The Samoa Airways allegedly “breached the solvency requirements of the Companies Act 2001, which attract both civil and criminal sanctions.”
This was revealed in a legal opinion issued by the Latu Lawyer firm upon the request of the Government owned airline Minister, Leatinuu Wayne Sooialo for a legal review of the lease.
Obtained by Radio Polynesia over the weekend, the legal review, endorsed by Taulapapa Brenda Latu; also found the Samoa Airways accumulated debt of up to $80 million.
This placed the Airline in a highly distressed financial position which on any assessment reflects a company which is technically insolvent as it is ‘unable to pay its debts as they fall due.
Repeated efforts by Radio Polynesia reach out to Chief Executive Officer of the Samoa Airway, Seiuli Alvin Tuala for comments have been unsuccessful, as of press time.
The legal opinion says the Samoa Airways Board of Directors approved the Lease and it would also appear to be individually breaching statutory directors duties under the same Act by failing to properly inform the shareholder of its financial position and continuing to trade whilst insolvent.
This led the Cabinet to cancel the Samoa Airway’s lease of the Generation Boeing 737-800 aircraft, currently stuck in Australia.
Furthermore, the 14 page legal review, says the source of the ‘distress’ can be identified from the figures in a Paper for Cabinet (PK21)302 signed by the former Prime Minister, Tuilaepa Dr Sailele Malielegaoi; where the extent of the financial losses when Samoa Airways took over the jet operations from the joint venture with Virgin Australia.
According to Cabinet papers, the accumulated losses of the Samoa Airways as of January 2021 were SAT$77 million of which SAT$68 million are the accumulated Jet losses from November 2017 to January this year.
Furthermore, the outstanding loans from Unit Trust of Samoa, amounting to $45 million tala and current liabilities and negative net assets of $22.45 million.
The firm says it is their view “that not only is the Company not financially capable to continue with the Lease contract which it has entered into, but that to do so, breaches the solvency requirements of the Companies Act 2001, which attract both civil and criminal sanctions, but the Directors of the Company in approving the Lease would also appear to be individually breaching statutory directors duties under the same Act by failing to properly inform the shareholder of its financial position and continuing to trade whilst insolvent.
