The NSW Supreme Court ruled on Tuesday that Rex Airlines breached continuous disclosure obligations by failing to notify the market of a $35 million profit downgrade in 2023. While the court found former executive chair Lim Kim Hai liable for contraventions, it cleared three other former directors of breaching their duties, according to the Australian Securities and Investments Commission (ASIC).
How did Rex Airlines mislead the market?
The court found that Rex failed to disclose market-sensitive information regarding its financial health in a timely manner. According to ASIC, the airline informed the Australian Securities Exchange in February 2023 that it expected “positive operating profits” for the financial year. However, the regulator argued the company lacked a “reasonable basis for that claim” as it was already incurring operating losses. The market was not alerted to the $35 million profit downgrade until June 2023, leaving investors to trade on inaccurate data, as noted by Justice Ashley Black.
The Australian government intervened during the airline’s collapse to settle $4.8 million in debts owed to regional councils, preventing the total grounding of the carrier’s services.
What is the status of the former directors?
ASIC pursued legal action against both the company and its leadership, but the court’s findings varied by individual. Justice Black found that former executive chair Lim Kim Hai admitted to the alleged contraventions and now faces potential pecuniary penalties and disqualification orders. Conversely, the court cleared former directors John Sharp AM, Lincoln Pan, and Siddharth Khotkar of breaching their director duties. Furthermore, the court ruled against ASIC in its separate claim of “misleading and deceptive conduct” against the airline.
Why does continuous disclosure matter for investors?
Continuous disclosure serves as a fundamental pillar of Australia’s corporate governance framework. ASIC chair Sarah Court stated that it is “critical that investors have access to accurate and timely information” to make informed investment decisions. When companies fail to report financial shifts, such as profit downgrades, it undermines the integrity of the market. The case underscores the legal risks companies face when financial projections deviate significantly from actual performance without immediate public disclosure.
Investors should regularly check the ASX company announcements page for listed entities to stay updated on official profit guidance and regulatory filings.
What happens next for Rex Airlines?
The airline is currently navigating a period of transition following its collapse in July 2024, when it entered administration with over $500 million in debt. The company was sold to US-based firm Air T in December 2024. The matter involving Rex will return to the NSW Supreme Court at a future date to finalize declarations against the company and determine specific penalties for Lim Kim Hai.
Frequently Asked Questions
Was Rex Airlines found guilty of all charges?
No. While the court found Rex breached continuous disclosure obligations, it ruled against ASIC regarding the claim of misleading and deceptive conduct.
Who was held liable for the disclosure failures?
The court found the company itself liable for the disclosure breach, and former executive chair Lim Kim Hai admitted to the contraventions. Three other directors were cleared of wrongdoing.
What is the current ownership status of Rex?
Following its collapse and administration in 2024, Rex was sold to the US company Air T in December 2024.
Stay informed on the latest corporate governance and market news by subscribing to our weekly newsletter. Have thoughts on this court ruling? Share your perspective in the comments below.
