penalty

Can Bankrupts be Company Directors?

The Corporations Act provides that undischarged bankrupts or those who have entered into personal insolvency agreements under Part X of the Bankruptcy Act (whether in Australia or another country) cannot act as a director of, or take part in the management of, a company.

Court can grant leave

The Court can however grant leave to an undischarged bankrupt to take part in management of a company and such leave can be granted either with or without conditions. Australian Securities and Investments Commission must be notified of any such application (so ASIC can intervene if required).

The applicant will bear the onus of establishing that the Court should make an exception to the legislative policy behind the prohibition (to protect the public). The court will not easily be convinced that the usual prohibition should not apply and will exercise its discretion with a view to balancing the considerations relevant to the bankrupt and the underlying public policy.

Leave will not be granted where the disqualification was imposed by ASIC (as opposed to an automatic disqualification due to the operation of the Corporations Act).

What is considered?

Hardship to the proposed director is not of itself a persuasive ground for the granting of leave however, it is one of many factors which may be considered by the court in exercising its discretion including the reason for the disqualification, the nature of the bankrupt’s involvement, the general character and conduct of the applicant in the intervening period since being removed from or prevented from being in office, the structure of the company, its business and the interests of shareholders, creditors and employees.

Although such applications are not commonplace, an undischarged bankrupt may be granted leave to take part in the management of companies generally or, more frequently, in the management of a particular company.

Penalties

The disqualification imposed by the Act continues despite the Court granting leave and care must be taken to ensure that any conditions on the leave are complied with as failure to do so can result in the leave being revoked and an offence then being committed and the penalty can include a significant 50 penalty unit fine and/or imprisonment for 12 months.

Bankruptcies generally last 3 years. You can check if someone is an undischarged bankrupt by checking the Australian Financial Security Authority’s Bankruptcy Register 

FURTHER INFORMATION

For further information in relation to bankruptcy, insolvency or company matters, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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Weekend and public holiday penalty rates

There has been a lot of news coverage recently in relation to the  Fair Work Commissions decision which effectively cuts Sunday and public holiday penalty rates for workers in the retail, fast food, hospitality and pharmacy industries. We explain how and why this occurred below.

Section 156 of the Fair Work Act 2009 (Cth)provides that the Fair Work Commission must conduct a 4 yearly review of Modern Awards.

The Commission’s task in the Review is to decide whether a particular Modern Award achieves the Modern Awards’ objective. If it doesn’t, then it is to be varied such that it only includes terms that are ‘necessary to achieve the Modern Awards’ objective’ (s.138).

As part of the Review, various employer bodies made applications to vary the penalty rates provisions in a number of Modern Awards in the Hospitality and Retail sectors. These applications have been heard together.

On 23 February 2017, a Full Bench of the Commission made a determination in relation to weekend and public holiday penalty rates and some related matters, in Hospitality and Retail awards.

The Modern Awards which are dealt with in this decision are:

  • Fast Food Industry Award 2010 (Fast Food Award)
  • General Retail Industry Award 2010 (Retail Award)
  • Hospitality Industry (General) Award 2010 (Hospitality Award)
  • Pharmacy Industry Award 2010 (Pharmacy Award)
  • Registered and Licensed Clubs Award 2010 (Clubs Award)
  • Restaurant Industry Award 2010 (Restaurant Award

A summary of sum of the changes are set out below.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to any business or employment related issue, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.

Fair Work Commission penalty rates

Fair Work Commission public holiday rates

Access the summary of the decision here

What is a director penalty notice? (and what to do if you receive one)

WHAT IS A DIRECTOR PENALTY NOTICE?

In addition to potential liability for insolvent trading, company directors need to be aware of their potential personal liability if their company fails to remit certain amounts as and when due.

Directors will become personally liable when a company fails to remit amounts withheld under the PAYG withholding system or fails to meet its superannuation guarantee obligations.

This personal liability arises through the issue by the ATO of a Director Penalty Notice (DPN) under s. 222AOE of the Income Tax Assessment Act. If not complied with, a DPN makes the director it was issued to personally liable for the amount that the company should have paid, through imposition of a penalty.

The director’s PAYG withholding credits can also be reduced/taxed as part of the process.

The Commissioner is using the Director Penalty Notice provisions to pursue directors more and more.

The Commissioner of Taxation will usually first make a formal demand on the company seeking payment. If the company fails to comply with the notice, at the Commissioner’s discretion, a DPN may be served.

HOW TO AVOID LIABILITY

A director’s liability under the DPN is remitted if, within the 21 days stated in the DPN, the company either:

  • pays the amounts due,
  • is placed into Administration, or
  • has a Liquidator appointed.

The liability will not be remitted if the company has failed to report its PAYG withholding liability or superannuation guarantee shortfall within 3 months of the lodgement day. This encourages reporting.

Importantly:

  •  The 21 days cannot be extended.
  • Notice is given on the day the DPN is issued, not when it is or is likely to have been received.
  • A DPN is sent via ordinary mail to the last recorded residential address on the ASIC database – so these details need to be kept up to date as actual non-receipt of a DPN is not a defence.
  • The DPN provisions can also apply to new directors where, if after 30 days of their appointment, the company has not discharged its relevant liabilities.
  • A DPN can be served on a director’s registered tax agent.
  • Resigning as a director at or before the due date is no escape from the DPN regime.

Defences may be available where recovery proceedings are subsequently instituted against a director following non-compliance with a DPN.

All directors must ensure they stay completely abreast of their company’s affairs and must ensure the company meets all relevant obligations at all times.

This is why having good procedures and good advisors – whether legal, accounting, financial or otherwise – can prove invaluable.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to bankruptcy/insolvency, litigation and dispute resolution or any commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.