Responsibilities of Directors
Suppose your clients are directors of their own businesses. In that case, they should ensure that they comply with general and specific laws applying to their Company’s operations and have regard to the interests of creditors if the Company is insolvent or bordering on insolvency. Beyond that, if and when companies are faced with financial difficulties, and they decide to liquidate the Company voluntarily or the Company is forced into involuntary liquidation (commenced by creditors through the Court), they are required to comply with the liquidator’s requests. Failure to comply with the liquidator’s requests may give rise to criminal proceedings as a result of the liquidator utilising the Liquidator’s Assistance Program made available by ASIC.
If this happens, ASIC’s prosecutor will commence an action against the director in the Court. As a director of the Company, a conviction may be recorded for breaching certain sections of the Corporations Act 2001 (the Act). Below are two examples where a director has breached the Act and one example where the director has not breached the Act:
- A Director was reported to ASIC for their non-compliance, due to failing to provide a completed Report regarding business affairs and all of the Company’s books and records. The Director was convicted under sections 475(1) and 530A(1) of the Act. Offences under sections 475 and 530A of the Act are “continuing offences” as set out in section 1314 of the Act. This means that the director has continuing obligations to submit the required documents notwithstanding that the period of time set by the legislation has expired.
- A Director was reported to ASIC for their non-compliance, for failing to provide all of the Company’s books and records and details of assets. Consequently, the Director was convicted of breaching sections 530A(1) and 530A(2) of the Act.
- A Director was reported to ASIC for his/her non-compliance and failure to provide all of the Company’s books and records. Promptly responding to ASIC’s assistance, the director complied with the obligations having provided the required books and records and relevant information. ASIC took no further action in this regard.
Stakeholders (which include the general public, employees and trade creditors) should take some comfort that liquidators have the power to report offences committed by directors to ASIC.
*The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.