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Loan firm wound up

By Victoria Young
 — 1 minute read
A short-term high interest lender to the business sector has been wound up by ASIC.
The corporate watchdog has wound up a Victorian finance company that charged 60 per cent per annum interest on short-term loans to businesses.

ASIC obtained orders in the Federal Court of Australia to wind-up Geelong-based Caveat Finance Pty Ltd (Caveat) on grounds of insolvency. It had more than $3.7 million outstanding.

Caveat was incorporated in November 2005. Interest on its loans was around 5 per cent per month with penalty rates often up to 10 per cent per month.

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To finance these loans Caveat borrowed money from private lenders, some of which were invited to loan cash to Caveat via the company's website.

The private lenders were promised interest rates of 2 per cent per month (24 per cent per annum).

ASIC initiated proceedings to wind up Caveat on 20 September 2007.

ASIC's proceedings alleged that in borrowing the money from private lenders, Caveat had contravened the Corporations Act by issuing debentures without entering into a trust deed or appointing a trustee for the debenture holders.

The watchdog found there was a serious risk that these loans would not be repaid.

Caveat directors appointed a voluntary administrator on November 12, following an auditors' report that concluded the business was insolvent.

"Some investors mistakenly believe debentures are similar to fixed term deposits with banks, except with a higher interest rate," ASIC executive director of enforcement Jan Redfern said.

"Unfortunately, what some investors don't realise is that investments offering high returns generally come with a high level of risk."

Loan firm wound up
A short-term high interest lender to the business sector has been wound up by ASIC.
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