More evidence controversial lawyer Dominique Grubisa is promoting dodgy and inaccurate legal strategies to her business investment students. David Donovan reports.
In Part One of this story, we mentioned the ploys promoted by Mrs Dominique Grubisa in her Business Turnaround Program to acquire businesses for no money down. But how did Grubisa come to develop these strategies?
The answer may lie in a course by Jeremy Harbour attended by Mrs Grubisa in Singapore in November 2018. A well-known British entrepreneur, Harbour operates a business in Singapore called the Harbour Club.
In a seminar held at the Hilton Hotel in Sydney, on 15 June 2019, Dominique Grubisa claimed:
We had one client who took over a business, it was profitable. But the staff there were the original staff. And they were doing things very, very manually. So, there was a lady who had been there on day one, worked in the job for 50 years. And she kept the books. So, when orders came in, she wrote them down by hand.
Then, twice a day, she climbed up two flights of stairs with these books, to show them to the people upstairs to take the orders. And they would photocopy them and say thank you. And then later on in the afternoon she’d walk up the stairs again with the new orders. And she’d show them that.
New owner who came in and took over said so let's use Google documents. They thought he was a wizard. What is this, we're all looking at the same document, at the same time and we don't have to climb stairs and we can change things?
Which sounds remarkably similar to a story related by corporate financial adviser Steve Pratt, who spoke at the Harbour Club seminar Mrs Grubisa attended.
In a YouTube video, Mr Harbour colourfully described different ways to buy a business for no money down: merger; hospital pass / invoice out; take a stake; buy-in buy-out (BIBO), work-in buy-out (WIBO); deal pie; corporate carve out; property split; minority roll up mergers and agglomeration; and leverage buyout (although he doesn’t recommend LBOs).
Dominique Grubisa’s Business Turnaround Guidebook (BTG), on the other hand, refers to mergers, take a stake, force-out (being her invoice-out structure); property split; carveouts; minority mergers, leverage buyouts and BIBO structures. In the place of the term “deal pie” referred to in Mr Harbour’s materials, Mrs Grubisa uses the term “pie charts” to cover these issues. Like Harbour, Grubisa frowns on LBOs, saying [BTG, pg51] they are not a strategy “that gels with the approach and the ideals” of her book and accompanying course.
Mrs Grubisa says a way to engage and reassure staff is by making them partners in the business through an arrangement called a Limited Liability Partnership (LLP). Under this model, she says [BTG, pg82], “salaried partners” are given a greater say in the running and direction of the business by being invited to participate in management.
A limited partnership, however, is very different to the LLP structure promoted. Indeed, under Australian law, there is no equivalent to the Limited Liability Partnership structure referred to in the Harbour Club material.
Dominique Grubisa states [BTG, pg130]:
“Limited liability partnerships are complex and very niche area of law and typically can’t be handled by the average lawyer off the street.”
Particularly if that street is Market Street, Sydney — the home of her law firm, DGI Lawyers.
In fact, limited partners are not allowed to take part in the management of the business of a limited partnership in any Australian jurisdiction, as detailed in the below table:
State / Territory
Partnership Act 1892
Limited partner must not take part in the management of the business of the limited partnership (section 67(1)).
Partnership Act 1958
Limited partner must not take part in the management of the business (section 67(1)).
Partnership Act 1891
Limited partner must not take part in the management of the business of the incorporated limited partnership (section 87(1)).
Limited partner must not take part in the management of the business of a limited partnership (section 60(1)).
Limited Partnerships Act 2016
Limited partner in a limited partnership must not take part in the management of the business of the partnership (section 14(1)).
Limited partner in an incorporated limited partnership must not take part in the management of the business of the partnership (section 42(1)).
Partnership Act 1891
Limited partner must not take part in the management of the business (section 65(1)).
A limited partner in an incorporated limited partnership must not take part in the management of the business of the partnership (section 65A(1)).
Partnership Act 1891
Limited partner must not take part in the management of the business of a limited partnership (section 79(1)).
Limited partner in an incorporated legal partnership must not take part in the business of the partnership (section 80(1)).
Partnership Act 1963
Limited partner in an incorporated limited partnership must not take part in the management of the incorporate limited partnership business (section 68(1)).
Partnership Act 1997
A limited partner in an incorporated limited partnership must not take part in managing the partnership's business (section 66(1)).
In her webinars, Grubisa says she is sharing information not many know; that no-one has joined the dots on it yet. That there’s no lawyers required to specialise in this area because most businesses in trouble aren’t able to access legal remedies.
As she loves to say, “financially dead men can’t tell tales”.
No trouble, then — just unleash your students on the “financially dead”.
She shares with her students what she calls “the holy trinity” — three important legal concepts her students need to comprehend. Ones so simple, she claims, apparently no one else sees them.
Dominique Grubisa goes on to talk about the safe harbour rules in the Corporations Act.
Mrs Grubisa contends that the Act "says that if a business is in trouble, it can wave a white flag, get a moratorium, freeze everything and just come out of the eye of the storm and fix itself.”
“All that is required is that they [the business owner] have the intention to formulate a plan to get a better outcome. The plan doesn’t have to be successful. They don’t even have to start to implement the plan. They just have to have the intention. They don’t have to file any documents or get approval from ASIC or anything. All they have to do is hold a meeting of the company and keep minutes. Put it in your bottom drawer, that protects you.”
According to Dominique Grubisa, “because you’re in a safe harbour, they [the creditors] can’t touch you”.
Another part of the trinity is what Grubisa claims are recent amendments that came into effect in 2019. Grubisa says that Division 6A of the Corporations Act says that you can build a war chest by inserting an “all monies clause” into the terms of trade. This means, she says, you can charge the assets of debtors.
IA spoke to a Australian solicitor about Mrs Grubisa’s safe harbour advice:
Again, these claims are concerning. The safe harbour rules are merely a potential defence to an action for insolvent trading. They don’t create any form of moratorium. Creditors can enforce their rights to be paid. There is no moratorium at all.
Anyone seeking to rely on the safe harbour rules needs to understand they are more complex than this. The evidential burden on satisfying the safe harbour rules falls on the directors of the company.
A director seeking to rely on the safe harbour rules should be taking appropriate advice from a qualified insolvency practitioner and/or lawyer, not relying on advice from a DG Institute student.
The solicitor says Australia's Corporations Act doesn't say what Mrs Grubisa says it does:
"Division 6A doesn’t say that you can build a war chest by inserting provisions into terms of trade. Division 6A was inserted into the Corporations Act in 2010 (under the Personal Properties Securities (Corporations and Other Amendments) Act 2010, not in 2019 as is claimed. It was inserted to align terminology in the Corporations Act with the Personal Property Securities Act."
On its website, the Australian Restructuring Insolvency and Turnaround Association (ARITA) says to “beware of dodgy advisers” who contact individuals and company directors in financial distress.
As ARITA says:
'There can be serious consequences for following the wrong advice — you could end up with a large fine or imprisonment .... In times of financial uncertainty and distress, it’s important to know where to go for help you can trust.'
With businesses across the country facing financial distress, one hopes consumers might heed such advice rather than relying upon the supposed expert counsel of someone who turned up to one of Dominique Grubisa’s seminars.
Read Part One of this story below:
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- Pesca de Bagre! More catfish, Mrs Grubisa?
- Dominique Grubisa: Making a fortune from others’ misfortune
- Dominique Grubisa's "distressed" Victorian law practising certificate
- Dominique Grubisa's 'Vestey Trust': Caveat emptor