Corporate watchdog ASIC is suing two top executives at Freedom Foods (now Noumi) who exited the company days before it unveiled a multi-million company write-down that brought the Milklab manufacturer to its knees and forced a business turnaround that is still ongoing.
ASIC is alleging that former CEO Rory Macleod and former chief financial officer Campbell Nicholas of Noumi, which produces plant-based beverages Milklab and Australia’s Own, were involved in providing misleading information about the company’s financial position, breaching director and officer duties and failing disclosure obligations by doing so.
ASIC deputy chair Sarah Court said directors and officers had a responsibility to ensure their companies complied with the law.
“However, in this case ASIC alleges Freedom Foods’ former CEO and CFO misled investors, auditors and directors, and allowed their company to breach continuous disclosure laws by failing to disclose a significant write-down, leading to an uninformed market,” she said.
Noumi’s share price has plummeted in early trade to be 14.8 per cent lower at $0.12 on Monday morning.
ASIC’s move to take Macleod and Nicholas to court comes after an investigation that began in July 2020 that was sparked by the sudden resignations of then-CFO Nicholas on June 30 followed by then-CEO Macleod the following morning, which saw ASX trading suspended and shares dip to a five-year low.
Later that week, the company revealed that its estimated value of useless assets, $25 million, was in fact $60 million. This figure would later be revised to $590 million after Freedom Foods redid several years of accounting for the 2019 financial year.
ASIC is alleging that Macleod and Nicholas failed to disclose information about the value of write-downs, the truth of the company’s revenue and profit figures, and were involved in the company’s failure to disclose the real figures for the 2019 financial year and the 2020 half-year ending 31 December 2019.
The corporate watchdog is also alleging the pair gave misleading information to directors, auditors and shareholders of the company as well as to the ASX.
“When directors and officers fail in their obligations, as we allege in this case, they not only cause harm to investors by denying them the information they are entitled to, they also erode confidence in Australia’s financial markets,” said Court.
“ASIC is continuing its focus on potential breaches of company officer and director duties, and we will continue to take court action seeking penalties and other sanctions in appropriate matters.”
Freedom Foods was rescued by its majority shareholder, the billionaire Perich family, rebranded itself as Noumi in late 2021, and is rolling out a company turnaround that is still underway.
After Noumi revealed its reinstated figures, high-profile law firm Slater + Gordon filed a shareholder class action lawsuit, followed by another from Phi Finney McDonald funded by Omni Bridgeway in late February 2021. The two class actions have been rolled into one proceeding.
In a statement to the ASX, Noumi said it had fully cooperated with ASIC’s investigation that began in July 2020.
“Noumi is currently reviewing ASIC’s statement of claim,” the company said.
“Given that the matter is before the Court, Noumi will not be providing commentary in relation to the progress of these proceedings but will continue to comply with its continuous disclosure obligations.”
ASIC is seeking declarations that the pair contravened sections of the Corporations Act, disqualification from taking up any corporate executive role for a period, penalties, and costs.
More to come
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Source: Thanks smh.com