Corporations Act 2001

CHAPTER 2D - OFFICERS AND EMPLOYEES  

PART 2D.6 - DISQUALIFICATION FROM MANAGING CORPORATIONS  

Note: This Part does not apply to a CCIV: see section 1224E .

SECTION 206A   DISQUALIFIED PERSON NOT TO MANAGE CORPORATIONS  

206A(1)    

A person who is disqualified from managing corporations under this Part commits an offence if:

(a)    they make, or participate in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or

(b)    they exercise the capacity to affect significantly the corporation ' s financial standing; or

(c)    they communicate instructions or wishes (other than advice given by the person in the proper performance of functions attaching to the person ' s professional capacity or their business relationship with the directors or the corporation) to the directors of the corporation:

(i) knowing that the directors are accustomed to act in accordance with the person ' s instructions or wishes; or

(ii) intending that the directors will act in accordance with those instructions or wishes.

Note: Under section 1274AA , ASIC is required to keep a record of persons disqualified from managing corporations.

206A(1A)    

For an offence based on subsection (1), strict liability applies to the circumstance, that the person is disqualified from managing corporations under this Part.

Note: For strict liability , see section 6.1 of the Criminal Code .

206A(1B)    

It is a defence to a contravention of subsection (1) if the person had permission to manage the corporation under either section 206GAB or 206G and their conduct was within the terms of that permission.

Note: A defendant bears an evidential burden in relation to the matters in subsection (1B), see subsection 13.3(3) of the Criminal Code .

206A(2)    

A person ceases to be a director, alternate director or a secretary of a company if:

(a)    the person becomes disqualified from managing corporations under this Part; and

(b)    they are not given permission to manage the corporation under section 206GAB or 206G .

Note: If a person ceases to be a director, alternate director or a secretary under subsection (2) the company must notify ASIC (see subsection 205B(5) ).

SECTION 206B   AUTOMATIC DISQUALIFICATION - CONVICTIONS, BANKRUPTCY AND FOREIGN COURT ORDERS ETC.  

206B(1)   Convictions.  

A person becomes disqualified from managing corporations if the person:

(a) is convicted on indictment of an offence that:

(i) concerns the making, or participation in making, of decisions that affect the whole or a substantial part of the business of the corporation; or

(ii) concerns an act that has the capacity to affect significantly the corporation's financial standing; or

(b) is convicted of an offence that:

(i) is a contravention of this Act and is punishable by imprisonment for a period greater than 12 months; or

(ii) involves dishonesty and is punishable by imprisonment for at least 3 months; or

(c) is convicted of an offence against the law of a foreign country that is punishable by imprisonment for a period greater than 12 months.

The offences covered by paragraph (a) and subparagraph (b)(ii) include offences against the law of a foreign country.

206B(2)    
The period of disqualification under subsection (1) starts on the day the person is convicted and lasts for:

(a) if the person does not serve a term of imprisonment - 5 years after the day on which they are convicted; or

(b) if the person serves a term of imprisonment - 5 years after the day on which they are released from prison.

206B(3)   Bankruptcy or personal insolvency agreement.  

A person is disqualified from managing corporations if the person is an undischarged bankrupt under the law of Australia, its external territories or another country.

206B(4)    

A person is disqualified from managing corporations if:

(a) the person has executed a personal insolvency agreement under:

(i) Part X of the Bankruptcy Act 1966 ; or

(ii) a similar law of an external Territory or a foreign country; and

(b) the terms of the agreement have not been fully complied with.

206B(5)    

A person is disqualified from managing corporations at a particular time if the person is, at that time, disqualified from managing Aboriginal and Torres Strait Islander corporations under Part 6-5 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 .

206B(6)   Foreign court orders.  

A person is disqualified from managing corporations if the person is disqualified, under an order made by a court of a foreign jurisdiction that is in force, from:

(a) being a director of a foreign company; or

(b) being concerned in the management of a foreign company; or

(c) being a director of a passport fund, or of an operator of a passport fund; or

(d) being concerned in the management of a passport fund.

206B(7)   Definitions.  

