Mosaic Brands, which at one point was Australia’s largest specialty fashion retailer, went into voluntary administration. This step reflects their dire fiscal circumstances and triggers claims of illegal operation in insolvency. The company has since bought up a bevy of mid-range fashion brands such as Noni B, Pretty Girl Fashion Group, Specialty Fashion Group and Ezi-Buy. At the time of its administration, it still owed creditors between $361 million and $392 million. This case is now set to be the most important test of the safe harbour legislation passed in 2017.
Under Scott Evans’s leadership as CEO from 2014 through April 2024, Mosaic Brands. His vision saw the company acquired aggressively to find new avenues for rapid growth. Luka Softa served as CFO during the same time and is up until June 2024. The firm’s staff used to number more than 4,000 people across Australia. In reality, Mosaic Brands enjoyed record prosperity and achieved monopoly control. While experiencing the unprecedented disruption caused by COVID-19, they were dependent on temporary safe harbour measures which existed from March 25, 2020, to March 31, 2021.
Yet from April 2021 onwards, the company resorted to these measures consistently off and on until it finally went into administration. According to these media reports, evidence of trading while insolvent was uncovered by administrators at Mosaic Brands. This predatory practice could date back as much as four years before the company’s spectacular recent implosion. While the bankruptcy raises the compelling issue of what the management’s decision-making procedure was before the bankruptcy, which ultimately created an insolvency.
In April 2024, only months before the company would go into administration, both Evans and Softa left their posts. This sudden shift in command happened just as the company was undergoing increasing financial strain. After their exits, Erica Berchtold became CEO in April 2024.
Mosaic Brands’ financial obligations extend well past Australia’s shores. businesses, but they will leave $385 million in unpaid bills to unsecured creditors in countries such as Bangladesh, China and India. A single successful insolvent trading claim could result in a liability of up to $38 million – $77 million in total. This unprecedented level of funding adds a layer of complication to the administration process.
Earlier this year, the company announced that its Rivers brand would close all remaining Australian stores, signaling a significant downsizing in its operations. As the decision demonstrates, it remains difficult out there in retail, especially for those who continue to make adjustments in the shadow of the pandemic.
“This is a long time to be using these protocols,” noted Professor Jason Harris in reference to Mosaic Brands’ reliance on safe harbour measures. The impact of this predicament is far-reaching. It further raises fundamental questions about the state of corporate governance practices and accountability during times of financial distress.
“This will be the first and potentially the biggest test of this legislation,” stated an unnamed source in connection with a report on the case. The effect of this outcome could change how other similar cases are handled going forward. It would dramatically shift the terrain of Australian corporate law.
Mosaic Brands has hardly emerged unscathed from the recent sector turmoil. Legal experts and industry observers are following its case very closely. According to FTI Consulting, that left the airline “at all times” with a level of uncertainty about its financial condition.
