Golden IT, a Victoria-based telecommunications provider trading under the name, GTelecom, has claimed the financial difficulties that led to the company being place under external administration were the result of a "misleading" contract signed with Novatel Telecommunications.
Novatel Telecommunications, registered as Netcube, was placed in liquidation in April 2017 owing more than $580,000 to Wirefreebroadband, nearly $49,000 to Melbourne’s Emersion Software Solutions and $48,000 to Loanworks Technology.
Golden IT was registered with the Australian Securities and Investment Commission (ASIC) in January 2002 and provided Telstra wholesale telephone and internet services to residential customers.
Blair Pleash from Hall Chadwick, who was appointed as Golden IT's administrator on 2 March, said that in November 2016, Golden IT entered into a novation agreement with Novatel Telecommunications for the forgiveness of a debt owing to related entity, Wirefreebroadband, in exchange for Novatel's contracts.
A second novation agreement was signed between Wirefreebroadband and Golden IT in a $100,000 transaction.
"I understand that there are 976 customers on the customer database of which there are 295 active customers. The monthly fee generated from the 295 active customers is approximately $26,305," Hall Chadwick's Blair Pleash said in the administrator's report.
According to the administrator, Zahid Baala, the director of Golden IT, alleged misleading customer conduct by Novatel, who provided its customers under an offer that would see customers pay for the first year of their service with the second being complimentary.
However, when Golden IT took over the customers it realised they were already in their second contracted year, leaving the company out of pocket by approximately $1 million.
Baala also told the administrator that the company had billing, integration and supplier issues of a customer database by Emersion Software Solutions. The alleged shortcomings of Telstra service delivery also resulted in the Telecommunications Industry Ombudsman (TIO) issuing complaints from customers for charges during December 2016 to April 2017, which would have also resulted in a loss of customers.
The administrator's preliminary investigations, however, indicated poor financial control of the company, including lack of records, inadequate cash flow to satisfy its debts and a trading loss of $500,000 for the period of July 2017 to March 2018.
The company currently owes $3.6 million to creditors, with $2.2 being to secured creditors – mostly owed to ANZ bank, with $17,000 owed to Hills and $22,000 to BNW Australia Finance –, $422,000 to unsecured creditors – including $93,000 to Telstra and $84,000 to Emersion – and $984,000 to related entities.
Dicker Data has, since the first meeting of creditors held on 14 March, advised that there are no outstanding debts.
The investigations found that the director of Golden IT is also the director of another nine companies – Golden Group Investments, Golden International Holdings, Wirefreebroadband, Golden Group Commercial, Golden Group of Companies, Velocity Power, IT By Design and BRG Networks and Front Foot Group which have been deregistered.
The administrator concluded in its preliminary investigation that the company may have been trading insolvent from May 2016.
ARN has attempted to contact the company director.
On the next meeting of creditors, to be held on 18 April, the administrator will recommend that the company be placed into liquidation. The director has expressed the intention of proposing a Deed of Company Agreement (DOCA) and has already drafted a proposal.