In this section:

foreign jurisdiction
means a foreign country, or part of a foreign country, prescribed by the regulations as a foreign jurisdiction for the purposes of this section.

SECTION 206BA   EXTENSION OF PERIOD OF AUTOMATIC DISQUALIFICATION UNDER SECTION 206B  

206BA(1)    

This section applies if:

(a) under subsection 206B(1) ; or

(b) as a result of the operation of subsection 279-5(1) of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 and subsection 206B(5) of this Act;

a person is disqualified from managing corporations on being convicted of an offence.

206BA(2)    
On application by ASIC, the Court may extend by up to an additional 15 years the period of disqualification.

206BA(3)    
ASIC must apply:

(a) before the period of disqualification begins; or

(b) before the end of the first year of the disqualification.

206BA(4)    
ASIC may apply only once in relation to the disqualification.

206BA(5)    
In determining whether an extension is justified (and if so, for how long), the Court may have regard to any matters that the Court considers appropriate.

SECTION 206C   COURT POWER OF DISQUALIFICATION - CONTRAVENTION OF CIVIL PENALTY PROVISION  

206C(1)    
On application by ASIC, the Court may disqualify a person from managing corporations for a period that the Court considers appropriate if:

(a) a declaration is made under:

(i) section 1317E (civil penalty provision) that the person has contravened a corporation/scheme civil penalty provision or subsection 670A(4) , 727(6) , 728(4) or 1309(12) ; or

(ii) section 386-1 (civil penalty provision) of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 that the person has contravened a civil penalty provision (within the meaning of that Act); and

(b) the Court is satisfied that the disqualification is justified.

206C(2)    
In determining whether the disqualification is justified, the Court may have regard to:

(a) the person ' s conduct in relation to the management, business or property of any corporation; and

(b) any other matters that the Court considers appropriate.

206C(3)    

To avoid doubt, the reference in paragraph (2)(a) to a corporation includes a reference to an Aboriginal and Torres Strait Islander corporation.

SECTION 206D   COURT POWER OF DISQUALIFICATION - INSOLVENCY AND NON-PAYMENT OF DEBTS  

206D(1)    

On application by ASIC, the Court may disqualify a person from managing corporations for up to 20 years if:

(a) within the last 7 years, the person has been an officer of 2 or more corporations when they have failed; and

(b) the Court is satisfied that:

(i) the manner in which the corporation was managed was wholly or partly responsible for the corporation failing; and

(ii) the disqualification is justified.

206D(1A)    

To avoid doubt, the references in paragraphs (1)(a) and (b) to a corporation include references to an Aboriginal and Torres Strait Islander corporation.

206D(2)    
For the purposes of subsection (1), a corporation fails if:

(a)    

a Court orders the corporation to be wound up under:

(i) section 459B of this Act; or

(ii) section 526-1 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 ;

because the Court is satisfied that the corporation is insolvent; or

(b)    the corporation enters into voluntary liquidation and creditors are not fully paid or are unlikely to be fully paid; or

(c)    the corporation executes a deed of company arrangement and creditors are not fully paid or are unlikely to be fully paid; or

(ca)    

the corporation makes a restructuring plan and creditors are not fully paid or are unlikely to be fully paid; or

(d)    the corporation ceases to carry on business and creditors are not fully paid or are unlikely to be fully paid; or

(e)    a levy of execution against the corporation is not satisfied; or

(f)    a receiver, receiver and manager, or provisional liquidator is appointed in relation to the corporation; or

(g)    

the corporation enters into a compromise or arrangement with its creditors under Part 5.1 (including that Part as applied by section 45-1 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 ); or

(h)    

the corporation is wound up and a liquidator lodges a report under subsection 533(1) (including that subsection as applied by section 526-35 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 ) about the corporation ' s inability to pay its debts.

Note: To satisfy paragraph (h), a corporation must begin to be wound up while the person is an officer or within 12 months after the person ceases to be an officer. However, the report under subsection 533(1) may be lodged by the liquidator at a time that is more than 12 months after the person ceases to be an officer. Sections 513A to 513D contain rules about when a company begins to be wound up.

