Australian Securities and Investments Commission v Merhi (No 3)

This case arose from ASIC's broader proceeding concerning alleged misconduct in the provision of financial product advice. ASIC sought orders to wind up Venture Egg Financial Services Pty Ltd and United Financial Advice Pty Ltd on the just and equitable ground under the Corporations Act. The application was heard by Justice Moshinsky in the Federal Court.

The companies were not coming to court as ordinary trading businesses defending a debt claim. By the time of this judgment, they had already been placed under provisional liquidation. That earlier step had been taken in October 2025 because the Court considered there was a reasonable prospect that winding up orders might later be made and that there were public interest reasons to put the companies under external control and preserve the status quo.

The provisional liquidator, Renee Sarah Di Carlo, then investigated the companies' position and reported back to the Court. Her report recommended winding up. She said the companies may have been insolvent from as early as August 2023, had not kept accurate financial records, and that the current and former directors may have breached duties under the Corporations Act, including by failing to participate in the provisional liquidation and failing to assist her.

ASIC also relied on its own allegations about the companies' financial services conduct. It alleged extensive and widespread deficiencies in the companies' provision of financial services and compliance with the law. ASIC said the companies were used to channel large numbers of individual investors into substantial superannuation investments in Shield and First Guardian, and that Venture Egg and associated persons received substantial benefits from that activity.

No one appeared for the first, second, third and fourth defendants at the hearing. There was no opposition to the winding-up orders.

ASIC put forward a combination of matters rather than a single decisive point. That is important. The judgment shows the Court's decision was based on an overall picture of management failure, public risk and apparent insolvency.

First, ASIC said there was a justifiable lack of confidence in the conduct and management of the companies' affairs. That concept is central to the just and equitable winding-up ground. ASIC argued that the Court could no longer have confidence in the companies being left under their existing control.

Second, ASIC alleged that the companies had committed a number of contraventions of the Corporations Act, and also referred to alleged contraventions involving the ASIC Act. The Court recorded that ASIC alleged serious contraventions in the provision of financial product advice by way of a system or pattern of unconscionable conduct. The allegations included that the companies were used to direct investors' superannuation money into Shield and First Guardian.

Third, ASIC relied on evidence said to show a risk to the public. The Court noted ASIC's submission that clients of the companies were likely to lose very large amounts of superannuation investments and that there was a risk of potential further contraventions that warranted protection.

Fourth, ASIC relied on the provisional liquidator's report, which raised concerns about insolvency, record-keeping and directors' conduct. The report said the companies may have been insolvent from at least August 2023 and that they had continued to trade and incur debts after that time. It also referred to apparent personal use of company funds and failures to provide required information and reports.

Fifth, ASIC pointed to practical indicators that the businesses had effectively ceased operating properly. Venture Egg was no longer trading, was no longer a corporate authorised representative of Interprac, and its website stated that the business had been shut down. Even so, ASIC submitted there remained a prospect that the companies could continue or recommence active operations while still under the control of the relevant shareholder.

The first issue was whether each company should be wound up on the just and equitable ground under section 461(1)(k) of the Corporations Act. In practical terms, the Court had to decide whether the evidence showed such a serious breakdown in confidence in the conduct and management of the companies' affairs that winding up was appropriate.

The second issue was whether ASIC should be granted leave under section 471B of the Corporations Act to continue the proceeding against the companies after they were wound up. Once a company is in liquidation, court proceedings against it are generally restricted. ASIC wanted to continue because it was seeking declarations of contravention and intended to seek pecuniary penalties.

The Court also had to be careful about the procedural posture of the case. Justice Moshinsky expressly said that no findings had yet been made on ASIC's allegations. That matters because this judgment was not the final trial of all alleged misconduct. The Court was deciding whether winding up should occur now, and whether ASIC should be allowed to continue the enforcement case despite the liquidation.

So the judgment sits in an important middle ground. The Court did not finally determine the alleged contraventions, but it was still entitled to assess whether the allegations, the provisional liquidator's report, the apparent insolvency and the public risk together justified winding up and leave to proceed.

The Court ordered that both Venture Egg Financial Services Pty Ltd and United Financial Advice Pty Ltd be wound up on just and equitable grounds. It appointed Renee Sarah Di Carlo as liquidator of both companies.

Justice Moshinsky said it was appropriate to make the winding-up orders in light of the matters before the Court. Those matters included ASIC's submissions that there was a justifiable lack of confidence in the conduct and management of the companies' affairs, that there were strong grounds to consider the companies may have committed contraventions, that there was a risk to the public warranting protection, and that each company appeared to be insolvent.

