Companies have an obligation to assist registered liquidators by providing a Report on Company Activities and Property (ROCAP) as well as books and records. Failure to do so may result in criminal prosecution and penalties from the Australian Securities and Investments Commission (ASIC).
Between 1 July to 31 December 2021, ASIC prosecuted 104 company officers and related individuals for failing to assist registered liquidators. The prosecutions resulted in fines and costs totalling over $280,000.
ASIC outlines the key considerations, and how it can assist liquidators when companies don’t cooperate.
Why are companies obliged to assist liquidators?
According to ASIC Commissioner Sean Hughes, “ASIC expects that company officers will always assist registered liquidators in their investigations, as they are required to under law. If they don’t comply, then ASIC will prosecute them. It is crucial that liquidators receive the assistance they need, so that they can accurately report to creditors about the circumstances and financial positions of the companies they are investigating.”
What happens if companies don’t comply?
When company officers fail to meet their obligations, registered liquidators can request ASIC’s assistance via the ASIC Regulatory Portal.
This assistance helps to ensure that liquidators can:
- Properly carry out their investigations,
- Realise assets to pay outstanding money owed to creditors and employees, and
- Report any findings of misconduct to ASIC.
On its website, ASIC outlines the information that needs to be provided when requesting assistance, and what you may be required to do. You must be prepared to attend court and give evidence in the event that ASIC commences a prosecution.
How does ASIC assist liquidators to ensure corporate compliance?
ASIC’s assistance may involve contacting company officers or third parties to remind them of their statutory obligations to assist liquidators and administrators when companies enter external administration.
Where the failure to assist the liquidator or administrator persists, ASIC may commence criminal proceedings against:
- Company officers – for failing to provide a ROCAP and/or failing to provide books and records.
- Third parties – for failing to provide books and records.
Key takeaways
Companies are legally obliged to assist registered liquidators by providing the information required to carry out their duties. ASIC may intervene if a company does not comply with a liquidator’s requests, and persistent non-compliance may result in criminal prosecution and large fines.