206D(2A)    

The reference in paragraph (2)(c) to a deed of company arrangement includes a reference to a deed of corporation arrangement (within the meaning of the Corporations(Aboriginal and Torres Strait Islander) Act 2006 .

206D(2B)    

For the purposes of subsection (1), a person is an officer of an Aboriginal and Torres Strait Islander corporation if the person is an officer of that corporation within the meaning of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 .

206D(3)    
In determining whether the disqualification is justified, the Court may have regard to:

(a)    the person ' s conduct in relation to the management, business or property of any corporation; and

(b)    any other matters that the Court considers appropriate.

206D(4)    

To avoid doubt, the reference in paragraph (3)(a) to a corporation includes a reference to an Aboriginal and Torres Strait Islander corporation.

SECTION 206E   COURT POWER OF DISQUALIFICATION - REPEATED CONTRAVENTIONS OF ACT  

206E(1)   [ Power of Court]  

On application by ASIC, the Court may disqualify a person from managing corporations for the period that the Court considers appropriate if:

(a) the person:

(i) has at least twice been an officer of a body corporate that has contravened this Act or the Corporations (Aboriginal and Torres Strait Islander) Act 2006 while they were an officer of the body corporate and each time the person has failed to take reasonable steps to prevent the contravention; or

(ii) has at least twice contravened this Act or the Corporations (Aboriginal and Torres Strait Islander) Act 2006 while they were an officer of a body corporate; or

(iii) has been an officer of a body corporate and has done something that would have contravened subsection 180(1) or section 181 if the body corporate had been a corporation; and

(b) the Court is satisfied that the disqualification is justified.

206E(1A)   [ Officer of Aboriginal and Torres Strait Islander corporation]  

For the purposes of subsection (1), a person is an officer of an Aboriginal and Torres Strait Islander corporation if the person is an officer of that corporation within the meaning of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 .

206E(2)   [ Relevant circumstances]  

In determining whether the disqualification is justified, the Court may have regard to:

(a) the person ' s conduct in relation to the management, business or property of any corporation; and

(b) any other matters that the Court considers appropriate.

206E(3)   [ Aboriginal and Torres Strait Islander corporation]  

To avoid doubt, the reference in paragraph (2)(a) to a corporation includes a reference to an Aboriginal and Torres Strait Islander corporation.

SECTION 206EAA   COURT POWER OF DISQUALIFICATION - DISQUALIFICATION UNDER A LAW OF A FOREIGN JURISDICTION  

206EAA(1)    
On application by ASIC, the Court may disqualify a person from managing corporations for the period that the Court considers appropriate if:

(a) the person is disqualified under the law of a foreign jurisdiction from:

(i) being a director of, or being concerned in the management of, a foreign company; or

(ii) carrying on activities that the Court is satisfied are substantially similar to being a director of, or being concerned in the management of, a foreign company; or

(iii) being a director of a passport fund, or of the operator of a passport fund; or

(iv) being concerned in the management of a passport fund; or

(v) carrying on activities that the Court is satisfied are substantially similar to being a director of a passport fund, or of the operator of a passport fund, or being concerned in the management of a passport fund; and

(b) the Court is satisfied that the disqualification under this subsection is justified.

206EAA(2)    
In determining what is an appropriate period for which to disqualify the person, the Court may have regard to the period for which the person is disqualified under the law of the foreign jurisdiction.

206EAA(3)    
In determining whether the disqualification is justified, the Court may have regard to:

(a) the person ' s conduct in relation to the management, business or property of a foreign company or a passport fund (as the case requires); and

(b) any other matters that the Court considers appropriate.

206EAA(4)    
In this section:

foreign jurisdiction
has the same meaning as in section 206B .

SECTION 206EAB   COURT POWER OF DISQUALIFICATION - UNRECOVERED PAYMENTS UNDER EMPLOYEE ENTITLEMENTS SCHEME  

206EAB(1)    
On application by ASIC, the Court may disqualify a person from managing corporations for a period that the Court considers appropriate if:

(a) subsection (2) applies to the person in relation to 2 or more corporations; and

(b) the Court is satisfied that the disqualification is justified.