The judgment is especially clear that the result did not turn on insolvency alone. The Court referred to the broader combination of factors. It noted the serious allegations, the provisional liquidator's concerns, the lack of cooperation, the apparent abandonment of the companies, the public protection issues, and the absence of any opposition. The Court also recorded that Venture Egg was no longer trading, was no longer a corporate authorised representative, and that its website said the business had been shut down.

The Court then granted ASIC leave under section 471B to continue the proceeding against the companies. It accepted that the relief ASIC sought, including declarations of contravention and other relief, was not something recoverable by proof of debt in the liquidation. It also accepted that the alleged contraventions were serious and that there was a clear and significant public interest in allowing ASIC to continue its enforcement role, particularly given the number of investors and the significant amount of investor funds affected by the collapse of Shield and First Guardian.

ASIC gave an undertaking not to take steps to enforce against the companies any money order, whether for penalty, costs or otherwise, without further leave of the Court. That helped limit prejudice to creditors and supported the grant of leave.

The judgment refers to a number of Corporations Act and ASIC Act provisions. For business owners, the key point is not to memorise section numbers, but to understand the kinds of obligations the Court was dealing with.

Section 461(1)(k) of the Corporations Act is the just and equitable winding-up power. It allows the Court to wind up a company where, looking at the overall circumstances, it is fair and appropriate to do so. In this case, that power was used because the Court accepted there was a justifiable lack of confidence in the conduct and management of the companies' affairs.

Section 471B deals with proceedings against a company in liquidation. ASIC needed leave under that section to continue the case after winding up. The Court granted leave because declarations and penalties serve a public enforcement function and are not simply private debt claims.

Section 286 concerns financial records. The provisional liquidator considered the companies' records did not comply with that section. Poor records matter because they affect solvency assessment, accountability and the ability of an external controller to understand what happened in the business.

Sections 180, 181 and 182 concern directors' duties. The provisional liquidator expressed views that the directors may have failed to exercise care and diligence, may have failed to act in good faith and for a proper purpose, and may have used a position to obtain a personal benefit to the detriment of the companies.

Section 588G concerns insolvent trading. The provisional liquidator considered the directors may have breached that duty by allowing the companies to continue trading while insolvent.

Sections 475, 530A and 530B concern cooperation with an external controller, including reporting on company activities and property and providing information, books and records. The provisional liquidator said those obligations had not been met.

The judgment also records that ASIC sought declarations for alleged contraventions of sections 952E, 961B, 961G, 961J and 961Q of the Corporations Act, and section 12CB of the ASIC Act, with an intention to seek penalties under section 1317G of the Corporations Act and section 12GBB of the ASIC Act. The Court did not determine those alleged contraventions in this judgment, but their seriousness was relevant to the winding-up and leave questions.

This case is particularly important for directors and managers in regulated sectors. It shows that a court can lose confidence in a company's management before all alleged misconduct has been finally proved at trial. If the surrounding evidence is serious enough, and especially if there is a public protection issue, the company can be wound up on just and equitable grounds.

It also shows that winding up can be driven by a combination of governance and compliance failures. Here, the Court was not looking only at whether the companies had enough money to pay debts. It was looking at alleged serious contraventions, the quality of records, the conduct of directors, the response to the provisional liquidator, the risk to investors, and whether the companies had effectively been abandoned.

For directors, one practical lesson is that poor cooperation can become part of the problem. The provisional liquidator's report referred to failures to participate in the provisional liquidation, failures to provide information, and failures to deliver up books and records. Once a company is under external scrutiny, silence and delay can reinforce the Court's concern that management cannot be trusted.

Another lesson is that regulated businesses need real supervision and compliance systems. The judgment refers to breach reports, external reviews questioning advice quality, and the termination of Venture Egg as a corporate authorised representative. Those are not minor administrative issues. In a financial services setting, they can become evidence supporting a conclusion that the company should no longer remain under its existing control.

The case also matters because ASIC was allowed to continue the proceeding after liquidation. That means liquidation does not necessarily end the public enforcement story. If ASIC seeks declarations and penalties in the public interest, the Court may allow the case to continue, particularly where the regulator undertakes not to enforce money orders without further leave.

The judgment was delivered on 25 March 2026. It should be read together with the earlier provisional liquidation decision delivered on 27 October 2025. The Court's reasons make clear that this judgment resolved the winding-up application and ASIC's application for leave to continue the proceeding against the companies, but it did not finally determine ASIC's substantive allegations of contravention.

That distinction is important for anyone relying on the case. The judgment is strong authority for the proposition that a company may be wound up on just and equitable grounds where there is a justifiable lack of confidence in management and a serious public protection concern. It is not, by itself, a final merits ruling on all of ASIC's pleaded allegations against the companies and individuals.