Downfall: Touchbase assets farmed off as company flops

The pursuit of growth at the expense of profit brought down voice and data integrator Touchbase Australia, according to a report to creditors lodged by administrators deVriesTayeh to the Australian Securities and Investments Commission. 

The administrators prepared the report for creditors at the second creditors meeting and before the company entered liquidation on October 8, 2010.

After its five year contract with Avaya ended in 2006, Touchbase had aligned with Cisco Systems. This partnership allowed the business to grow significantly, the report said,  "to the point where it became Cisco's number one contact centre partner in Australia and had in excess of 80 percent share of the Cisco contact centre enterprise market.

"The focus has been on growth rather than profitability and this has resulted in the business sustaining losses," the report found.

"These losses have been funded through intercompany loans. Management did not pay enough attention to the actual financial position of the business and the easy supply of cash from the parent has further exacerbated this lack of focus," it said. 

CRN has reported that Touchbase Australia's UK parent, Touchbase Group, was owed more than $11 million in unpaid company loans. Touchbase Unified Communications in the UK, Touchbase Global Services in Singapore and Touchbase Singapore have also claimed a further $1 million in unpaid company loans.

"The business was able to pay its debts as and when they fell due through the support provided by its parent company," the report said. "Although sales and market share have been significant it was not been enough to ensure profitability." 

The report said that under a liquidation scenario - which Touchbase is now in - ordinary unsecured creditors of Emodite (formerly trading as Touchbase Australia) will receive zero of their unsecured debts because of the significant outstanding employee entitlements, which rank as a preference to unsecured creditors.

A new entity? 

Touchbase managing director Magnus Maynard registered a new company, Touchbase Asia Pacific on July 12, 2010. 

Based on the report to creditors before the commencement of the voluntary administration, the company had sold its business and assets to this wholly owned subsidiary (Touchbase Asia Pacific). This entity continues to trade independently of the administrators.

Touchbase Asia Pacific, according to the documents, also made an offer to purchase its parent (Touchbase Australia) from the liquidator. This approach was rejected by creditors.

Cisco has not responded to CRN's calls to confirm whether it was now a partner of Touchbase Asia Pacific.

Liquidation scenario

Administrator Riad Tayeh from chartered accountants deVriesTayeh was appointed liquidator on October 8 following the second creditors meeting. The administrator recommended that Touchbase Australia be put in liquidation.

"Winding up the company should provide at least priority creditors - (which includes employees) with a return as their entitlements will be funded by GEERS," the report said. 

The Department of Education, Employment and Workplace Relations told CRN that the liquidators of Touchbase had notified GEERS for payment. 

"Following the appointment of liquidations, former Emodite employees may now access assistance under General Employee Entitlements and Redundancy Scheme (GEERS), provided they meet the other eligibility requirements of the Scheme.

"At this stage the Department has not received any claims for GEERS assistance from any former employees of Emodite, however, the Liquidator has advised that a number of former employees will be seeking GEERS assistance and will lodge claim forms over the coming weeks. The Department aims to work closely with the Liquidator, to provide GEERS assistance as quickly as possible once an employee lodges a GEERS claim form," a spokesperson from the department told CRN.

GEERS assistance is available when an employer has entered liquidation or bankruptcy and there are no other funds available to pay outstanding employee entitlements.

The liquidators said they would continue their investigations into the company's affairs, including a more thorough examination of the viability of an insolvent trading action.