Insolvency Network Update May 2019
May 14 2019
OFFICERS’ AND THIRD PARTIES OBLIGATIONS – THE REQUIREMENT TO HELP LIQUIDATORS
Once a company is placed into liquidation, the company’s officers no longer have the power to act on its behalf. However, they have an ongoing statutory obligation to assist the Liquidator with their investigations into the affairs of the company.
Section 530A of the Corporations Act 2001 (“the Act”) imposes a number of obligations on an officer of a company that has been placed into external administration, including:-
- Delivering all of the company’s books and records in their possession or advising the Liquidator of their location if they are not in the officer’s possession;
- Assisting with whatever the Liquidator ‘reasonably requires’ of an officer to help in the winding up, which includes attending an interview to give such information as may be required in relation to the promotion, formation, management, administration and the winding up of the affairs of the company; and
- To attend such meetings of the company’s creditors or members as the Liquidator reasonably requires.
An officer of a company is also required to submit to the Liquidator a Report on Company Activities and Property (“ROCAP”) pursuant to Section 475 of the Act. This report has two parts, one part details the company’s assets and liabilities and the second part contains a questionnaire relating to the formation and management of the company. This report must be submitted no later than 10 business days after the making of the winding up order. The part of the report detailing the assets and liabilities is lodged with the Australian Securities and Investments Commission (“ASIC”) and is available to the public.
In the absence of a reasonable excuse, it is an offence of strict liability for an officer not to comply with these obligations. Where a company officer fails to comply with their responsibilities, the Liquidator may refer the matter to the ASIC. Such referrals may result in the ASIC commencing action against the officer to compel them to comply with their obligations.
The Court may also impose a number of penalties on the officer, including fines of up to $10,500, or imprisonment of 1 year, or both.
In addition to the above, pursuant to Section 530B of the Act, Liquidators also have the power to serve a notice upon third parties, for example accountants, advisors, lawyers. This notice requires the third party to deliver the company’s books and records in their possession to the Liquidator. Failure of the third party to comply with such a notice is an offence of strict liability, which may result in fines of up to $10,500, or imprisonment of 1 year, or both, upon conviction.