Both directors of the company offered a record $2.5 million on Network Ten’s Shark Tank last year could have breached their duties under the Corporations Act, its administrator has found.

Coffee pod company iCapsulate went into voluntary administration on 10 September, following the withdrawal of financial support by one of its directors, Peter Draper, one of the trio who bought Fantastic Furniture out of liquidation in 1996 and listed it on the ASX.

iCapsulate made headlines in July 2017 when Morgan & Banks founder Andrew Banks pledged $2.5 million to Kane Bodiam, Mr Draper’s business partner, for 22.5 per cent of the company, the biggest on-camera deal in the four-season history of televised pitch contest Shark Tank.

However, Mr Banks never followed through on the investment after doubts were cast on Mr Bodiam’s claim that iCapsulate had a competitive advantage in biodegradable coffee pods – claims Mr Bodiam stood by.

Shark Tank’s Andrew Banks with Kane Bodiam, before their $2.5 million investment deal fell through.

Voluntary administrator Andrew Barnden of Rodgers Reidy, in a publicly available report lodged with the corporate regulator on 5 October, found both Mr Bodiam and Mr Draper had potentially breached their duties as directors of iCapsulate (and its asset holding company iCap Holdings), for at least three reasons.

One was their removing plant and equipment from iCapsulate’s western Sydney premises just prior to and following his appointment – including a forklift in Mr Bodiam’s case – and claiming the equipment was owned by them or their related parties, but to date providing inadequate supporting documents.

Other questionable behaviour identified by Mr Barnden concerned a dispute over a chattel mortgage agreement between iCapsulate and BMW Australia Finance, in respect of a BMW X5. Mr Draper has asserted that he did not sign the mortgage, despite his signature apparently appearing alongside Mr Bodiam’s on the document.

Mr Bodiam had also registered security interests to himself in respect of two of iCapsulate’s biggest trade creditors – Scolari and Opem, both owed around $1 million each – and advised he was acting as an agent for the two overseas suppliers in respect of their claims.

However Mr Barnden’s investigation to date contradicted Mr Bodiam’s claim, and the administrator advised he was seeking legal advice on the validity of these registered security interests.

The administrator also took issue with Mr Draper taking until 3 August 2018 to register a security interest against iCapsulate on behalf of his Kia Leah Securities, the main provider of loans to iCapsulate and its holding company, with proofs of debt of $3.5 million.

Their lodgement within six months of iCapsulate entering administration meant they could be voided, Mr Barnden wrote, and the fact that fellow iCapsulate director Mr Bodiam had not signed them meant this was a potential breach of director duties.

Mr Draper’s coffee beans business, Black Drum Roasters, has lodged a proof of debt for a further $625,000 against iCapsulate.

Mr Barnden wrote there was grounds for a claim that iCapsulate had traded insolvently during its last year of operation, however he noted that was likely to be defended given the financial support offered by Mr Drapers’ Kiah Leah and Black Drum Roasters over that period.

Mr Barnden advertised iCapsulate for sale after being appointed, and advised 18 parties had expressed an interest in buying the business.

He recommended to creditors that the business be wound up and its assets offered for sale. The next meeting of creditors will occur on 16 October.

 

Article via Financial Review on 7 Oct. 2018 https://www.afr.com/leadership/entrepreneur/shark-tanks-biggest-deal-company-gets-scathing-administrators-report-20181007-h16brx