Ex-Nathans directors to battle ban threat

Nathans Finance was placed into receivership in August 2007 owing $174 million to 7000 investors. Photo / Glenn Jeffrey

In a rare move, two former directors of collapsed finance company Nathans Finance are fighting against the Registrar of Companies' attempt to ban them, the Ministry of Economic Development says.

The National Enforcement Unit of the ministry, which is running the case, applied to have the four former directors, John Hotchin, Donald Young, Kenneth (Roger) Moses and Mervyn Doolan, banned along with Gary Stevens.

Moses and Young along with Stevens are fighting the MED application. The unit's manager, Phil Day, said if the directors failed in their fight against the Registrar of Companies, it could take up to five years before they could hold another directorship or be a promoter of a company.

He said their decision to fight the application was "unusual".

The companies registrar filed an application to see them removed as directors under the Companies Act because of their alleged conduct when they were directors of Nathans Finance.

The Securities Commission laid criminal charges against Nathans' four directors for allegedly making untrue statements in the company's registered prospectus and investment statement dated December 13, 2006.

These statements concern lending to related parties, including Nathans' parent company VTL Group.

The commission also alleges the directors made further untrue statements when they signed a prospectus extension certificate on March 20, 2007. The company's certificate stated that the company's financial position had not changed since its last balance date, and that the December 13, 2006, prospectus was not false or misleading.

The Crown's case against the directors is expected to start next year.

Nathans Finance was placed into receivership in August 2007 owing $174 million to 7000 investors.

The Companies Office seeks a ban to prevent directors or managers of failed companies from holding future directorships in order to protect the public from peoplewho have a track record of commercial failure.

The criteria include having been involved in a number of failed companies, the degree of mismanagement, the amount owed to the creditors, the number of creditors and the strength of evidence against the directors to justify banning.

The next hearing is scheduled for the High Court at Auckland next month.

If the directors are convicted, the charges carry a maximum penalty of five years' imprisonment or fines of up to $300,000.

The commission has also filed civil charges against Hotchin, Young, Moses and Doolan - but that case is awaiting the outcome of the criminal charges.

The commission has applied for civil penalties of up to $500,000 against each of the directors.

This is the first step towards gaining compensation for those who invested under the December 13, 2006, prospectus.

No charges have been laid against Stevens.