The Federal Court has ordered Holista Colltech Ltd pay a penalty of $1.8 million for breaching its continuous disclosure obligations and making misleading representations regarding the sales of its sanitiser product, Natshield.
On 9 April 2020, Holista announced to the ASX that Health Therapies LLC placed additional orders for 415,000 bottles of NatShield, said to be effective against COVID-19, with expected revenue totalling $3.8 million. At the time, the additional orders had not been placed. It was only three months later, on 9 July 2020, when Holista announced to the ASX that sales revenue had been scaled back to $500,000.
The Federal Court found Holista’s Chief Executive Officer, Dr Rajendran Marnickavasagar, failed to discharge his duties to Holista with sufficient care and diligence by permitting Holista to contravene its disclosure obligations and making misleading or deceptive representations (s180 of the Corporations Act).
Further, Dr Marnickavasagar made available or authorised false or misleading information in three documents, being the announcement on 9 April 2020 and in two letters to the ASX dated 17 and 20 April 2020 regarding when a binding term sheet had been signed. Dr Marnickavasagar was ordered to pay a penalty of $150,000 and was disqualified from managing a corporation for 4 years.
ASIC Deputy Chair Sarah Court said, ‘Holista engaged in serious contraventions of the Corporations Act and made misleading claims to investors. ASIC’s action highlights the importance of the need for strong corporate governance within ASX listed entities.’
ASIC and Holista are required to file submissions in relation to whether Holista may pay the penalty by instalments.
In handing down her judgment, Justice Derrington remarked on the harm done to investors and shareholders by continuous disclosure failures. ‘They – shareholders and investors – are the persons for whom the continuous disclosure regime exists. Holista’s conduct had significant consequences for its financial position, and so for its investors, after the corrective disclosure.’
Dr Marnickavasagar was ordered to contribute $200,000 towards ASIC’s legal costs. Holista was also ordered to contribute to ASIC’s legal costs to be agreed or taxed.
