16-326MR ASIC acts to freeze sale of land proceeds in excess of $100 million pending disclosure to investors

Following an application made by ASIC on 19 August 2016, the Federal Court of Australia has made orders limiting the ability of Aviation 3030 Pty Ltd (Aviation) to deal with the proceeds of sale of property it owns in Victoria.

The Aviation property was purchased in 2011 by Aviation, which raised funds for this purpose from around 70 shareholders and unitholders.

Aviation consented to the orders being made.

ASIC commenced its investigation into Aviation in May 2016. In the course of its investigation, ASIC became aware that: 

  • in March 2016, Aviation had issued shares to companies associated with a director and a former director of Aviation, purportedly pursuant to an Aviation letter dated 4 May 2011 and an option agreement dated 18 September 2012 entered into by the then directors of Aviation ('the 2016 share issue'); 
  • this resulted in a substantial dilution of the interests of investors, and an increase in the interests controlled by the directors of Aviation and their associates; 
  • neither the 4 May 2011 letter nor the 18 September 2012 option agreement had been disclosed to investors prior to their investments in Aviation and the 2016 share issue had also not been disclosed to all investors; and  
  • in May 2016, Aviation received an offer from a third party to purchase the Aviation property for more than $100 million and that this offer had not been disclosed to all investors. ASIC's understanding was that this property was expected to be sold within a short timeframe.

Based on these matters, ASIC was concerned that the proceeds of sale of the Aviation property would be distributed in accordance with the 2016 share issue. This was in circumstances where investors had not been provided with proper disclosure in relation to the dilution of their interests, either at the time of their investments or subsequently.   

ASIC obtained the orders to protect the interests of investors and specifically to enable them to be provided with:

  • information as to the 2016 share issue (and the documents purportedly relied upon by Aviation for that purpose);
  • details of the proposed sale of the Aviation property; and
  • an opportunity to decide whether to obtain independent advice concerning their investments. 

As part of an agreement reached with ASIC, Aviation undertook to provide disclosure to the Investors in relation to these matters, in a form agreed to by ASIC. Aviation has advised ASIC that it has completed this process.

Developments subsequent to the orders

Aviation has advised ASIC that the offer to purchase the Aviation property has been withdrawn.

The Orders will remain in place until further order of the Federal Court. The matter returns to the Federal Court on 25 November 2016.

ASIC's investigation into Aviation is ongoing.