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Former Rex boss knew of dire finances in early 2023, ASIC alleges
Former Rex executive chairman Lim Kim Hai has been accused of knowingly misleading the ASX about the airline’s poor financial results in early 2023.
Editor's note: This story was first published on Accounting Times' sister brand, Australian Aviation.
In its case against Lim and three other former Rex directors, the Australian Securities and Investments Commission (ASIC) said Lim had approved a February 2023 market update stating Rex was “optimistic” about a full-year profit despite knowing the airline was on track to report a loss.
According to ASIC, Rex had incurred operating losses year to date before issuing that statement and had not prepared a financial forecast for FY23. The airline later forecast a $35 million loss for that financial year and ultimately posted a $31.7 million loss.
The regulator told the NSW Supreme Court that the airline had needed to bring in $9.5 million per week to break even for the 2023 financial year, but was bringing in “under $600,000 a day”.
ASIC said it believes Lim was the only one of the four directors – also including John Sharp, Siddharth Khotkar, and Lincoln Pan – who knew the release was misleading when it went out, but that the other directors must have known about Rex’s poor financial position at some point.
According to Michael Borsky KC, lawyer for ASIC, Lim – described as a “nano-manager” – was “knowingly involved in the continuous disclosure contraventions from the outset”, as reported by The Australian Financial Review.
“Mr Lim, in particular, but all of the defendants knew the position much, much earlier and ought to have taken steps to correct or withdraw the unreasonable guidance well before the middle of June,” he said.
In court documents filed last year, ASIC said Rex’s directors had sought $10 million in funding from its financiers less than two months after the February statement.
“On 21 March 2023, Lim received the year-to-date and monthly profit-and-loss figures for the Rex Group for February 2023, and Rex was thereby aware that the Rex Group had incurred an operating loss of approximately $46.2 million,” ASIC wrote.
“On 14 April 2023, Lim made a request by email 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 ‘disappointingly and bewilderingly bad’, the February results as having ‘crashed’ and a lack of recovery in March.”
Rex left administration late last year after its purchase by American firm Air T, following the collapse of its domestic jet operations in 2024.
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