies, 39 were nominated for voluntary administration. On that list of 39 was VARA. We also know that Velocity (the five companies associated with it) was not placed into administration. That left about 15-odd entities, notionally just dormant shells, that were slated for liquidation. On that liquidation list was VAH Newco 2.
In keeping with the practice of both checking and confirming that you're shutting down the correct engine, there's an accounting equivalent for liquidation; you get confirmation via a declaration of solvency signed by the company's director(s). In the case of VAH Newco 2, that signed declaration of solvency came from Paul Scurrah and former CFO Geoff Smith (I can only assume that there was an incomplete handover to Keith Neate when he took the CFO position last year if Geoff Smith was still a director). Any old how, now armed with confirmation that they could liquidate VAH Newco 2, Deloitte set about doing so only to find that - hang on a minute - rather than being dormant with no assets or liabilities per the signed declaration of solvency, VAH Newco 2 in fact had both - it was the 100 percent shareholder of VARA and it was the guarantor for the best part of a AUD one billion in unsecured debt.
This latest round of submissions, applications and affidavits is seeking the reversal of the earlier decision to liquidate VAH Newco 2. The administrator now wants it and another entity,
VB Investco, added to the list of companies under voluntary administration.
In the grand scheme of things I don't think that it changes anything much other than to underline the fact, to the extent that it needed to be underlined, that Virgin's management really didn't have a handle on their own corporate structure.