Former Rex chief executive Lim Kim Hai has been accused of deliberately misleading the ASX about the airline’s poor financial results in early 2023.
In its case against Lim and three other former Rex directors, the Australian Securities and Investments Commission (ASIC) said Lim had approved a market update in February 2023 saying Rex was “optimistic” about full-year profits despite knowing the airline was on track to make losses.
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According to ASIC, Rex had experienced year-to-date operating losses before issuing that statement and had not prepared a financial forecast for FY23 in advance. The airline subsequently forecast a loss of $35 million for that financial year and ultimately posted a loss of $31.7 million.
The regulator told the NSW Supreme Court that the airline had needed to raise $9.5 million a week to break even in the 2023 financial year, but was taking in “less than $600,000 a day”.
ASIC said it believes Lim was the only one of the four directors, including John Sharp, Siddharth Khotkar and Lincoln Pan, who knew the statement was misleading when it came out, but that the other directors must have known about Rex’s poor financial situation at some point.
According to ASIC lawyer Michael Borsky KC, Lim – described as a “nanomanager” – was “knowingly involved in the ongoing disclosure breaches from the beginning”, ASIC lawyer Michael Borsky KC reports. he Australian Financial Review.
“Mr Lim in particular, but all the defendants were aware of the position much, much earlier and should have taken steps to correct or withdraw the unreasonable guidelines long before mid-June,” he said.
In court papers filed last year, ASIC said Rex directors had requested $10 million in funding from its financiers less than two months after the February statement.
“On 21 March 2023, Lim received Rex Group’s monthly and year-to-date profit and loss figures for February 2023, and Rex learned from this that Rex Group had incurred an operating loss of approximately $46.2 million,” ASIC wrote.
“On April 14, 2023, Lim made an email request to Pan and Khotkar (copying Sharp) requesting $10 million in funding from PAG, describing the company’s cash reserves as ‘critically low,’ domestic sales as ‘disappointing and disconcertingly poor,’ February results as ‘collapsed,’ and a lack of recovery in March.”
Rex left management late last year following its purchase by US firm Air T, following the collapse of its domestic aircraft operations in 2024.
