The director of a company that was wound up by the Deputy Commissioner of Taxation (DCT) has recently been handed a suspended jail sentence after he failed to produce documents required by the company’s liquidator.

A liquidator appointed to a company that has been wound up has obligations to try to maximise any return to creditors. In turn, section 530A of the Corporations Act 2001 requires officers of a company in liquidation to assist the liquidator with this process. This obligation includes a requirement to deliver up to the liquidator all books in the officer’s possession that relate to the company.

While this is a strict liability offence under s.6.1 of the Criminal Code, section 530A(6B) provides a way out; it is not an offence to fail to provide the books and records if the person has a reasonable excuse.

The former director of Middlebrook Estate Pty Ltd (in liquidation), Joseph Cogno, was sentenced to three months imprisonment after pleading guilty to charges brought by the Australian Securities and Investments Commission (ASIC) for failing to provide the documents requested by the liquidator.

After Mr Cogno agreed to enter into a good behaviour bond, which requires him to comply with his obligations to the liquidator, Mr Cogno’s prison sentence was suspended.

This is a poignant reminder that, as an officer of a company in liquidation, a person retains a statutory obligation to provide assistance to the liquidator and that there can be very serious consequences from non-compliance.

The penalties for failing to assist a liquidator can be as follows:

• Failing to provide a liquidator with books and records – a fine of up to $9,000, a penalty of 1 year in prison, or both.
• Failing to provide a report as to affairs – $4,500, 6 months in jail, or both.

If you are a director of a company in liquidation and are unsure of your obligations, you should urgently seek legal advice.

For more information please contact ERA Legal.