Here is my July 2020 administrator column. I could go over and over this column and gradually make it more and more palatable, however, I just really dislike the whole administration process.

“To a certain extent,
I am a subscriber to ‘the end
justifies the means’”

As an EA member, I feel bullied by the Australian Sports Commission.

I feel badly let down by the EA Board who operated secretly and who seriously withheld information and pushed us members into a process over which neither the board nor EA members have any real control.

I am worried that there is more than meets the eye in terms of prior knowledge and that we, the EA members, are being herded like a group of lemmings down a cattle race that someone else has designed. The most obvious anomaly being the $363,990 left in the EA bank account at the end of the 2020 financial year.

To a certain extent, I am a subscriber to “the end justifies the means” and I think the end results of this administration process does have the potential to deliver a good result and a much better future for the EA going forward. It can, however, also backfire. This is a bit Russian roulette.

I do apologise for the clumsiness of the following column, however, for those of you interested you will need to just plough your way through it.

WHY IT HAPPENED

• On 11 May 2020 Ricky McMillan, who was Chair of the Equestrian Australia (EA) Board resigned. As I understand it, one of the matters that Ricky McMillan was attempting to address was the multiple disciplinary tribunals which had been conducted in Queensland. The composition of the Tribunal Panel and its outcomes were unsatisfactory, according to Equestrian Queensland members, and those who were called before these panels. It is my understanding that the Chair was of the view that an inquiry into these allegations was warranted. The majority of the EA Board was unsupportive of the Chair’s attempt to start an inquiry into the allegations. It has been suggested there were potential conflicts of interest on the EA Board that were undeclared prior to the vote to implement or not implement an inquiry being undertaken. Very messy.

• At the same time, board member Gillian Canapini also resigned.

• In the last 16 months EA has gone through three chairs and eight directors. This is clearly an indication of an unhappy and unstable board.

• The Australian Sports Commission (ASC) on 3 June sent a letter to the EA Board claiming they had invested some $13 million in EA over the past four years. The ASC gave notice of its intention to withdraw sports funding and stated that the EA must demonstrate good governance, leadership in the sport and generate a stable board. The board election processes is to represent genuinely democratic outcomes, and further, the board needs a good skills mix, diversity balance and effective and efficient administration which can soundly acquit ASC investments. The ASC insisted on an unequivocal focus on ensuring that the safety of EA members is paramount.

• The ASC was of the view that the EA and its fundamental structure had proven itself manifestly unfit for the sport’s national governance and now needs to be overhauled.

• The ASC is now withholding $450,000 from the EA sport business core funding for the 2020 financial year ending June 2021.

• The ASC has frozen nearly $600,000 according to board member John Glenn in The Australian newspaper of 14 June 2020.

• The ASC seems to still have $363,990 in the EA coffers, which is left over from the above $600,000 according to John Glenn, which was originally granted to the EA for the 2019/2020 financial year. This $363,990 is my guess how the ASC has managed to be a substantial creditor in the voting process conducted by KordaMentha deciding on the Committee of Inspection (which was voted down on 19 June 2020), to oversee the administration process. It appears to me that the ASC could use this creditor value to vote and influence the final KordaMentha meeting on 14 July. What the EA is doing with $363,990 unspent in its account at this stage of the financial year doesn’t make sense to me. I do wonder.

• The ASC certainly has implemented financial hardship on the EA.

• The EA does own its offices in Homebush outright. This certainly would give the EA, in my opinion, a line of credit up to $500,000 within 24 hours. The EA is almost certainly not insolvent.

• Equestrian Queensland (EQ) and Equestrian New South Wales (ENSW) both have $1 million in their bank accounts. Equestrian Victoria (EV) has at least $500,000, and so again these member states of EA did have the potential to bail the EA out of financial difficulties. I am not sure what Tasmania, South Australia and Western Australia have to offer in terms of finances to the EA, however, none of them were approached as far as I know. EA is clearly not insolvent or going to be in the near future.

• The EA being in danger of becoming insolvent is, in my opinion, incorrect. This danger of becoming insolvent was claimed by one of the four remaining EA Board members John Glenn on his video posted on the Equestrian Australia Facebook page on 11 June 2020. www.facebook.com/EquestrianAus/videos/187446279297904/

• None of the states that make up the shareholders of EA were notified of the voluntary administration until 30 minutes before it happened. So the opportunity to reach an agreement with the states providing funding for EA was never explored.

• KordaMentha as the administrators were appointed on 9 June 2020.

• Fascinating is the reading of the KordaMentha website. In a ‘News and Insight’ article on Restructuring, the final paragraph reads:

“This process is probably
going to deliver an outcome
that has been needed
for a long time.”

