Feltex Carpets Limited Directors Prosecuted

2 February 2009

Feltex Carpets Limited Directors Prosecuted

The Registrar of Companies has laid criminal charges in the Auckland District Court against the Directors of Feltex Carpets: John Michael Feeney, John Carlaw Hagen, Peter David Hunter, Timothy Ernest Saunders, and Peter Thomas.

The Directors each face two charges under section 36A of the Financial Reporting Act 1993.

The charges relate to information provided in the company’s 31 December 2005 half-yearly financial statements.

“In these statements, Feltex Carpet Ltd failed to disclose a breach of its banking covenants, and did not to properly classify its debt," said Registrar of Companies’ National Enforcement Unit Manager Shane Keohane.

The defendants appeared on Monday 2nd February 2009 in the Auckland District Court and entered pleas of not guilty. The matter has been remanded to 7th April 2009 for a status hearing.

If convicted, each Director is liable to a fine not exceeding $100,000

Mr Keohane said the case was now before the Court and it would not be appropriate to comment further.

Background

Feltex Carpets Limited

Feltex Carpets Limited (which changed its name to EXFTX Limited in December 2006), went into receivership on 22 September 2006 and subsequently into liquidation in December 2006.

Following an inquiry by the Securities Commission into the initial flotation of shares by Feltex Carpets Limited and the company’s compliance with financial reporting standards, the matter was referred to the Registrar of Companies’ National Enforcement Unit for further investigation.

The Charges

Each of the directors has been charged with two offences under section 36A of the Financial Reporting Act 1993 on the basis that the company’s statement of interim financial information of 31 December 2005 did not comply with applicable financial reporting standards.

The first offence relates to the failure to disclose the breach of a loan agreement (the ANZ Bank debt facility) that had not been remedied on or before the balance sheet date. This breach was material to an understanding of the interim period (in breach of financial reporting standard NZIAS 34).

The second offence concerns the classification of the ANZ Bank debt facility as “non current”, whereas it should have been classified as “current”. This breach was material to an understanding of the interim period (in breach of financial reporting standards NZIAS 34 and NZIAS 1.60).

ENDS

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