The Australian Securities and Investments Commission (ASIC) has initiated court proceedings against Regional Express Holdings Ltd (Rex) and several former directors, including Lim Kim Hai and John Sharp, alleging deceptive and misleading conduct regarding the airline's financial position.
The move raises questions about the Federal Government’s decision to provide an $80 million loan to the airline despite the ongoing investigation.
ASIC claims Rex misled the market with a February 28, 2023, announcement suggesting optimism about operating profits for the 2023 financial year, despite internal knowledge of significant financial challenges.
The corporate regulator alleges Rex lacked a financial forecast to substantiate its optimism and failed to disclose material downgrades until June 20, 2023, when it projected a $35 million operating loss.
Lim, the former executive chairman, is accused of drafting and approving the misleading statement. ASIC also alleges directors Sharp, Lincoln Pan and Siddharth Khotkar breached their duties by failing to act after becoming aware of the company’s financial struggles from April 2023.
Rex entered administration on July 30, 2023, with debts exceeding $500 million, leading to the suspension of its major city operations. Administrators received an $80 million Federal Government loan in November to sustain regional services until June 2025.