Insights + Resources

July 31, 2019

Get your records straight! ASIC record-keeping obligations and penalties

Officers have legal obligations under Australian law to keep information on ASIC registers up to date, and may face fines or even jail time if they fail to do so.

Introduction

Under the Corporations Act 2001 (Cth) (‘Act’), companies and individuals acting as directors and secretaries within companies (together, ‘Officers‘) are legally obliged to provide and update certain information to registers maintained by ASIC. This information generally relates to corporate and financial records of the company, with key examples being:

  • Financial statements
  • Changes to registered office
  • Addresses of the company and its shareholders
  • Share issues, transfers and capital reductions
  • Changes to officers

The public interest-driven purpose of these requirements is to heighten the accountability of corporations and their Officers.

In addition to these rules, Officers face other obligations in the form of directors’ duties. Providing false or misleading information to ASIC in respect to financial records may also contribute to a finding that one or more of these duties has been breached.

What offences can be committed in respect of ASIC records?

Broadly, there are two tiers of severity for offences relating to the submission of information to ASIC. These can be concisely stated as follows:

(a) Wilfully and intentionally supplying false information or omitting information, such that the information lodged with ASIC is materially misleading; and

(b) Unintentionally supplying false information or omitting information in ASIC lodgements, which as a result renders the lodged information materially misleading, without having taken reasonable steps to check the nature of the information.

Offences that fall into category (a) are treated considerably more seriously and can lead to significant fines of up to $94,500 and jail time. Offences in category (b) only attract fines.

ASIC’s attitude to prosecutions

From 2002 onwards, ASIC has actively sought summary prosecutions for offences and contraventions relating to ASIC registers. ASIC continues to release details of these convictions through its’ Media Centre.

With respect to intentional category (a) breaches by public companies, in 2014, a Perth director was sentenced to 14 months in jail after pleading guilty to three counts of providing false and misleading information to the Australian Securities Exchange (‘ASX’).

A case in November 2018 involved a Queensland lawyer who, in support of his application for an Australian Financial Services licence, claimed in a Statutory Declaration that he had never been bankrupt when, in fact, he had. He was fined $3,000 for unintentionally supplying false information after his hearing at Southport Magistrates Court.

Earlier in 2018, a Cairns man was charged with the same offence when he failed to disclose an outstanding liability when he sought to deregister his business. He was fined $2,000, though this was later set aside on appeal.

Both cases seem to be typical of the prosecution sought by ASIC and is indicative of the fact that the most readily targeted instances of lodgement offences are those that involve companies with outstanding legal proceedings, liabilities or undisclosed bankruptcy events. Notably, both cases were unintentional, category (b) breaches.

There is a lower evidentiary burden on ASIC to obtain rulings relating to category (b) disclosures since there is no need to prove intent. Nevertheless, directors should be aware of the potential for category (a) breaches, and the harsher penalties that come with them.

Concluding Remarks

Especially in the aftermath of the Financial Services Royal Commission, directors would be well-advised to ensure all records provided to ASIC are updated and accurate.

The information above is general in nature. If you would like more information about obligations under the Corporations Act, please contact us below.

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