Recently we recorded in our e-Update that a director of a company in liquidation being handled by Worrells Sydney, had been a director of a number failed companies and observed that it appeared no action had been taken by ASIC pursuant to Section 206F of the Corporations Act leading to the banning of the director.
As required by section 533 of the Corporations Act, Worrells partner Chris Darin reported that the director had a history of involvement in failed companies. ASIC has advised that up until now no action had been taken by them because the liquidators of the previous companies did not report it, as required.
The law is of course that if a person is a director of two or more corporations that were wound up within seven years and a liquidator lodged a report under section 533, ASIC may apply to the court for a banning order.
It occurs to us that there would be merit in the law being changed so that if a person who is a failed director, in the above circumstances they should be automatically banned. They should of course have the right to apply to the court for an order that the automatic banning provisions should not apply, in appropriate circumstances.
The benefit of this approach is that the onus is on the errant director to demonstrate to the court that the automatic banning should not apply, rather than the public purse being rifled. The concept of automatic banning is not unprecedented as section 206B(3) automatically prohibits bankrupts from acting as company directors.