Sources close to the Friday 15th March vote in a proposed Deed of Company Arrangement for Starleaton Holdings Pty Ltd and SDS Bidco Pty Ltd, indicate that the vote in support of the DOCA was decided by the casting vote of the Administrator, Cathro Partners, after a deadlocked for-and-against vote and many abstaining from voting. Under ASIC regulations, the Administrator has 15 days to implement the DOCA, which will return control of Starleaton to its original directors, with oversight by the Deed Administrator.
Starleaton's sole remaining warehouse/office will be a consumables-only vendor under the DOCA
Starleaton Holdings and SDS Bidco. who jointly entered administration on January 19th this year, will resume business within 2 weeks, following a knife-edge vote for the Deed of Company Arrangement (DOCA) conducted by Administrators Cathro Partners on Friday 15th March.
Although there are over 150 creditors, including ex-staff owed wages and entitlements, only 32 votes were cast (including 5 from Eaton family member/related parties. Of these 32 votes, 16 voted against the DOCA, leaving a deadlocked situation that was ultimately decided by a casting vote by the Cathro Administrator, Andrew Blundell. The remaining 120 or so creditors, presumambly abstained or did not return proxies.
In adopting the DOCA, Starleaton has avoided liquidation, which would have enabled around 35 staff to lodge FEG (Fair Entitlement Guarantee) claims, resulting in payment of all entitlements owing, apart from superannuation, usually in 6-8 weeks. The Treasury would then seek to recover to FEG payments from any remaining assets, related parties or the former directors themselves.
However, under the terms of the DOCA, employees will have to wait around 12 months before repayments start, so a longer wait but for 100% of entitlements.
Unsecured creditors are not so fortunate, with the 'dividend' under the DOCA estimated at between 1 and 3 cents in the dollar owed. Priority top rank secured crediors are likely to see 100% of their debt discharged and ordinary secured creditors paid out during the 2-year term of the DOCA deed administration, from the $800,000 DOCA fund secured by Peter & Leanne Eaton and Starleaton Pty Ltd (not in administration), and on-going trading profits as a going concern.
Uncertainty surrounding pre-payment of equipment
However, the fate of large sums paid in advance to Starleaton for the supply of equipment, mostly Zund Systemtechnik CNC cutting/finishing machines and upgrades, is less clear. The amounts prepaid were at the request of Starleaton's finance/accounts department, in some cases promising deliver 'within a week' but thus far, no equipment has been delivered. Two customers, desperate for upgrades to existing Zund machines, sourced the parts directly from Zund and paid again for them. Some of these transactions date back to May 2023, with the last one handing over funds just seven days before Starleaton entered administration. They are:
- Broadley Signs, NSW
- Blueprint Digital, NSW
- CV Services, Qld
- Fireworks Digital, Qld
- Inspired Signs & Print, Vic
- Sydney Print Media, NSW
- Allpride Signs, NSW
The sum total of prepaid equipment involved is over $1 million. A Starleaton spokesperson has indicated they are 'talking to manufacturers' about the supply of machines but, with the new structure limiting the company to consumables only supply, the situation remains vexed.
On the subject of prepayment for equipment, Cathro's supplementary report to creditors only states, at 6.5:
"We note a number of creditors have been affected by prepayments to Starleaton Holdings for the purchase of goods which have not been supplied. These prepayments largely relate to purchases of cutting machines that Starleaton Holdings sources from Zund Systemtechnik AG (“Zund”) in Switzerland. In that regard, creditors are advised that:
• the Companies are not in possession of any of the relevant machines;
• various amounts, and in some cases the entirety, of creditors’ prepayments were remitted to Zund; and
• we understand in some instances Zund may have applied funds received against the Companies’ historical debt.
Prepayment creditors should seek their own legal advice in that regard. If the Companies are liquidated, a liquidator will investigate any remedies that may be available in respect to the relevant transactions, such as unfair preference payments, unjust enrichment claims etc"
We understand that 4 independent legal actions are continuing to seek either delivery of the prepaid equipment or refunds of deposits and whole payments.
