Lawyers seem set to determine CGI's destiny in the next two weeks following Statutory Demand maneuvers by interests associated with Anthony Palermo.
Anthony Palermo controls Monarch Corp Pty Ltd, CGI's second biggest shareholder with 10pc of capital.
Monarch is seeking recovery of $390,000.
According to half yearly accounts, CGI had cash of $260,000 at December 31.
On this basis it would seem that Anthony Palermo's demands will find CGI about $130,000+ short - unless the company can sell assets, convert receivables and/or raise more money from backers such as John Palermo and Celtic Capital.
In a legal context, the issuance of a Statutory Demand is often the first step in a process to send a debtor company into liquidation.
John Palermo will need to respond to his brother's action within 21 days of the receipt of the demands.
We don't have an exact date but we conclude that the 21 day clock started on/about March 21, the day CGI called a trading halt.
The next salient date is March 25, the day CGI issued a statement to the ASX headed RECEIPT OF STATUTORY DEMANDS ON DISPUTED DEBT.
The use of the term "Disputed Debt" is telling.
It suggests that CGI will try and neutralize Anthony Palermo's strategy by signaling to the Court that the debt is in "dispute" and hence the Statutory Demands should be set aside.
The Court would then consider argument in order to satisfy itself as to the veracity of the "dispute".
As Courts frown on claims of "dispute" that turn out to be trivial, CGI will need to take great care to substantiate its claim.
If it can convince the Court to set the Statutory Demands aside, it will have achieved a notable legal victory.
According to legal sources, where a Demand is set aside in its entirety, the Court will generally order the creditor who served the Demand to pay the company's costs pursuant to s459N of the Corporations Act 2001.
Where a Demand is merely varied (i.e. the amount of it is reduced), the company will not generally be awarded its costs.
If its setting aside application fails, CGI will have an additional seven days to pay the debts under s459F(2), unless the Court extends the time for compliance with the demand.
If the company intends to appeal the Court's decision, it would be prudent to apply for additional time for compliance before the time for compliance has expired.
Once the time for compliance has expired, the Anthony Palermo camp would be entitled to petition for CGI to be wound up.
Given the clock's now been ticking for 10 days, it would seem that CGI's destiny will be clarified around Friday, April 11.
Meantime, Anthony Palermo's legal moves on CGI have spelt bad news for the value of Monarch's shareholding and, of course, that of John Palermo's Finebase Holdings.
Finebase owns 49.5m shares equal to 54.2pc of capital.
A 70pc crash in the CGI share price since the trading halt was lifted has left CGI with a market capitalization of just $274,000.
CGI Price at posting:
0.3¢ Sentiment: None Disclosure: Not Held
