BCS - BrisConnections Unit Trusts

freddy2 · 28 February 2009

Re: Brisconnections shareholders - financial ruin

Sunder said:
See my post above, but I think it's going to be very murky waters.

The test questions would be:

1. Is this a normal transaction, or is it fraud.
1a. Is the buyer aware of his obligations, and;
1b. Is the buyer intending to fulfill them in good faith?

2. If this transaction is fraud, was the seller aware that they were participating in a fraudulent transaction, even if they themselves are not commiting the fraud.

If those conditions are proven to a balance of probabilities, I'd venture a guess that a court would be willing to have the transactions reversed.

Couldn't you then also argue that selling the shares through the ASX market at 0.1c is fraud. Even putting them up for offer at 0.1c is attempted fraud. Surely the sellers know that the shares have negative value and only someone without all the information would buy. Or does the anonymity of the ASX market absolve the sellers of fraud and attempted fraud?

Prospector · 28 February 2009

Re: Brisconnections shareholders - financial ruin

Sunder said:
They would. I'm not sure how difficult that would be, but considering they PAID to have their shares taken off them, by someone who has had a lot of media attention, I don't think it's impossible.

Did they pay?

Anyone know how many ASF'ers were able to 'buy' their shares to Bolton? From the sounds of silence, maybe a few. And was that Bolton who posted that cryptic post a few weeks ago? C'mon Joe, we need to know! :

Sunder · 28 February 2009

Re: Brisconnections shareholders - financial ruin

freddy2 said:
Couldn't you then also argue that selling the shares through the ASX market at 0.1c is fraud. Even putting them up for offer at 0.1c is attempted fraud. Surely the sellers know that the shares have negative value and only someone without all the information would buy. Or does the anonymity of the ASX market absolve the sellers of fraud and attempted fraud?

I wouldn't say so, because there is an arms length to the transaction. When someone buys off you at market, you don't know who it is, or what their intent is. There may actually be a genuine market out there for someone who believes these will recover to over $2 once all installments are paid.

The "Fraud" doesn't come from offloading the obligation. That can be fully legal. The "Fraud", if it were to be called such, would come from paying someone to take your obligation, knowing at the time of transaction, they intend to default to the benefit of you, and the detriment of the third party.

It's all conjecture, and yes, I am being very "negative" about it, posting the worst case scenario. But I also think it's a possible, but perhaps not the most probable outcome.

freddy2 · 28 February 2009

Re: Brisconnections shareholders - financial ruin

Sunder said:
I wouldn't say so, because there is an arms length to the transaction. When someone buys off you at market, you don't know who it is, or what their intent is. There may actually be a genuine market out there for someone who believes these will recover to over $2 once all installments are paid.

The "Fraud" doesn't come from offloading the obligation. That can be fully legal. The "Fraud", if it were to be called such, would come from paying someone to take your obligation, knowing at the time of transaction, they intend to default to the benefit of you, and the detriment of the third party.

It's all conjecture, and yes, I am being very "negative" about it, posting the worst case scenario. But I also think it's a possible, but perhaps not the most probable outcome.

I suppose the question is what obligation a seller has to make sure the buyer can meet future obligations. Can someone remain wilfully ignorant to avoid the "fraud" charge? If so all you have to say is "I didn't know and I didn't care if he could pay the future installments". If not why are these shares still trading on the ASX market?

IMO paying for Mr Bolton to take the shares is easy to justify in that the shares obviously have negative value. This in no way goes to show that someone knew Mr Bolton's company couldn't meet future obligations.

shaunQ · 28 February 2009

Re: Brisconnections shareholders - financial ruin

As Sunder said it will be a very interesting test case. It could probably also be argued that the payment is in itself also a transaction. It would have to be very murky grounds to go against "buyer beware" and an otherwise legal transaction. The fact there was no market available, and the company did very little to provide one meant they had no other option to "sell" there assets. Who is responsible for ensuring the other party is capable of meeting there obligations? It would be a mine field.

