New lawsuit over online education provider’s troubled acquisition
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A shareholder of an online education provider has taken the company to court, claiming it owes him up to $9 million.
Michael Walker sold his company Management Institute of Australia (MIA) to iCollege (ASX:ICT) in 2015. But iCollege, after finding “inconsistencies” in the company during a post-sale audit, is refusing to pay the final $8 million agreed in the sale document.
Mr Walker has now started proceedings against iCollege in the NSW Supreme Court.
iCollege said in a statement that it disputes the claims, which date back to a share sale agreement in March 2015.
In early 2015, iCollege bought MIA for $10 million — $2 million in cash and scrip up front, and the other $8 million to be paid out over three years provided MIA hit certain EBIT targets.
But immediately after the sale the Victorian government cancelled its training contract with MIA as part of a crackdown on quality standards.
At the time, The Australian reported that the MIA breach was unauthorised subcontracting in 2014.
Chairman Ross Cotton told the paper the breach occurred before they bought they company, but a subsequent internal review found “a number of inconsistencies”, according to the company.
It also found $210,000 of uncollectable debts.
Those inconsistencies led to an impairment charge of $4.9 million over the new acquisition’s intangible assets.
As a result, iCollege decided to suspend all future share and cash payments to Mr Walker, and proposed mediation.
The legal challenge is the latest in a string of proceedings that began in September last year.
Two separate cases were brought against MIA for breaching franchise agreements — Mr Walker was named as a defendant in both.
iCollege has been contacted for comment.