Generally speaking, if you have not been involved in two (2) or more company collapses within the last 7 years then it is unlikely that the Australian Securities Investment Commission (ASIC) will impose a director banning order against you. However, in more serious cases ASIC has imposed a director banning order after the director’s involvement in the first company collapse. This occurred in the case of HIH Insurance which collapsed in the early 2000s. ASIC imposed a director banning order through the court and it was found that the directors had breached their duties as directors in that they had:
- Failed to exercise due care and diligence;
- Failed to exercise good faith;
- Improperly used their position as a director (i.e. abused their powers); and
- Improperly used information they had obtained as a director.
This case is a reminder that ASIC can impose a director banning order, even if it is the director’s first involvement in a company collapses. Company directors must observe proper standards and act strictly in accordance with the law and not place their personal interests ahead of those of the company.
What happens if I receive a director banning order?
If you have received a director banning order, you will be unable to act as a company director or take part in the management of a company for the time period set out in the notice. The usual time period for a banning order is for one (1) to five (5) years, however it can be up to ten (10) years for more serious matters. A director banning order is not automatic and if you receive a notice setting out ASIC’s intention to issue such an order, you will firstly be given an opportunity to appear at a private hearing at ASIC and make submissions on the matter.
Company directors should also be aware, that if you become personally bankrupt you will automatically become ineligible to act as a company director for the time that you are bankrupt.
For more general information on director banning orders, call the company liquidation experts on 1800 981 070.
The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 981 070 for a free initial consultation to discuss your specific issues.