206EAB(2)    
This subsection applies to the person in relation to a corporation if:

(a) within the last 7 years:

(i) the person has been an officer of the corporation; and

(ii) while the person was an officer, or within 12 months after the person ceased to be an officer, the corporation began to be wound up; and

(iii) money was advanced for the purposes of paying the entitlements of employees of the corporation under the Fair Entitlements Guarantee Act 2012 ; and

(b) the Commonwealth has received a minimal return, or no return, on the advance (whether or not the corporation is still being wound up, or has been wound up); and

(c) the Court is satisfied that the Commonwealth is unlikely to receive more than a minimal return on the advance; and

(d) either of the following occurred during the 7-year period mentioned in paragraph (a):

(i) the corporation contravened this Act or the Corporations (Aboriginal and Torres Strait Islander) Act 2006 while the person was an officer of the corporation, and the person failed to take reasonable steps to prevent the contravention;

(ii) the person contravened this Act or the Corporations (Aboriginal and Torres Strait Islander) Act 2006 while the person was an officer of the corporation.

206EAB(3)    
For the purposes of paragraphs (2)(b) and (c), the Commonwealth has received a minimal return on an advance under the Fair Entitlements Guarantee Act 2012 if the amount of the advance recovered by the Commonwealth is 10 cents in the dollar or less.

206EAB(4)    
In determining whether the disqualification is justified, the Court may have regard to:

(a) the person ' s conduct in relation to the management, business or property of any corporation; and

(b) any other matters that the Court considers appropriate.

206EAB(5)    
To avoid doubt, the references in paragraph (1)(a) and subsections (2) and (4) to a corporation include references to an Aboriginal and Torres Strait Islander corporation.

SECTION 206EA  

206EA   DISQUALIFICATION UNDER THE COMPETITION AND CONSUMER ACT 2010 ETC.  

A person is disqualified from managing corporations if a court order disqualifying the person from managing corporations is in force under:

(a) section 86E of the Competition and Consumer Act 2010 ; or

(b) section 248 of Schedule 2 to that Act, as that section applies as a law of the Commonwealth, a State or a Territory.

SECTION 206EB  

206EB   DISQUALIFICATION UNDER THE ASIC ACT  

A person is disqualified from managing corporations if a court order disqualifying the person from managing corporations is in force under section 12GLD of the ASIC Act.

SECTION 206F   ASIC ' S POWER OF DISQUALIFICATION  

206F(1)   Power to disqualify.  

ASIC may disqualify a person from managing corporations for up to 5 years if:

(a) within 7 years immediately before ASIC gives a notice under paragraph (b)(i):

(i) the person has been an officer of 2 or more corporations; and

(ii) while the person was an officer, or within 12 months after the person ceased to be an officer of those corporations, each of the corporations was wound up and a liquidator lodged a report under subsection 533(1) (including that subsection as applied by section 526-35 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 ) about the corporation ' s inability to pay its debts; and

(b) ASIC has given the person:

(i) a notice in the prescribed form requiring them to demonstrate why they should not be disqualified; and

(ii) an opportunity to be heard on the question; and

(c) ASIC is satisfied that the disqualification is justified.

206F(1A)    

To avoid doubt, the references in paragraph (1)(a) to corporations include references to Aboriginal and Torres Strait Islander corporations.

206F(2)   Grounds for disqualification.  

In determining whether disqualification is justified, ASIC:

(a) must have regard to whether any of the corporations mentioned in subsection (1) were related to one another; and

(b) may have regard to:

(i) the person ' s conduct in relation to the management, business or property of any corporation; and

(ii) whether the disqualification would be in the public interest; and

(iii) any other matters that ASIC considers appropriate.

206F(2A)    

To avoid doubt, the references in subsection (2) to a corporation includes a reference to an Aboriginal and Torres Strait Islander corporation.

206F(3)   Notice of disqualification.  

If ASIC disqualifies a person from managing corporations under this section, ASIC must serve a notice on the person advising them of the disqualification. The notice must be in the prescribed form.

206F(4)   Start of disqualification.  

The disqualification takes effect from the time when a notice referred to in subsection (3) is served on the person.

