Liquidator investigating sale of failed Melbourne reseller Mount IT to related party

The liquidator of Melbourne-based reseller Mount IT said it would investigate if the company entered into an uncommercial transaction when it sold the business and assets to a related party in 2016.

Mount IT, which traded as AV2PC Computers, was placed into liquidation on 20 April by the Federal Court following a winding-up application from the Australian Taxation Office, appointing PPB Advisory as its administrator.

The company, which operates as a retail store specialising in repairs for PCs, mobile phones, tablets, video game consoles and other consumer electronics, was found to owe more than $528,000, with $300,000 owed to the Australian Taxation Office (ATO) as an unsecured creditor.

The liquidator has found that Mount IT was sold in 2016 for $75,500 to a related entity named AV2PC Pty Ltd, comprising $18,000 for stock, $15,000 for shop fittings and $42,500 of goodwill based on Mount IT’s current turnover, profit and customer base.

PPB noted that the director of Mount IT, Kenneth John Skeats, is also the sole director of AV2PC Pty Ltd.

PPB said Skeats provided the accounting of payments made to Mount IT under the contract of sale, but did not provide any supporting documentation to back up the numbers.

In 2016, Mount IT and Skeats were ordered by the Federal Circuit Court to pay Microsoft $22,000 for copyright infringement, after allegedly installing unlicensed copies of Microsoft Windows 7 onto new PCs. Microsoft said the company used product keys that were printed onto counterfeit certificate of authenticity labels.

“I am currently undertaking further investigations to determine whether [Mount IT] received the payments required under the contract of sale and obtained adequate consideration for the sale of its business and assets,” PPB liquidator Ian Carson said in the liquidator’s report.

“In the event that my investigations determine that the business and assets were not sold for proper consideration, AV2PC may be liable to compensate Mount IT for entering into an uncommercial and/or unreasonable director related transaction pursuant to sections 588FB and 588FDA of the Corporations Act.”

PPB is also looking into the possibility of trading while insolvent.

Mount IT also owes an additional $177,850 to the ATO with respect to Superannuation Guarantee Charge, and an additional $47,235 to a security interest with Westpac.

The security interest is related to a lease of a 2015 Holden Calais that isn’t registered with Mount IT. Skeats had since surrendered the vehicle to Westpac and is in the process of being sold by public auction.

On top of the current debt, the estimated cost of the administration is expected to be in the range of $15,000 to $25,000 plus GST, according to PPB.