Former Kleenmaid director pleads guilty to dishonest conduct and insolvent trading

The former director of collapsed whitegoods distribution company Kleenmaid has pleaded guilty to three charges relating to company’s collapse.

Gary Collyer Armstrong appeared before Brisbane District Court yesterday on one charge of dishonestly gaining a Westpac loan of $13 million in 2007 and two counts of insolvent trading relating to debts of $3.5 million dating back to 2008.

Kleenmaid had about 200 staff and 15 retail franchises before it collapsed in 2009, when liquidators reported consolidated debts of about $100 million.

The company’s collapse affected an estimated 6000 customers around the country who paid money for appliances they never received, while its retail and service franchisees lost their investments.

The Australian Securities and Investment Commission has been pursuing the matter since 2012, with the latest development set to see Armstrong sentenced in October.

Two of the other former Kleenmaid directors, Andrew Eric Young and Bradley Wendell Young, who are also facing charges, will appear back in court in October.

The court will decide on further directions about the charges the brothers face, after the original trial date of August 17 was vacated.

Matt Davis, a solicitor at Breene and Breene Solicitors who specialises in insolvency and criminal law, told SmartCompany this morning the important thing for SME business owners to understand is such cases are not just a “big end of town issue”.

 “The laws apply to all companies regardless of size,” Davis says.

“It’s as much of a problem for big companies or Kleenmaid as it is for one or two directors or mum or dad style companies.”

Davis says in his experience ASIC and the Australian Tax Office are taking a “much harder line” now than they have for some time.

“ASIC are much more proactive in prosecuting offences under the Corporations Act,” he says.

“ATO has seriously ramped up investigations into delinquent directors… the ATO is jumping on them much quicker than in past.”

Davis says members of the public are also a bit more “savvy” in their understanding of general criminal law as it applied to company directors.

Davis says the liquidators in the Kleenmaid case would have already taken steps to try and recover money owed.

“Liquidators can sue for insolvent trading, if directors cause a company to incur debt,” he says.

Davis says the Corporations Act clearly spells out prosecution will follow insolvent transactions.

“It’s not irregular for directors to be prosecuted by ASIC, this just happens to be a high profile case,” he says.

 “It affects everyone, criminal law is for everyone not just big end of town affected by it.”