It has been revealed that audit firm KPMG raised concerns that Forge Group may have been trading insolvent a week before the company’s collapse.
Former board members have told receivers KordaMentha a board meeting on February 6 was the first they had heard the company may be in breach of corporate laws.
Non-executive director Julie Beeby said at the meeting, fellow director John O'Connor flagged advice from KPMG on reporting the problems it was having at two massive contracts to the corporate regulator.
"Specifically, KPMG sought clarification from management regarding its cash flow forecast in light of the insolvency provisions of the Corporations Act," Beeby said.
"This was the first I had heard about this matter."
Forge called in administrators on February 11 after ANZ Bank withdrew its support for the embattled company.
As part the investigation into the collapse, administrator Ferrier Hodgson are looking into whether the company was trading insolvent.
It is also investigating decisions made by Forge’s directors before the collapse, including the payment of bonuses to directors.
It says Forge went into crisis mode in November after posting a market capitalisation of almost $600m a year ago and posting a net profit after tax for FY2013 of $62 million.
In November Forge told investors it expected profits to be well below guidance this financial year, revealing a $127 million write down which it attributed to two power station projects.
At the time the company said an internal review had "identified concerns in relation to the underperformance" in relation to its $420 million Diamantina contract in Queensland and its $150 million contract with Rio Tinto at the West Angelas iron ore mine in Western Australia.
Forge owes around $800 million to creditors, with between $45 and $50 million of those debts are owed to around 1,600 sacked workers.
Forge director Grahame White said the board requested chief financial officer Donald Montgomery explain to KPMG an ongoing solvency review process the board had undertaken on the advice of lawyers Herbert Smith Freehills.
However Forge corporate services chief executive Mark Rankmore said the law firm advised directors the company was not insolvent, The West Australian reported.
Rankmore also stated that just four days before the collapse, he thought:
"ANZ were positive that the financial support would continue to enable the hold- ing company to complete a takeover transaction and/or recapitalisation".
Beeby also said ANZ’s announcement came as a surprise.
She said that apart from the Australian Tax Office she could not recall reports of creditors asking for payments.