Business cessation

Business cessation
Shakuhachi liquidation shows almost $1 million owed to creditors
SMH 11/03/2017
Read through the article below. Highlight any terms you are unsure, find a definition of them and write it at in the margin of the page.
A scroll through the Instagram profile of Australian fashion designer Jessica White reveals a charmed life in sunny Bali, replete with cocktails, waterfront parties and an enviable wardrobe.
But back home things aren’t so sunny for more than 80 creditors to her company who remain empty-handed since Ms White left Australia potentially owing almost $1 million dollars and facing possible investigation for trading while insolvent.
The dress that never came
Nikki wanted the perfect dress for a friend’s wedding last December. So to be safe, she placed her order for a dress by Australian label Shakuhachi more than a month early. It never arrived.
Ms White is the founder and former director of the Australian fashion label Shakuhachi, which was listed on the NSW Fair Trading Complaints Register in January.
A recent Fairfax Media report detailed a wide consumer backlash against the brand, largely for late and undelivered orders.
Founder and former director of Shakuhachi Jessica White, who now lives in Bali. Photo: therealjessiewhite, Instagram
But shoppers may be unaware that the business of Shakuhachi has been sold, and a voluntary liquidation of the former company under Ms White is taking place.
In May 2015 the former Shakuhachi Limited was placed under voluntary administration, after which Andrew Spring of forensic accounting firm Jirsch Sutherland was appointed liquidator.
Mr Spring’s report to the company’s creditors, who include manufacturers, modelling agencies and Woollahra Municipal Council, sets the total amount owed to creditors at more than $860,000.
According to Mr Spring’s analysis of the company books and records, Ms White also personally owes the company $634,034.
“Blessed:” A recent post on Instagram by Ms White, whose company Shakuhachi is under liquidation. Photo: therealjessiewhite, Instagram

Mr Spring’s report says Ms White’s solicitor has previously disputed the debt, but has failed to provide him with a statement of her personal assets.
“I have been advised that [she] has moved to Bali, Indonesia, and I anticipate there may be an issue with serving a statement of claim on her. My investigations in this regard are ongoing.”
Jessica White and friends in Bali. Photo: therealjessiewhite, Instagram

Mr Spring has estimated any insolvent trading claim against Ms White would be at least $476,397.
He is conducting traces on $58,000 in money transfers listed in the company’s bank statements as “Bali transfers,” but remain otherwise unexplained.
A recent Instagram photo posted by Ms White, advertising new Shakuhachi “resort wear … dropping in store and soon to be online.” Photo: therealjessiewhite, Instagram

In order to continue the investigation, Mr Spring requires funding from creditors of $20,000 to $40,000.
In the interim, he said he has identified any potential breaches of director duties in a confidential report to the Australian Securities and Investment Commission.
Shakuhachi was listed on the NSW Fair Trading Complaints Register in January, for complaints largely related to late and undelivered orders. Ms White declined to answer Fairfax Media’s questions, citing “ongoing legal matters,” however in a statement she said her personal finances were “not a concern for Shakuhachi”.
“I can confirm and assure your readers that I am taking any allegations made against me (which are not admitted) very seriously.”
Ms White said foreign investment in the brand had allowed for overseas design and manufacturing opportunities, confirming her ongoing association with the brand.
“Shakuhachi is currently working to attract new international designers … I am excited by the prospect of working with [them].”
While the former business under Ms White is undergoing liquidation, assets such as the brand and the online store were purchased by Loft HK Limited in 2015.
Questions
1. Briefly summarise what has occurred to Shakuhachi.
2. What type of business is Shakuhachi? (Size and legal structure) shakuhachi.net/
3. What does insolvent mean in this context?
4. What is the role of the Department of Fair Trading?
5. Identify the stakeholders affected by the cessation.
6. Which form of cessation is occurring? Justify your answer.
7. How does the size and legal structure of the company affect the cessation process?
8. Use the internet to search for any other references to Shakuhachi and summarise the