Energy Watch faces liquidation amid $8 million in unpaid debts

BEN Polis' old company, Energy Watch, is heading for liquidation with unpaid debts of more than $8 million while he faces potential fines of hundreds of thousands of dollars for misleading advertising.

By InvestSMART · 19 Jun 2012

By InvestSMART ·
19 Jun 2012

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Investigations by administrator Lawler Draper Dillon have also found Energy Watch may have been trading insolvent since as early as July 2009. But early indications were that the former directors did not have enough assets to justify legal action, the firm's Stirling Horne said.

Energy Watch went into administration on May 18 with debts of $8.6 million including $886,000 in employee entitlements, $1.1 million to a secured creditor and $6.5 million to unsecured creditors, including the tax office. "No proposal has been put forward for a deed of company arrangement, so the only alternative left is to put the company into liquidation," Mr Horne said.

A second creditors' meeting is due to be held this Friday. Former employees may get some unpaid entitlements and superannuation, but will have to rely on the federal government's general employee entitlements and redundancy scheme (GEERS) if administrators cannot recover the full $886,000. "The GEERS scheme will have to cover the unpaid entitlements which will potentially leave a massive shortfall for the super that is owed and the responsibility for that, in the union's view, lies with the former directors of the company," Victorian branch manager of the Australian Services Union, Ingrid Stitt, said.

The competition watchdog will reveal on June 28 proposed penalties against Mr Polis and the old Energy Watch for 80 false and misleading claims made in 2011. Energy Watch's business tumbled after offensive comments by Mr Polis were made public in April. Three energy firms terminated their commercial relationship with Energy Watch and several sports clubs terminated sponsorship deals. The company name and assets were transferred to a new company called Energy Watch International on May 16. Mr Polis has nothing to do with the new Energy Watch, owner Danny Wallis told BusinessDay recently.

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Frequently Asked Questions about this Article…

What happened to Energy Watch and why is it facing liquidation?

Energy Watch went into administration on May 18 and administrators say no deed of company arrangement has been proposed. With debts of about $8.6 million and no rescue proposal, the administrators say the only alternative left is to put the company into liquidation.

How much unpaid debt does Energy Watch owe and who is owed money?

Administrators report total debts of roughly $8.6 million, including about $886,000 in employee entitlements, $1.1 million to a secured creditor, and about $6.5 million owed to unsecured creditors (which includes the tax office).

Will former employees receive unpaid entitlements and superannuation?

Former employees may receive some unpaid entitlements if administrators can recover funds, but if the full $886,000 is not recovered they will have to rely on the federal government’s General Employee Entitlements and Redundancy Scheme (GEERS) to cover unpaid entitlements and redundancies.

What does it mean that Energy Watch may have been trading insolvent since July 2009?

Administrators from Lawler Draper Dillon found early indications that Energy Watch may have been trading while insolvent as early as July 2009. That suggests the company may not have been able to pay its debts as they fell due from that time, although administrators said early signs did not show enough assets to justify legal action against former directors.

Are there potential penalties related to misleading advertising by Energy Watch?

Yes. The competition watchdog plans to reveal proposed penalties on June 28 against Mr Polis and the old Energy Watch for 80 alleged false and misleading claims made in 2011. The article also notes Mr Polis faces potential fines of hundreds of thousands of dollars for misleading advertising.

What happened to the Energy Watch name and are the original directors involved?

The company name and assets were transferred to a new company called Energy Watch International on May 16. The new owner, Danny Wallis, has said that Mr Polis has nothing to do with the new Energy Watch.

How did public comments by Mr Polis affect Energy Watch’s business relationships?

After offensive comments by Mr Polis were made public in April, three energy firms terminated their commercial relationships with Energy Watch and several sports clubs ended sponsorship deals, which contributed to a tumble in the company’s business.

What should creditors and everyday investors expect next in the Energy Watch administration process?

A second creditors’ meeting is scheduled for Friday where administrators will update creditors. With no deed proposal currently on the table, administrators have indicated liquidation is likely. Creditors should follow updates from the administrators (Lawler Draper Dillon) to learn about recoveries and next steps.