Rex Airlines and four of its directors are facing a lawsuit for allegedly misleading Australian investors, according to Australia’s corporation regulator ASIC. This legal action comes as the airline is undergoing an administration process, with its future uncertain.
ASIC has accused Rex of failing to disclose a profitability downgrade in February 2023, despite being aware of it. The regulator alleged that Rex issued a misleading ASX announcement on Feb. 28, 2023, claiming optimism about positive operating profits for the 2023 financial year without a reasonable basis. Additionally, ASIC claimed that Rex violated disclosure obligations by not revealing the profitability downgrade when the announcement was made.
Former Rex Executive Chair Lim Kim Hai was also accused of breaching his directors’ duties by approving the misleading announcement and failing to prevent the airline from breaking the laws. Three other directors, John Sharp, Lincoln Pan, and Siddharth Khotkar, were sued for failing to ensure Rex met disclosure requirements despite knowing the company’s financial situation.
ASIC Chair Joe Longo emphasized the importance of accurate market information and continuous disclosure for upholding financial integrity. He stated that the directors’ failure to ensure compliance with disclosure obligations was unacceptable.
As Rex is currently under voluntary administration, ASIC will not seek financial penalties against the company but will pursue contravention declarations, penalties, and disqualification orders against the directors. Rex reportedly has a debt of $500 million.
In November, the government provided an $80 million support package to help Rex maintain regional services. Despite the lawsuit, researcher Rob Nicholls from the University of Sydney believes it will not have a significant impact on the company or consumers, especially since Ernst and Young is administering Rex. The researcher also mentioned that the government bailout should help keep the airline operational.
The Epoch Times has reached out to Rex Airlines for comment on the matter.
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