Sargon NZ is on track to lose its supervisor licence as it prepares for liquidation.
Just-released annual accounts for the NZ company, part of the troubled Australian Sargon enterprise sold to former directors last month, show the firm had breached minimum capital requirements for holding its supervisor licence this March.
The Financial Markets Authority (FMA) set a special condition of a $500,000 capital buffer for Heritage Trustees when granting it a supervisor licence in March 2018. Sargon Australia bought Heritage late in 2018, rebranding the business under its own banner last year.
According to the Sargon NZ accounts, the group told the FMA it had fallen below the $500,000 at the end of March after earlier flagging the prospect with the regulator. Sargon was due to rectify any issues by April 9 under an ‘action plan’ but was granted an extension by the FMA.
“By 31 July [Sargon NZ] is required to respond with submitting a Business Plan for continuing the licensed business, or, filing a request to cancel the Company’s license,” the annual report says.
Sargon (Heritage) is one of just six licensed supervisors, which provide the first line of defence for all retail investment products including KiwiSaver. However, in its brief history the company, secured just three supervisory clients – Kernel Wealth, Kōura Wealth and Christian Savings, all now housed elsewhere.
The Sargon NZ accounts show the firm lost about $3 million before tax over the 12 months ending March 31 following on from a similar performance the previous year. Sargon Australia, then headed by founder Philip Kingston, allegedly paid $10 million to buy Heritage after snapping up a smaller firm, the New Zealand Trust Company, in 2017.
Sargon NZ told the FMA as early as February it was in trouble as parent Australian firm imploded under a series of debt claims and law suits. From late March the NZ firm, headed by Edward Russell, has been in wind-down mode “in preparation for a potential liquidation”, the annual report says.
“The Board anticipates that any liquidation would take a number of months if not years to complete,” the report says. “This is because of the number of personal trust clients which have yet to retire the Company as a trustee of their Trust, or for the client Trust assets to yet be legally transferred into the names of new trustees.”
Under the terms of the Sargon NZ agreement with the FMA, the current board – featuring Edward Russell, Harold Titter, Darran Goodger, and Mel Hewitson – cannot resign until July 31 this year.
Meanwhile, as reported in May two former Sargon Australia directors – Teddy Wasserman and Matthew Kibble – bought the rump business via the new Pacific Infrastructure Partners vehicle in May for about A$30 million, pending legal rulings.
Sargon still claims to be operating in NZ, according to the company website.
The company has a few legal hurdles to jump, however, including a creditor squabble over certain Sargon assets that has spilled over into another Australian corporate takeover announced.
ASX-listed financial information provider, Iress, agreed to pay $107 million for fund administration firm, OneVue, which is caught up in a costly legal wrangle with Sargon and other parties over disputed assets.
In documents outlining the takeover deal, Iress says “… OneVue is involved in ongoing insolvency and court proceedings in respect of its attempt to recover deferred proceeds from Sargon Capital and its subsidiaries relating to a disposal of a material business by OneVue to that group of companies during 2019.
“Given the complex nature of the proceedings, and the number of parties involved, OneVue may be exposed to potential claims or counterclaims, or adverse reputational risks, in relation to the Sargon Capital insolvency or other matters. While these proceedings are not anticipated to be material in the context of Iress’ business as a whole, litigation and the costs of responding to any threats of legal action may adversely affect the financial performance or position of Iress post-Acquisition.”
The OneVue sale is slated to complete by September this year.
Sargon is not the only tech-based Australian super admin firm to run into turbulence this year. Josh Wilson, founder of Grow Super, was forced to resign late in May in the wake of an alleged betting scandal at another company he ran.