Website delivers the goods on failed firms

Simon Hoyle

The Sydney Morning Herald

14 June 2003

 If you're a shareholder in a company that in the past 12 months has gone bust, been placed into receivership, suspended, or removed from the lists of the Australian Stock Exchange, then you may face a few additional tax issues this time around.

When a company goes into some form of administration, the flow of information to shareholders can dry up.

Knowing exactly how and when you're entitled to claim a capital loss from such an investment can be tricky.

Tony McLean, a former executive officer with the Australian Shareholders' Association, estimates that some 400 companies have been deregistered in the past 10 years.

McLean has created a web-based service for shareholders, www.delisted.com.au, to help them track companies in administration and to know when it's appropriate to crystallise capital losses.

A key event in being able to crystallise a capital loss is the issue of a declaration by the liquidator that there's little or no likelihood of further recoveries being made.

Shareholders in HIH Insurance, for example, may go to the website and obtain a copy of the liquidator's declaration, if they haven't already done that and crystallised their losses.

Sometimes just finding out if a declaration has been issued can be a tough job.

The site carries the declarations for companies including HIH, One.Tel, Centaur Mining, New Tel, Liberty One, Seafood Online, Cinema Plus, Normans Wines, Harts Australasia, Satellite Group and EISA, “along with some of the earlier corporate disasters such as Hooker Corp, Clifford Corp, Mount Lyell Mining, Bond Corp, Jennings Group, Clutha and the Duke Group," a statement issued by deListed says. “These declarations can be downloaded and printed off in order to substantiate a tax claim."

McLean says: “The issue of the ability to crystallise a tax loss has been an issue for shareholders since the mid 1980s, 1985, when capital gains tax was introduced.

“From that point, the main trigger they had [for crystallising a loss] was the issue of a declaration by a liquidator.

“But the difficulty for shareholders in the past has been in obtaining copies of the liquidator's declaration, or even knowing that a declaration had been issued. That was the main rationale [for the website]."

The site covers a lot more than just the issuing of liquidators' declarations, including the consideration received in mergers and takeovers, and directions on where to find unclaimed monies arising from compulsory acquisitions.

At this time of the year, when shareholders are beginning to think about the sort of information they'll need to complete their tax returns, finding a liquidator's declaration can be pretty handy.

The site is a free service for shareholders. “I'm not making any money out of it," McLean says.

“I got into it because I sort of made a mental commitment to some people several years ago.

“There was a spate of people who phoned the [ASA] office. I thought at the time that a website would be the ideal way of keeping people informed.

“So that sort of commitment led to the construction of the site.

“Working with the ASA at the coalface, I had a lot of shareholders call and complain about the lack of information and their inability to determine what their tax position was.

“If you listen to enough disillusioned investors, you resolve that, one way or another, the thing needs to be addressed."

It's been a 12-month task to get the site up and running. But McLean is convinced it will meet investor demand. “When a company went into administration we are confined here to public listed companies, let's be clear about that if a shareholder was lucky, and the company was big enough to warrant media attention, there might be mention of it in the press," he says.

“But in normal circumstances, there's really no other way a shareholder would know, unless they are really monitoring company announcements on a regular basis.

“Even then they would see, in all likelihood, a fairly bland announcement to the ASX that the company was faced with financial difficulties and that directors had resolved to appoint a voluntary administrator. And as a general rule, that's the end of it."

Once an external administrator is appointed to a company it is “beholden to creditors, and generally doesn't feel compelled to keep shareholders informed on developments within the administration", McLean says.

“That includes the issue of a liquidator's declaration, which is an essential trigger for crystallising a capital loss.”

“There's another one: the final deregistration of the company. That's a capital gains tax event as well."

The site will begin to carry information about a company once it's suspended, and it will refer shareholders to the ASX's own website so they can stay on top of the company's latest announcements.

“But generally, when a company goes into administration, that's the point at which we start to reflect developments in a more substantial way on our website," McLean says.

“There's a lot of disillusioned people out there who know that their company has failed, and they accept there's an element of risk associated with investing, but they are pretty angry with what has happened to their company and why can't they claim a capital loss, and why is no one keeping me informed?"