ASIC briefed the government about Rex probe before $80m lifeline

“Our case will allege serious governance failures at Rex,” ASIC chair Joe Longo said.

“Rex’s directors had a responsibility to take reasonable steps to ensure the company complied with the law, and we will seek to hold them to account. We will allege four of Rex’s directors breached their duties because they failed to take steps to ensure the market had accurate information about the company’s financial performance.”

Former executive chair Lim Kim Hai has been accused of drafting and approving the statement released to the ASX on February 28, 2023, and failing to take steps to ensure the market had accurate information.

The claim alleges the other directors, Sharp, Lincoln Pan and Siddharth Khotkar became aware of the company’s finances from April 14, and also failed to inform investors.

“Continuous disclosure of market-sensitive information is fundamental to upholding the integrity of our public markets and supporting a fair and efficient financial system,” Longo said.

“Directors of listed entities play a critical role in ensuring companies comply with their continuous disclosure obligations. Failing to take reasonable steps to ensure a company is compliant is not acceptable.”

ASIC will seek declarations, pecuniary penalties and disqualification orders against Lim, Sharp, Pan and Khotkar. However, it is not seeking financial penalties against Rex.

In a statement, Sharp said he would be defending “the matter vigorously”

“I do not believe I have breached any regulations,” he said.

The airline entered voluntary administration in July after its failed attempt to run flights between major capital cities. Rex had been struggling with successive losses for years despite a string of profitable months at the start of last financial year.

Loading

It had been crippled by a global pilots’ shortage, competition from its bigger rivals and the costs associated with flying on major domestic routes, forcing it to suspend a string of regional routes over the past year.

In 2021, the airline was fined $66,000 for breaching continuous disclosure laws after Sharp gave an interview to the Australian Financial Review revealing Rex’s expansion plans before the market was informed.

Rex has been contacted for comment. EY, the administrators of Rex, said it would be inappropriate to comment as the matter was before the courts.