In a letter sent to shareholders, Mr Sully — who is listed as the sole director of the business — said police had been involved and security measures taken to keep Ms Ross and the small team “feeling as safe as possible’’.
“To receive abuse and death threats is beyond the pale,’’ he said.
Kester Black, which started in Wānaka, was placed in voluntary administration on July 9 due to the company’s financial position and difficult trading conditions.
Mr Sully said the couple understood “the profound disappointment and frustration’’ that shareholders were experiencing.
“As the founder, Anna lost her entire life savings, hundreds of thousands of dollars. We have suffered in this process and it’s been devastating to see the impact on our valued shareholders who believed in our vision.
“We don’t benefit from this outcome as some have incorrectly suggested, quite the opposite. We’ve lost financially and suffered damage to a wonderful business we poured our hearts into for over a decade,’’ he said.
Mr Sully said he understood the frustration around the company’s communications.
“Under Australia’s laws when a company is in administration, control of the company passes to the administrator which means we could not speak on the company’s behalf. I am now able to clear up any misinformation and explain our situation and plans for the future.’’
One of the most challenging issues had been the “deeply personal attacks’’ on Ms Ross and it had been difficult to stand by, watch and read as disinformation was spread. He, along with Ms Ross and the Kester Black team were committed to building their business again.
Addressing a list of questions, including what key events contributed to the liquidation outcome, Mr Sully said a warehouse packing its three largest nail polish orders ever was flooded in January 2023.
No negligence on the part of the warehouse was found and, due to an “insurance gap’’, the damages could not be paid out. It took significant time and resources to process the damaged stock for discounted sale to recover costs.
“We can’t overstate the devastating impact this natural disaster had on the business and cash flow, ultimately pushing the company towards administration. It took a long time to fully grasp the long-term effects this event had on the business,’’ he said.
Late last year, when the FY23 financial statements were sent for sign-off, they showed a significant loss “which we couldn’t understand, considering our accountant had not highlighted these losses at at any point during that financial year’’.
They spent eight months working with two new external advisors to try and verify the company’s actual financial position while paying down debt.
“We managed significant progress, growing top-line revenue by four times during FY24 and paying down almost all debt taken on while recovering from the flooding event. Unfortunately, rapid growth while cash was tied up in excess (mostly damaged) nail polish stock created further pressure on cash flow.
“As soon as we confirmed the losses, we took immediate action and engaged Hamilton Murphy [a specialist insolvency company],’’ he said.
The administrator realised selling the business to an external party was not viable.
After negotiations, they sold the company’s stock, intellectual property (IP), and goodwill to New New New Pty Ltd, a company owned by Mr Sully. The sale allowed the business to continue operating under the new, simplified, more viable structure, he said.
“The administrator, acting independently, believed this sale was for a fair price, considering the current stock levels and how much the business relied on Anna and myself to run it.
“This approach aimed to get the best possible outcome for the people the company owed money to (creditors), keep the business running and ensure the five employees kept their jobs,’’ he said.
Mr Sully said Ms Ross stepped back from her official title as company director following advice from her doctor after experiencing chronic fatigue and burnout caused by the stress of running a small business and working long hours for the past 12 years.
“We’ve watched our enterprise, built carefully over a number of years, struggle due to poor external advice and numerous global economic factors, as well as a massive natural disaster, which has significantly impacted Anna’s mental and physical well-being.
“As a result, we made the difficult decision as a family and a business for Anna to take a step back while I continue as the main company director. This decision, like many in family businesses, is profoundly personal.
The circulation of misinformation and rumours of obstruction and wrongdoing has made navigating this situation even more distressing. We remain committed to our values and transparency within a legal framework, even as we work through these challenge,’’ he said.
Ms Ross was still very much involved in the business from a creative, product and operations perspective while she recovered, he said.
She was the largest creditor when the company entered into voluntary administration, owed more than $220,000, but she opted to be an excluded creditor, meaning she would be paid nothing.
