Financier accuses ReelTime directors of misconductFont...

Financier accuses ReelTime directors of misconduct
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Andrew Colley | April 22, 2008

A MAJOR financier of ReelTime Media has accused current and former directors of the failed online movie start-up of corporate misconduct in a legal bid to recover $1 million it invested in the company.

Maylord Equity Management said directors of ReelTime misled the investment group about its financial position before a $1 million financing deal was agreed to in July.

ReelTime and its trading subsidiary, ReelTime Infotainment, were placed in voluntary administration in early February.

Solicitors acting on behalf of Maylord Equity wrote to ReelTime's administrator, insolvency specialist Ferrier Hodgson, in early March outlining the company's claim.

The letter includes claims the company traded while insolvent, and that its directors made misleading and deceptive statements about the company's financial position.

"We're going to be seeking restitution of various things," Maylord Equity spokesman Peter Batterham said.

"It's clear the company was trading insolvent. Representations were made to us that were incorrect, we believe."

Ferrier Hodgson shelved an attempt to place ReelTime under a deed of company arrangement last Friday when it received a second letter of claim from Maylord Equity, a spokesman for the insolvency firm said.

The administrator was seeking creditor approval for an arrangement that would have led to ReelTime's corporate shell being acquired for about $500,000, returning 90c in the dollar.

It is understood that ReelTime Infotainment's assets have already been disposed of under separate administration arrangements concluded soon after it was placed in administration.

Ferrier Hodgson did not rule out the possibility that the company was trading while insolvent in its creditors' report on ReelTime Media released last month.

The administrator took the view that "an insolvent trading action would not be commercially viable".

ReelTime and its trading subsidiary struggled to generate revenue while burning through millions in operating costs, including costly fees to Hollywood studios.

The creditor's report reveals that the company owed about $1.4 million in content licence fees when it was placed in voluntary administration.

Mr Batterham said the company continued to pay large salaries to directors while the fees were left unpaid.

"The company was unable to pay debts but I can assure you the salaries were paid first thing," he said.

Ferrier Hodgson said it expected to reschedule its creditors' meeting in three weeks, after considering Maylord's claim.