The Australian Securities and Investments Commission (ASIC) has taken a formidable stance against corporate non-compliance, prosecuting 100 individuals for failing to assist registered liquidators. These legal actions, which took place between 1 January 2023 and 30 June 2023, are a response to the alarming increase in insolvency cases and the subsequent failure of company officers to fulfill their governance obligations.
ASIC Deputy Chair Sarah Court emphasised the importance of corporate cooperation during insolvency proceedings, stating, “During this period, ASIC successfully prosecuted 100 individuals for 194 offences under the Corporations Act for failing to assist liquidators and were fined more than $430,000.”
The prosecutions primarily targeted company officers and other individuals who neglected key governance obligations. These obligations include providing registered liquidators with access to company books and submitting a Report on Company Activities and Property (ROCAP) after a company enters external administration. Such information is crucial for liquidators to make informed decisions about the financial position of an entity and determine the best outcome for creditors.
Ms. Court highlighted the necessity of compliance with these fundamental obligations, especially in the context of a recent uptick in corporate insolvencies. “After a period of low corporate insolvencies in recent years, insolvency numbers have continued to rise over the last six months,” she noted. “ASIC will take action where directors fail to meet these fundamental obligations.”
The 100 individuals prosecuted were spread across Australia and faced charges summarily in Local and Magistrates’ courts by ASIC and the Commonwealth Director of Public Prosecutions. The charges resulted in fines exceeding $430,000, indicating the severity with which ASIC views non-compliance in this regard.
Before resorting to prosecution, ASIC follows a procedural approach by offering individuals the opportunity to comply with their statutory obligations. If company officers persist in preventing liquidators from accessing company books and ROCAP, enforcement action becomes inevitable.
In light of these developments, ASIC encourages registered liquidators to report misconduct through the Liquidator Assistance Program. This initiative aims to streamline the reporting process and ensures that instances of non-compliance are promptly addressed. ASIC’s stringent approach serves as a clear warning to corporate entities and their officers, underscoring the imperative of cooperation during insolvency proceedings and the repercussions for those who fail to meet their obligations.