Directors, partners, trustees and senior managers of ACL licensees must be ‘fit and proper people’. Responsible managers of AFS licensees must be of good fame and character. Not only does this mean you have to be competent and of good character, you can’t have been disqualified by law from performing a role in a financial services or credit business.
The bad news
If you’re insolvent (i.e. an undischarged bankrupt, or a person who is subject to a personal insolvency agreement or a Part X bankruptcy arrangement), are disqualified from managing corporations or you have been convicted of serious fraud within the last 10 years you effectively can’t be ‘involved in the management” of an ACL licensee or a responsible manager of an AFS licensee.
But wait there’s more.
If you’re insolvent, or you’ve been convicted of fraud, breach of directors’ duties or insolvent trading within the last 5 years, you can’t be a director or secretary of or manage a company of any kind without court consent.
And ASIC has the power to disqualify a person who’s been involved with 2 or more companies that have gone into liquidation within the last 7 years and paid their creditors less than 50 cents in the dollar, from being a director of or managing a corporation for up to 5 years.
The ban can be up to 20 years if the person’s conduct contributed to the failure.
The good news
The good news is that, provided the financial difficulties were a short one off problem or you can demonstrate that you weren’t the cause of a company’s financial problems, you’re likely to be able to convince banks, industry bodies and ASIC that you should still be permitted to run a business.
But this can be time consuming and costly to do.
So it’s important to be alert to early signs of financial difficulty and take prompt action to preserve your future ability to conduct your business. If you suspect your company is in financial difficulty, get good accounting and legal advice as early as possible.
For example insolvency practitioners can conduct a solvency review of your company and outline available options such as refinancing, restructuring or changing your company’s activities, or appointing an external administrator.
Getting this advice early can increase the likelihood of your company surviving and avoid these difficulties getting in your way in the future.
About Claire Wivell Plater
Claire Wivell Plater is a lawyer specialising in financial services regulation and compliance matters.
She is owner and managing director of The Fold, providing legal consulting services to financial planners, insurance brokers and credit providers.
She was formerly a manager in the corporate development department at ING and a partner at major law firm DLA Phillips Fox, specialising in insurance and litigation
