The former chief of music-streaming startup Gureva has been banned from managing corporations for two years, following a series of business failures and an IPO that crashed and burned spectacularly.
Darren Herft was disqualified by the Australian Securities and Investments Commission (ASIC) following the failure of seven companies, including four within the Guvera Group.
ASIC found Herft “did not act in good faith” in his management of Guv Services, and improperly used the group structure for his own gain, where there were “significant conflicts of interest”.
Guvera Australia entered into an agreement with its own parent company, to provide research and development services, ASIC said.
Expenses were incurred, generating a tax refund, by Guvera Australia. The refund, however, was directed to the parent group, Guvera Limited.
This affected the viability of Guvera Australia, and also Guv Services, which secured most of its income from Guvera Australia.
ASIC also found that while under the helm of Herft, Guvera failed to meet statutory obligations relating to debt owed to the Australian Taxation Office and the Office of State Revenue. Guv Services also failed to meet statutory obligations.
The decision follows a tumultuous journey for Guvera Group and Herft himself.
Founded in 2008 by Claes Loberg, the startup raised about $180 million from investors and set out to take on the likes of Apple and Spotify with its music-streaming app.
In May 2016, the company filed for IPO on the Australian Securities Exchange, with a prospectus that was widely criticised.
Guvera was looking to raise $100 million, despite recording a net loss of more than $80 million in the previous financial year, and losses of more than $50 million in the first six months of the 2016 financial year.
In June, the prospectus was rejected, and just weeks later, Guvera Australia and Guv Services were placed into voluntary administration.
A Deed of Company Arrangement (DOCA) was established, requiring Gureva to pay creditors $180,000 a month. But, in May 2017, it was revealed the business had breached the agreement, and it ceased operations.
In a Federal Court hearing the following December, Herft suggested that he and two others were planning to re-launch the business as Dragonfly Music, although it doesn’t appear that this amounted to much.
Herft’s two-year disqualification is effective from December 19, 2019.
ASIC is able to disqualify an individual from managing corporations for up to five years if they have been in an officer position at two or more companies that have been placed into liquidation within seven years.