Swift prosecution can be avoided ASIC Report

Saturday, 01 February 2003

Professor Berna Collier photo
Professor Berna Collier
Commission member, ASIC

    Now, more than ever, it is vital for company directors and officers to comply with their Corporations Act obligations. If you comply with the law, you have nothing to worry about. But if you don't comply, you run the risk of being swiftly prosecuted...

    Swift prosecution can be avoided

    Now, more than ever, it is vital for company directors and officers to comply with their Corporations Act obligations. If you comply with the law, you have nothing to worry about. But if you don't comply, you run the risk of being swiftly prosecuted by ASIC under our compliance program, which received renewed impetus through increased funding for our enforcement activities in the 2002 Commonwealth Budget. Since its inception, the compliance program has successfully prosecuted 160 company officers and 13 corporations in relation to 326 offences under the Corporations Act. These prosecutions have resulted in $205,075 in fines and costs. Presently before the courts are another 96 individuals and corporations facing 184 charges while another 192 like matters are being investigated.

    Why are we running this compliance program?

    Launched on 1 July 2002, a major aim of this program is to remind you, as a company director or officer, of your Corporations Act obligations, the breach of which impacts on the whole community. In our view, the fine, or the court result is secondary to the compliance we seek. Other reasons for the program include:

    • improving the quality of information available to the public, shareholders and members or officers of companies
    • assisting external administrators to address ongoing misconduct by company officers
    • discouraging the misuse of ASIC\rquote s public database and
    • preventing disqualified directors from managing companies.

    What sorts of summary offences are we targeting?

    We are prosecuting, in local and magistrates courts across Australia, a wide variety of breaches of the Act, including:

    • persons continuing to act as an officer of a company following appointment of a Liquidator (section 471A(1)
    • company officers failing to assist insolvency practitioners in the administration of their failed companies, thus denying employees and creditors potential returns (sections 475 and 530A)
    • company officers and their companies failing to update ASIC registers with the addresses of their companies and company officers, in an attempt to thwart creditors' efforts at initiating debt recovery proceedings (sections 142, 146 and 205B), and
    • persons using unregistered company structures, the effect of which denies customers and individuals an entity against which they can pursue legal claims (section 156).

    What are the more serious breaches we are investigating?

    We are also investigating a variety of more serious breaches of the Corporations Act, which we will ultimately refer to the Commonwealth Director of Public Prosecutions for action. These matters include:

    • submitting documents to us that contain false and misleading statements (section 1308(2)
    • managing a company while disqualified (section 206A), and
    • failing to hand over company assets and property to liquidators upon their appointment (section 590).

    Penalties for these types of matters range from fines of between $5500 and $11,000 or two years imprisonment, or both.

    We conduct these sorts of investigations to tackle the common types of complaints regularly brought to our attention. These include:

    • company directors lodging applications for deregistration of their company with us in which they declare that the entity has no liabilities and/or is not subject to legal p roceedings, but where creditors are pursuing debt recovery actions against the subject company through the courts
    • company directors lodging forms with us in which they state they live at fictitious addresses to defeat debt recovery proceedings by creditors
    • persons continuing to manage companies despite the fact they are disqualified from doing so by being bankrupt, convicted of fraud or banned by us, and
    • former company officers misappropriating or secreting from liquidators, company assets and funds. We are not just focusing on criminal prosecutions, but are currently in the process of seeking court orders under section 1274(11) of the Corporations Act, where the court directs officers to provide the reports as to affairs (RATAs) and the books and records to the administrator. Failure to comply with the court order is an additional breach, punishable by a fine of $5500 or one year's imprisonment, or both.

    We will prosecute a second time if necessary

    If a company director or officer still persists in doing the wrong thing despite being prosecuted the first time, we will prosecute them a second time. We have already done this, using the continuing offence provisions of the Corporations Act. So to avoid prosecution by us, make sure you comply with your obligations under the Corporations Act.

    If you have any queries about our compliance program, contact Adrian Borchok, assistant director, Complaints Management Program on (02) 9911 2311 or e-mail adrian.borchok@asic.gov.au


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