I would have thought they could also attempt to prove conspiracy and attack under an area of commercial law.

sails · 28 February 2009

Re: Brisconnections shareholders - financial ruin

Sunder said:
I wouldn't say so, because there is an arms length to the transaction. When someone buys off you at market, you don't know who it is, or what their intent is. There may actually be a genuine market out there for someone who believes these will recover to over $2 once all installments are paid.

The "Fraud" doesn't come from offloading the obligation. That can be fully legal. The "Fraud", if it were to be called such, would come from paying someone to take your obligation, knowing at the time of transaction, they intend to default to the benefit of you, and the detriment of the third party.

It's all conjecture, and yes, I am being very "negative" about it, posting the worst case scenario. But I also think it's a possible, but perhaps not the most probable outcome.

I am guessing Bolton's intention would be to remain solvent and is probably hoping to achieve that with the voting power of so many retail investors. If so, any investors selling to him would be on the understanding that his intent is to remain solvent.

If he were just planning to be the fall guy, why would he bother with the EGM? Who knows what else he has planned to ensure he doesn't end up bankrupt. On that basis, I would have thought it difficult to prove they had knowingly offloaded their shares illegally.

Anyway, all conjecture on my part too.

On Julia's radio link, there was an interesting comment that only 12% of shares were originally going to be available for retail investors. It seems absurd that this ceiling has obviously been breached many times over and nothing appears to have been done about it.

Julia · 28 February 2009

Re: Brisconnections shareholders - financial ruin

freddy2 said:
Below is from the prospectus. I am not a lawyer, but I would think it is in shareholders best interest that BrisConnections throws in the towel, let the state take over and declare bankruptcy. Sure the original $1 payment will be gone and current shareholders lose all equity but it is better than throwing good money after bad.

-----------------------
Default by BrisConnections and termination by the State Events of default by BrisConnections include:
Failure to commence or to diligently progress construction of Airport Link, the Busway or the Airport Roundabout Upgrade;
– Abandonment of Airport Link, the Busway or the Airport Roundabout Upgrade;

...

If the Project Deed is terminated by the State due to a default by BrisConnections, the State is not obliged to pay any compensation to BrisConnections.
-----------------------

The work is apparently on time and on budget so there seems little likelihood of default on the above criteria.

I don't see why the State should pick up the tab. Isn't that why Macquarie and Deustche are the underwriters?

Would the taking up of investors' shares by Nick Bolton have been done via off market transfers?

Go Nuke · 28 February 2009

Re: Brisconnections shareholders - financial ruin

korrupt_1 said:
Truly a nightmare for those that weren't aware of the $1/share installments.

Brisconnect CEO claims that it fully disclosed the installments in the PDS, their website, etc and everyone 'should' have been fully informed.

I guess the problem is that how do you inform traders about the installments after the stock is trading on the ASX? How do you inform them BEFORE they purchase?

It would have been easy to purchase 500,000 shares at 0.1c for $500... but then u realise that you're up for at $0.5M when the installment comes.... scary thought!

Very scary thought.

What would have stopped me from logging in to Commsec and buying $2000 worth at 0.1c...how the hell would I have known about the extra installment.

Be interesting to see what comes of all that.

Shine · 1 March 2009

Re: Brisconnections shareholders - financial ruin

I was just doing a google search on Brisconnections and came upon another forum where a mobile number was given and the thread was basically saying you could gift away your shares by providing your contact details / number of shares / agents commission etc to this mobile number. I think that is just so scary. I unfortunately still have my shares (listed for sale on etrade of course!) - but I know people are getting very very desperate to get rid of them.

shaunQ · 1 March 2009

Re: Brisconnections shareholders - financial ruin

Shine said:
I was just doing a google search on Brisconnections and came upon another forum where a mobile number was given and the thread was basically saying you could gift away your shares by providing your contact details / number of shares / agents commission etc to this mobile number. I think that is just so scary. I unfortunately still have my shares (listed for sale on etrade of course!) - but I know people are getting very very desperate to get rid of them.

