By Kenneth Lim
A former executive of MF Global Singapore is challenging the directors' declaration that the company was insolvent when it underwent provisional liquidation.
In a lawsuit joined by six other former MF Global Singapore employees, he is now seeking access to the failed futures brokerage's financial information before a creditors' meeting takes place on May 28.
A closed hearing will take place on Friday.
MF Global Singapore went into provisional liquidation on Nov 1, 2011, a result of company directors declaring that MF Global Singapore could be insolvent, which means that creditors may not get all their money back.
The company on Tuesday announced that it will hold a creditors' meeting on May 28, during which creditors will receive a statement of affairs, and be asked to appoint liquidators and a committee of inspection.
In his complaint with the court filed in March, former MF Global Singapore head of sales Michael Joseph Drennan said he believed that the company was still solvent when it went under provisional liquidation.
"I had had access to the accounts of the company in my role as head of sales of the company prior to the provisional liquidators being appointed," Mr Drennan stated in his affidavit. "At this time I believe that the company was solvent and hence the creditors would be paid in full.
"However, from the directors' resolution of the company dated 1 November 2011, I understand that the company is insolvent."
Mr Drennan therefore is asking for a copy of the financial statements that the directors relied upon to declare that MF Global Singapore is insolvent.
Mr Drennan and the other former employees say that they are owed more than $3.5 million.
The provisional liquidators, from KPMG Singapore, have said that pertinent information will be provided at the creditors' meeting. But the former employees said they cannot wait.
"We are concerned at the costs and expenses that will be incurred by the provisional liquidators between now and then," Mr Drennan's complaint stated.
"This may potentially impact the returns of the creditors."
In his response, provisional liquidator Bob Yap said substantial work has had to be done to wind down the company, especially in terms of resolving customers' trades and accounts. Such work, and the resultant costs, would have to be borne by the company regardless of how the winding down was carried out.
"Any suggestion that the appointment of the provisional liquidators was extended to enable additional costs and expenses to be incurred by the provisional liquidators is wholly unfair and unwarranted," Mr Yap said in his response to the court.
Mr Yap said that the former employees should raise their concerns at the creditors' meeting, stating that their claims were "misguided" attempts at "fishing" for information.
This article was first published in The Business Times.