GTC-AF Lawyers merger terminated amid leadership resignations and governance cracks

Like the Suicide Squad, AF Lawyers’ (ASX: AFL) super firm dreams with GTC have gone bust. What’s more? Much of the squad has left, too, from CFO Pratyush Jagdishwala to Executive Director Grant Dearlove. The company has seen it all in less than six months: scandal, power tussle, financial losses. What’s going on?

For a Company that handles divorces, AFL sure has all the trappings of a family drama. On October 19, 2022, GTC and AFL came together to form one of Australia’s most extensive personal services legal groups, giving GTC shareholders nearly 40% of ownership. It was also set to acquire GTC’s outstanding debt of about $10 million.

The deal came at the heels of AFL’s awkward annual report. In FY22, the Company suffered a loss of $96k, while its total expenses shot up to $18.3 million from $11.6 million in FY21. Moreover, it incorrectly reported the salaries of two of its personnel, Jagdishwala and former director Kevin Lynch. 

The report claimed that Jagdishwala, who joined in February 2022, received a salary of $187,000. Three months later, AFL corrected that the amount was $290,000—whoops? Ten days before the correction was revealed, Jagdishwala tendered his resignation without a specified reason. His role entailed assisting with mergers and deriving cost-saving measures. Yep.

But that wasn’t all. The Australian Financial Review dug deeper and revealed an email correspondence between him and former board director Glenn Dobbie. In the email, Jagdishwala suggested changes to his salary, demanding an additional portion in two tranches, worth $48,000 and $55,000, to be paid via an Indian entity. This salary would be greater than that of his senior, Stace Boardman, the chief executive. 

Perhaps he resigned to avoid ticking off Boardman. Or maybe, he did so to avoid being blamed for more financial mishaps about to befall the Company, such as the dissolution of the GTC merger. 

Secondly, the report incorrectly noted Lynch’s salary as $35,000 when it was actually $50,000. Following the correction, on November 14, Lynch ceased to be the director, and executive director Grant Dearlove retired. AFL appointed Mr Peter Johns, Founder and Investment Officer of Westferry Investment Group, as a director.

On the same day, the Company appointed Rick Dennis as the non-executive chair, and he was to provide consultancy services to assist in preparation for the merger with GTC. Now, he has to pick up the pieces; it must feel like deja vu. 

For AFL Legal shareholders, it’s been like watching a car crash in slow motion with AFL shares falling from $0.50 at the start of 2022, down to $0.13 following news of the GTC merger termination.