Well if you haven't rung it, do so (possibly from a public phone?), it doesn't hurt to hear what the deal/go is. Then make an informed decision either way after maybe seeking some legal advice. Why is it scary? I guess because its almost like a black-market? But also your present situation is pretty dam scary as well. They're not going to sell themselves on eTrade so you will need to be proactive in someway.

Prospector · 1 March 2009

Re: Brisconnections shareholders - financial ruin

What would you have to lose? If you do give them to this person, then you might absolve yourself from the second instalment. Shares can be willed, gifted, bought and sold in 'off market' transfers, and bought online and through brokers. So, is this any different?

Macquack · 1 March 2009

Re: Brisconnections shareholders - financial ruin

Prospector said:
What would you have to lose? If you do give them to this person, then you might absolve yourself from the second instalment. Shares can be willed, gifted, bought and sold in 'off market' transfers, and bought online and through brokers. So, is this any different?

As pointed out by Enzyme, Nicholas Bolton will take them off your hands if you give him $1305.

So far 17 people have given him 20 million odd shares and paid him an administration fee of $1305 each. So Bolton has an extra $22,185 to put towards his legal bills.

If Bolton was such a big shot he should have come up with $20,000 and paid these people $0.001 per share and made the transaction look "fair dinkum".

I reckon Bolton is an "internet gangster" who is out of his league.

freddy2 · 1 March 2009

Re: Brisconnections shareholders - financial ruin

Macquack said:
If Bolton was such a big shot he should have come up with $20,000 and paid these people $0.001 per share and made the transaction look "fair dinkum".

Actually if there was a market that represented the fair value of Brisconnections shares they would be negative - ie you would need to pay someone to take them off your hands as Mr Bolton has done. In fact I would say that Mr Bolton has not been paid enough. For example if the value after future installments is $1.50 the current price should be around $-0.50. If the ASX is going to allow such installments to trade the price should be allowed to go negative or not allow them to be traded at all.

bluecheese101 · 1 March 2009

Re: Brisconnections shareholders - financial ruin

I feel sorry for people who were unaware of the payment arrangement with Brisconnections, i really do. However it just goes to show that you need to do some reseach before buying into a stock, regardless of how "cheap" the price is.

I just checked out the Brisconnections website, and after clicking on "Investor Information" and "FAQ" i found a entire section on the requirement to pay the further installments and the Consequences if this was not fulfilled. This information was found without even looking at the Prospectus - which should also be read.

Stapled securities in BrisConnections are partly paid securities.
There are 2 further instalments of $1.00 each per stapled security payable on 29 April 2009 and 29 January 2010 respectively.

When am I required to pay the instalments?
When purchasing stapled securities in BrisConnections, you assume a legal obligation and liability to pay instalments if you are on the register on the date when liability for payment of each instalment is determined.

The dates for payment of the instalments are 29 April 2009 and 29 January 2010. The date for determining the liability for payment of an instalment (i.e. the date on which, if you are on the register, you are liable to pay an instalment) is expected to be approximately 8 days before the date for payment of that instalment – i.e. 21 April 2009 and 21 January 2010.

Second instalment of $1.00 Final instalment of $1.00
Date when liability for payment is determined 21 April 2009 - 21 January 2010
Instalment payment date 29 April 2009 - 29 January 2010

If you are liable for an instalment on the stapled securities and do not pay the instalment, BrisConnections can take action to recover the amounts owing.

If you do not want to be liable to pay an instalment, you need to have sold your stapled securities before the date when the liability for payment of that instalment is determined. You should be aware that there may be a limited market for BrisConnections stapled securities in the periods after the dates when liability for payment is determined, but prior to the instalment payment dates, which may affect your ability to sell your stapled securities during these periods. Unitholders will receive further details closer to the time regarding the last dates for “call unpaid” trading in the BrisConnections stapled securities.

