The office of Director is becoming more closely
scrutinised by the Australian Securities and Investment
Commission (ASIC), with ASIC now having a number of programs to
monitor possible breaches of directors' duties,
particularly in relation to insolvency related
National Insolvency Program
Since July 2003, ASIC has established a program of reviewing
companies which may be potentially insolvent. The program
undertakes surveillance of companies which demonstrate signs of
insolvency or potential insolvency, based upon complaints made
by the public, such as credit providers and employees, listed
company reports and liquidator's reports.
ASIC reports that since the inception of the program they
have undertaken nearly 2,000 surveillance visits of companies
which may have had potential insolvency or liquidity
issues1. ASIC also notes that the purpose of its
national insolvency program is to reduce insolvent trading, and
to encourage directors of financially troubled companies to act
properly and in the interest of creditors.
As a consequence of its program, ASIC reports that over 200
companies, which were investigated, have been placed in some
form of external administration, either voluntarily or upon
application by ASIC2.
Liquidator Assistance Program
Another initiative by ASIC to investigate and pursue
possible breaches by directors has been the instigation of the
Liquidator Assistance Program. This means ASIC provides
assistance to liquidators to investigate possible breaches by
directors and to pursue prosecutions for director related
Since the inception of the liquidator assistance program,
ASIC has instigated action against directors which has resulted
in a total of in excess of 2,000 company officers being
prosecuted from 2002 to date3.
Assetless Administration Fund
Another initiative to examine director conduct has been the
establishment of a $23 million fund in February 2006.This is
for the purpose of having liquidators undertake further
investigations into the conduct of directors of companies which
have been wound up and where there may be insufficient funds
for a detailed investigation to be carried out.
Investigations are specifically focused on directors of
multiple failed companies, whomay be subject to banning orders,
insolvent trading and other contraventions of the Corporations
Act. Since the inception of the Assetless Administration
Program, ASIC has funded 170 matters to be investigated,
resulting in banning orders against 35
These initiatives implemented by ASIC are designed to
protect the interest of creditors and other stakeholders
dealing with a company. However it also places directors on
notice to be vigilant, particularly in relation to insolvent
trading and it should also encourage directors to seek expert
financial advice to ensure they are complying with their
1From 1 July 2003 to 28 February 2007
2From 1 July 2003 to 28 February 2007
3From 1 July 2002 to 28 February 2007
4From 24 February 2006 to 28 February 2007
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