Legal action against collapsed Forge Group widens

A class action against collapsed contractor Forge Group has been widened as more shareholders are given the option of recouping their losses in the company.

The company collapsed earlier this year, in February, following major cashflow problems, finding itself owing $800 million to creditors, employees, and shareholders.

Administrator KordaMentha's Martin Jones said Forge’s 1600 employees were owed $15.5 million after they were let go without their final pay cheques or any entitlements.

More than $48.8 million is owed to around 1200 trade creditors while ANZ Bank has a claim of $289 million.

Insurance bond facility liabilities amount to $217 million and a further $24 million for hire-purchase facilities.

Jones said investigations into who was responsible for the company’s collapse would continue but warned it could be some time before there were clear answers.

Further shady dealings were revealed in April, when it was uncovered that Forge Group may have been trading insolvent a week before the company’s collapse.

Former board members told receivers KordaMentha a board meeting on February 6 was the first they had heard the company may be in breach of corporate laws.

Shareholders were hit particularly hard by implosion of the company, with ordinary shareholders of the collapsed Forge Group to receive no payments from the sale of the company’s assets, liquidator Ferrier Hodgson revealed, which has generated a class action against the contractor.

And while shareholders will be entitled to declare a capital loss for the year equal to the reduced cost base of the shares, those who received shares under an employer scheme are ineligible.

The aforementioned class has has gained momentum and may now involve thousands of shareholders, and will now include those who had bought stock around two years before the contractor's collapse, according to The West Australian.

Law firm Bentham IMF has contacted parties to join a class action over Forge's alleged failure to meet its disclosure obligations, moving the originally stipulated period of between January 2013 and 11 February this year  to now sit between March 2012 to November 2013.

This widening of the time period now includes the era before David Simpson took the lead at Forge.

However it does negate the ability of those who bought stock after Forge's four week trading halt in November to participate in the class action.

Shareholders have been given until late October to join the class action.

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