NSW Legal options when company in loss

[Nick04019]

Hi,
I have started Production house (Entertainment industry) 5 months ago along with my friend as director.
We have raised investment from close friends and family to 800K.
contract terms:
we gave contract to investors as each share at 2000$.
We(company) will buy shares as agreed price(no price mentioned)
investors understand the riskl involved.(not mentioned any detail level what will be the risk)
End of contract terms.
Next we invested money in one commercial program and program was not successful.
company made 80 % loss.
now the investors are sending legal notices to pay back their money.
so far we have not issues any share holders certificates ,(not registered at ASX) we just game above contract, are we breaching the law for not issuing share certificates.( not even non market certificates)

What options do we have (company)
can any investors sue personally
can the company declare insolvency ? or bankrupt ?
what is the legal process to tell investors that company made loss and cant return money ?
what if any investors claim negligence of director duties what will happen ?
if we go legally will the court ask for all receipt of expenses and income ?
since we raised money in very short period and made loss would there be any directors duties breach as with out any experience we raised money on personal goodwill and with in no time we made loss(2 months time every thing).

 

[Tripe]

without any knowledge of the full wording of the contract,

I understand that the company is not insolvent, but the initial share holders capital is now only worth 20% of initial investment.

Are you a registered business via ASIC?

 

[Nick04019]

without any knowledge of the full wording of the contract,

I understand that the company is not insolvent, but the initial share holders capital is now only worth 20% of initial investment.

Are you a registered business via ASIC?

Hi,
Yes its registered with ASIC.

 

[Nick04019]

Hi All any advice please .

 

[Rod]

You need a lawyer. Not issuing share certificates to investors looks a mistake that could cost you money.

Get real legal advice.

 

[Nick04019]

Hi Rod,

Sorry for the delay.

I have prepared the contract as follows:

Investment oppurtunity (for particular concert /event only not shares of company) based on total cost of project total of 500 shares including promoters shares witheach share value $2000.

At the end of the project/event, shares will be bought back by company as an agreed price with investor (nothing on paper of what price is).

Agreement:

This agreement is made between the investor and the company (XXX) address....

The following are the terms:

The investor agrees to invest 10000 in to event being planned for 20 july 2017 in Melbourne.

The investor agrees to understand the risk involved with event (nothing specific).

Company will pay returns after 1 month of the event finishes.


We have not issued any shares. We have done some cash transactions. We have paid overseas team but not paid any taxes or super and we are not going to declare to ATO. We invited overseas artists on some other organisation name (immigration visa).

If any one of the investor goes to court, we are worried that we are breaching Immigration law, ATO rules and have to pay more taxes for amount paid to overseas artists.

We might have misled some investors and didn't follow director duties. Does the court give the direction/investor a chance to complain at the Immigration/ATO irregularities?

 

[Nick04019]

You need a lawyer. Not issuing share certificates to investors looks a mistake that could cost you money.

Get real legal advice.

Hi Rod,

Sorry for the delay.

I have prepared the contract as follows:

Investment oppurtunity (for particular concert /event only not shares of company) based on total cost of project total of 500 shares including promoters shares witheach share value $2000.

At the end of the project/event, shares will be bought back by company as an agreed price with investor (nothing on paper of what price is).

Agreement:

This agreement is made between the investor and the company (XXX) address....

The following are the terms:

The investor agrees to invest 10000 in to event being planned for 20 july 2017 in Melbourne.

The investor agrees to understand the risk involved with event (nothing specific).

Company will pay returns after 1 month of the event finishes.


We have not issued any shares. We have done some cash transactions. We have paid overseas team but not paid any taxes or super and we are not going to declare to ATO. We invited overseas artists on some other organisation name (immigration visa).

If any one of the investor goes to court, we are worried that we are breaching Immigration law, ATO rules and have to pay more taxes for amount paid to overseas artists.

We might have misled some investors and didn't follow director duties. Does the court give the direction/investor a chance to complain at the Immigration/ATO irregularities?

#6Nick04019, Sunday at 10:26 AM
Last edited by a moderator: Monday at 7:02 PM

 

[DMQC]

As Rod said, you need legal advice - proper, comprehensive and detailed legal advice. This issue would be far too complex to give any accurate advice on a forum. I think your question is "if we are taken to Court by the investors, would the Court report the matter to the ATO or Dept of Immigraiton?". If this is your question, the short answer is no. The Court is not responsible for reporting people to relevant authorities. It is worth noting that an investor could certainly make a report to the ATO/ASIC/Immigration, although how successful said report would be is anyone's guess.

And for what it is worth, if what you have copied above is essentially all of the contract, it will not have much relevance during Court proceedings at all. Also you stated "...shares will be bought back by Company as an agreed price with investor (nothing on paper of what price is)" - If this means that, although nothing is on paper, verbal assurances were made to the investors of an approximate price that the shares would be bought back, the "approximate price" the Court may be advised of this statement by the investors.