Colmont School directors knew mounting debt could not be paid six months before its collapse

A probe into Colmont School has found directors knew mounting debts could not be paid at least six months before the troubled school’s collapse.

Directors of the failed Colmont School knew their mounting debts could not be paid at least six months before its collapse in June, an investigation has revealed.

A report into the school’s finances by administrators Cor Cordis states it could have been trading while insolvent since December last year.

The damning report recommended the former Kilmore International School’s administration be wound up because it could not pay the millions of dollars owed to creditors, including staff owed wages and parents who forked out up to $50,000 in upfront fees for the 2023 school year.

Colmont’s revenue has steadily declined each year since 2018, posting the sharpest drop between 2020 and 2021 when income dropped from $16m to $11m.

The biggest shortfall was from international students, as income plummeted from just under $10m in 2018 to $2m in 2021.

Colmont School could have been trading while insolvent last year, a report found.

“Based on our investigations to date we have identified possible director breach and insolvent trading claims,” administrator Rachel Burdett said.

“Our preliminary view is that the Company (Colmont) may have been insolvent from at least 31 December 2021, possibly earlier,” she said.

“In our opinion the Company suffered a net asset deficiency as at 31 December 2021, if not earlier, as it did not have sufficient assets available to meet the liabilities that had already been incurred and did not have sufficient funds to repay student fees paid in advance.”

The report alleged that the school could not repay 2022 student fees because that money was being used to cover debts incurred last year.

It also claimed that both current and former directors breached the Corporations Act by “failing to prevent the Company from trading while insolvent”.

“At this point we estimate director breach claims would be in the vicinity of $500,000 to $800,000 … investigations and legal advice are required to finalise our position,” the report said.

The schools owes “priority creditors” such as former staff and the administrators more than $3.3m, and a further $2.5m to ‘unsecured creditors’ such as parents who paid tuition and boarding fees.

Businessman Ayub Khan is attempting to invest in the school to revive it, despite administrators recommending it be liquidated.

Colmont School announced its sudden closure in late July, just weeks after undergoing a complete overhaul, which included being renamed Colmont, new uniforms and rebranding of the school’s signage and colours.

Parents had confirmed 2023 enrolments for almost 300 students and paid advance fees just days before the school closed down.

About 60 Year 12s were taken in by other colleges such as Assumption College in Kilmore and Our Lady of the Way in Kingsbury before other year levels were told not to return.

The school community voted out Colmont’s previously appointed administrators, Vince and Associates, on August 5.

Further probes into Colmont’s financial situation will continue.

Administrators will meet with creditors on November 17 to determine the school’s fate.