A recent appeal to the Administrative Appeals Tribunal of Australia has highlighted the very real risks that directors face when overseeing the operations of a business.
The appeal was made by two directors who had previously been disqualified from directing a company by the Australian Securities and Investments Commission (ASIC). The two men, who were both barred from holding a directorship for 12 months, were unsuccessful in their appeal, with one having their sentence extended further by the Appeals Tribunal.
The disqualifications both relate to the roles the two men played in failed companies within the Beacon Group. As directors of these firms, the two were held to be responsible for the fact that businesses under their control were trading insolvent.
This lack of oversight, and other issues around the management of these companies, led the courts to the conclusion that the two men had not been diligent enough in their respective roles. In fact, the two men allowed the firm to continue trading for almost six months, before it was finally wound up in January 2010.
During their time as directors, the pair did not familiarise themselves with any financial records and failed to provide the right levels of supervision within the business.
This decision highlights the importance of the ASIC’s power when it comes to disqualifying directors of companies from holding further positions of responsibility.
What’s more, the case highlights the importance that directors need to place on taking a proactive approach to their firms’ operations. Ignorance is clearly no defence when it comes to the mismanagement of companies which enter insolvency.
A commercial lawyer can help with any corporate issues that might affect the running of a business, as well as the requirements that come from any commercial agreements you have entered into.