Forestlands: Fear shareholders will receive only 'fraction' of $18m

Photo / ODT File

A shareholders group fears thousands of investors left out of pocket by the Forestlands group of companies will receive only "a fraction" of the $18million set aside for them.

Wayne Drogemuller, a Forestlands investor and spokesman for a group of shareholders still waiting for their money, voiced the concern ahead of a High Court hearing in Nelson to discuss the liquidation of most of the group's companies.

The Financial Markets Authority is seeking to have Forestlands companies numbered two to 20 placed into liquidation.

Each company is associated with a specific forestry block, and together they represent the bulk of the Forestlands group, which is headed by director Rowan Kearns.

Mr Drogemuller told the Otago Daily Times he was worried shareholders would cover the cost of the liquidation proceedings, as well as other costs, which would be deducted from money held in trust for shareholders' benefit.

Already, the High Court, in a ruling released this week, had granted 10 of the Forestlands companies permission to use the funds held in trust to pay Inland Revenue $1.64million in taxes and interest owed, to avoid $157,136 in penalty fees.

He feared claims by other creditors, as well as other costs, would further erode the sum, he said.

He called on the FMA to "front up" and explain to shareholders how much a liquidator would cost, and who would pay, among other questions.

"The outcome for shareholders is not good if we have to end up paying for the cost of liquidation as well as any creditor claims made against the funds.

"These costs will quickly eat away the remaining funds held in trust, and `B' shareholders will see only a fraction of the $18million," he said.

The FMA began investigating the Forestlands group in March last year, following complaints from investors about the sudden sale of Forestlands' assets, and the Serious Fraud Office was later called in as well.

Both inquiries are ongoing, despite an initial hearing on liquidation proceedings, which was due to start in Nelson yesterday. Mr Kearns has vowed to oppose the application.

In the meantime, $18million from the $23.5million raised from the sale of Forestlands' assets had been placed in a trust account, to be given to shareholders with the approval of the FMA only after Mr Kearns' advisers devised a formula for distribution.

The formula had so far failed to materialise, despite earlier promises it would be ready in January, but Mr Kearns said this week advisory company KordaMentha was still working on it.

An FMA spokesman, asked about the shareholders' concerns, confirmed the cost of the liquidator would come from the $18million held in trust, but defended the approach.

"This is a standard part of the liquidation application - the organisation seeking to put a company into liquidation is entitled to claim reasonable costs.

"At this stage, the FMA is reserving its position in relation to costs, as who may oppose the application and the length and complexity of the case is not yet clear."