Largesse · 1 March 2009

Re: Brisconnections shareholders - financial ruin

"If you do not want to be liable to pay an instalment, you need to have sold your stapled securities before the date when the liability for payment of that instalment is determined."

I see no problems here with a proper/legal off-market transfer.
Bolton has at no point stated that he intends to default on the payment, rather that he intends to wind up the company before he is liable for the first installment.

As a young, relatively inexperienced market watcher, this is one of the most interesting chain of events i have been witness to

Enzyme · 1 March 2009

Re: Brisconnections shareholders - financial ruin

Julia said:
This is an excellent interview from Radio National's "The National Interest" with Professor Ramsay on the legal implications of the current situation. He reiterates what has already been suggested, i.e. that divesting themselves of the shares does not divest investors of the liability.

http://www.abc.net.au/rn/nationalinterest/stories/2009/2503496.htm

Good find, and it is good to see this issue getting some attention, but that interview didn't have a fraction of the information that is in this thread. It didn't even get across that current shareholders can't sell their shares.

For me, the key thing was hearing a professor of corporate law say that transferring the shares doesn't get rid of your liability. I just wish he'd spent more than five seconds of a fifteen minute interview on that point, and most of that was repeating what the company had said. While respecting his qualifications I'm still not convinced:

I don't think there is a difference in how you come to own a parcel of shares: On market or off market is immaterial. Either you own them on a specific date or you don't. As far as I'm aware there isn't different classes of share ownership. How you came to own them can't matter. If that is right, then what is stopping the liability back tracking through each transaction back to everyone who ever owned BCS shares possibly bankrupting each in turn. I still can't accept that.

Sunder · 1 March 2009

Re: Brisconnections shareholders - financial ruin

Largesse said:
I see no problems here with a proper/legal off-market transfer.
Bolton has at no point stated that he intends to default on the payment, rather that he intends to wind up the company before he is liable for the first installment.

You've obviously never wound up a company before. A company cannot wind up while it still has assets or liabilities on its book. Ah, I hear you saying. Liability isn't there until the call date? You're perfectly right. But the partially paid shares are still an "asset", according to accounting standards.

If he winds up the company without thinking, all the "assets" default to him personally... Then who has to pay the installment when the call date comes?

GreatPig · 1 March 2009

Re: Brisconnections shareholders - financial ruin

By my understanding, winding up a company makes the unpaid part of any shares immediately payable, at least up to the value of any company debts. And I gather Brisconnections has a lot of debt.

It seems these are trusts though, so I don't know what the situation is there, but I would imagine it's similar.

GP

Julia · 1 March 2009

Re: Brisconnections shareholders - financial ruin

Enzyme said:
Good find, and it is good to see this issue getting some attention, but that interview didn't have a fraction of the information that is in this thread. It didn't even get across that current shareholders can't sell their shares.

For me, the key thing was hearing a professor of corporate law say that transferring the shares doesn't get rid of your liability. I just wish he'd spent more than five seconds of a fifteen minute interview on that point, and most of that was repeating what the company had said. While respecting his qualifications I'm still not convinced:

Enzyme: Professor Ramsay is often in the media and seems an approachable person. Why not email him with your question? I'd be very surprised if you didn't receive a courteous reply.

Here is his staff profile from Uni of Melbourne. His email link is on the right hand side of the page.

http://www.law.unimelb.edu.au/index...0D0-AB80-E2BC989969E28989&username=Ian Ramsay

Prospector · 1 March 2009

Re: Brisconnections shareholders - financial ruin

Enzyme said:
For me, the key thing was hearing a professor of corporate law say that transferring the shares doesn't get rid of your liability. .

So two issues arise from that statement if correct. What is the difference between a "transfer" and a "sale". As long as money was exchanged, then a sale took place, it just happened to be off market. And if that "transfer/sale" does not remove the liability to pay the next instalment, then why doesn't this also apply the people who bought the shares from a third party originally? Using this logic, the liability remains with the original purchaser when the plan opened.

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