Shareholders of Forge Group have been asked to participate in a class action against the company.
Commercial litigation funder Bentham IMF announced this morning that it would bankroll a legal claim against the company, its former directors and management on behalf of shareholders.
The claim relates to the alleged deceptive and misleading conduct of the company’s continuous disclosure obligations in the lead up to its collapse.
Specifically the firm claims Forge should have known and disclosed the issues it was having at two power station projects which ultimately led to the company’s demise.
Furthermore it says three downgrades announcement by the company misled the market because it claimed ANZ had “waived covenants and confirmed ongoing support, without disclosing that this was conditional on Forge securing an injection of fresh equity.”
IMF investment manager Tania Sulan said she expected “a large number of shareholders to sign up to the action”.
“This as a classic case of a company and its directors breaching fundamental obligations to shareholders and the market,” Sulan said.
“It is simply not believable that Forge directors waited until late November 2013 to tell investors of problems with the power station contracts, when it knew or ought to have known about them much earlier in the year.”
Forge Group confirmed it would go into administration last week after ANZ withdrew its financial support for the company after months of project blowouts and massive writedowns.
The future of the Perth-based contractor has been unstable since November when it revealed profits were well below guidance this financial year, revealing a $127 million write down which it attributed to two power station projects.
While last-month the company flagged losses for 2014 to total $25 million before one-offs and writedowns.
The company has culled its workforce by more than 1300 since the announcement.
Receivers KordaMentha and administrators Ferrier Hodgson have taken control of the company.
Administrators will host the first meeting for Forge creditors in Perth on Friday.