Now is the time

There is no doubt that the COVID-19 pandemic has brought many systemic issues to a head. This presents an opportunity to use the period of slower economic activity to make full use of the voluntary administration process to restructure a business so the company emerges in a stronger position. During periods of upheaval, companies should take the time to explore all of the options available, and voluntary administration is one of the most underutilised ways to enact a business restructure.

Placing a company into voluntary administration should no longer be seen as a negative reflection on the Company and its directors, but rather view it as a proactive, tactical gambit to be deployed when transforming a struggling business.

• KordaMentha is an advisory firm promoting a governance model to sporting bodies like the EA where it is called in to restructure organisational inefficiencies and internal management difficulties. These shortfalls in lots of sporting bodies are being exposed with the difficulties of Covid-19.

• KordaMentha will without doubt walk away with a pay package potentially in the vicinity of $500,000. This will include the current administration costs, preliminary advice, and then the creation of the Deed of Company Arrangement (DOCA) documentation of the new EA infrastructure. KordaMentha is slightly reluctant to share this information with everybody.

• This EA restructure has been overdue for more than a decade. Recently, suggestions of a Senate Inquiry has been mooted as a way forward. The cost of a senate inquiry would be well in excess of $1 million.

• In actual fact KordaMentha may well deliver a new EA at half the cost of a Senate inquiry and in a quarter of the time.

WHERE WE ARE RIGHT NOW

The next really big date is 14 July 2020. This is the second and final creditors’ meeting. This meeting is where, as I understand, each member will vote three times. These will be yes or no votes on the following three outcomes:

1. Acceptance of the DOCA: This is a presentation I think of just one recommended EA model which KordaMentha thinks is the best. There have been a number of submissions regarding a new EA model from some motivated EA members as well as the state EA branches. Our submissions will have already been considered and hopefully influenced this end model. Hopefully, we are all going to decide that this outcome is best for the future of the EA in terms of moving forward in all ways. If we vote against this we are about to enter a world of lots of pain.
2. Liquidation: If we have a majority vote in favour of liquidation, all EA assets are sold and divided up amongst the creditors and then a volunteer group of equestrian enthusiasts will get together and try and piece back a new EA. There will be no insurance, no FEI recognition necessary for Olympics next year, no official competitions, no one allowed to use FEI dressage tests or anything FEI, no funding for paid staff, no funding from the ASC or any government body. Just lots of very painful miles done as quickly as possible by volunteers to get the sport back up and running and officially recognised both nationally and internationally. A total nightmare.
3. Administration will end: If we vote to get rid of the administrators and hand control of the EA back to the original board members, the whole administration process will have been pointless and it will cost we members maybe $500,000 or more. The old board will be reinstated to carry on from where they left off, which clearly was very unsatisfactory, and we could be up to $500,000 poorer. We will be much closer to being insolvent!

• On 7 July 2020 the administrators will release a report with the administrator’s recommendations and the relevant information for members to make an informed decision on how they are going to vote on 14 July 2020.

• KordaMentha is working on the DOCA, which is part of the new EA model or outcome, number one as listed above. This will facilitate changes to the constitution to allow for “one member, one vote” and the appointment of a new independent transitional board for EA. This board will take over after 14 July and have a given period of time in which to consult with the membership and put the new EA model and new constitution together so that it functions in compliance with the prerequisites being demanded by the ASC, Australian Olympic Committee, the FEI and the EA members. I think this period in which this outcome is to be achieved will be something like 180 days. If the outcome is not achieved then the EA will go into automatic liquidation.

• The new independent, transitional board of EA will engage with members and stakeholders to determine the most appropriate and sustainable operating structure for EA and the sport. This is not for the administrators to decide. Members and stakeholders need to have their say and will be able to do this through a new platform expected to be put up by KordaMentha.

As an EA member, I feel like I am being bullied by the ASC: do as I say or I won’t give you any money. I also feel like I have been kept in the dark and excluded from critical information by the EA Board and eventually ambushed. I think the EA has just set a world record in non-transparency and non-communication with the members. At the risk of a conspiracy theory, I get the distinct impression that some of this rather catastrophic process has been thought through and implemented by someone or a body who I am unable to identify, and we, the EA members, are just jogging along like a group of lemmings. I think us average EA members are all being treated like idiots. On the other hand, I think I do need to get over this bullied, ambushed and being-treated-like-an-idiot feeling, because this process is probably going to deliver an outcome that has been needed for a long time.

I think a lot of very good people have in the past tried desperately hard to bring about this restructuring of EA and been destroyed in the process. I feel sorry and say thank you to those of you who tried and could not succeed. It’s important that we all take our turn at fighting a good fight even if we are doomed to failure. I am never going to admire those who are bullying and deceiving and treating we EA enthusiasts as idiots. We, the EA members, come together because of the passion we all share for our horses. Thank god for the horses. EQ

Cheers, Heath