206F(5)    
(Repealed by No 44 of 2019, s 3, Sch 1[27] (effective 6 April 2019).)

SECTION 206GAA   ASIC ' S POWER OF DISQUALIFICATION - UNRECOVERED PAYMENTS UNDER EMPLOYEE ENTITLEMENTS SCHEME  

206GAA(1)    
ASIC may disqualify a person from managing corporations for up to 5 years if:

(a) subsection (2) applies to the person in relation to 2 or more corporations; and

(b) ASIC has given the person:

(i) a notice in the prescribed form requiring them to demonstrate why they should not be disqualified; and

(ii) an opportunity to be heard on the question; and

(c) ASIC is satisfied that the disqualification is justified.

206GAA(2)    
This subsection applies to the person in relation to a corporation if:

(a) within 7 years immediately before ASIC gives the notice under subparagraph (1)(b)(i):

(i) the person has been an officer of the corporation; and

(ii) while the person was an officer, or within 12 months after the person ceased to be an officer, the corporation began to be wound up; and

(iii) money was advanced for the purposes of paying the entitlements of employees of the corporation under the Fair Entitlements Guarantee Act 2012 ; and

(b) the Commonwealth has received a minimal return, or no return, on the advance (whether or not the corporation is still being wound up, or has been wound up); and

(c) ASIC has reason to believe that the Commonwealth is unlikely to receive more than a minimal return on the advance; and

(d) ASIC has reason to believe that either of the following occurred during the 7-year period mentioned in paragraph (a):

(i) the corporation contravened this Act or the Corporations (Aboriginal and Torres Strait Islander) Act 2006 while the person was an officer of the corporation, and the person failed to take reasonable steps to prevent the contravention;

(ii) the person contravened this Act or the Corporations (Aboriginal and Torres Strait Islander) Act 2006 while the person was an officer of the corporation.

206GAA(3)    
For the purposes of paragraphs (2)(b) and (c), the Commonwealth has received a minimal return on an advance under the Fair Entitlements Guarantee Act 2012 if the amount of the advance recovered by the Commonwealth is 10 cents in the dollar or less.

Note: For recovery of advances paid under the Fair Entitlements Guarantee Act 2012 , see Part 5 of that Act.

206GAA(4)    
In determining whether the disqualification is justified, ASIC:

(a) must have regard to whether any of the corporations mentioned in paragraph (1)(a) were related to one another; and

(b) may have regard to:

(i) the person ' s conduct in relation to the management, business or property of any corporation; and

(ii) whether the disqualification would be in the public interest; and

(iii) any other matters that ASIC considers appropriate.

206GAA(5)    
To avoid doubt, the references in paragraph (1)(a) and subsections (2) and (4) to a corporation include references to an Aboriginal and Torres Strait Islander corporation.

Notice of disqualification

206GAA(6)    
If ASIC disqualifies a person from managing corporations under this section, ASIC must serve a notice on the person advising them of the disqualification. The notice must be in the prescribed form.

Start of disqualification

206GAA(7)    
The disqualification takes effect from the time when a notice referred to in subsection (6) is served on the person.

SECTION 206GAB  

206GAB   ASIC POWER TO GRANT LEAVE  

ASIC may give a person who it has disqualified from managing corporations under this Part written permission to manage a particular corporation or corporations. The permission may be expressed to be subject to conditions and exceptions determined by ASIC.

SECTION 206G   COURT POWER TO GRANT LEAVE  

206G(1)    
A person who is disqualified from managing corporations may apply to the Court for leave to manage:

(a)    corporations; or

(b)    a particular class of corporations; or

(c)    a particular corporation;

if the person was not disqualified by ASIC.

206G(2)    
The person must lodge a notice with ASIC at least 21 days before commencing the proceedings. The notice must be in the prescribed form.

206G(3)    
The order granting leave may be expressed to be subject to exceptions and conditions determined by the Court.

Note: If the Court grants the person leave to manage the corporation, the person may be appointed as a director (see section 201B ) or secretary (see section 204B ) of a company.

206G(4)    
The person must lodge with ASIC a copy of any order granting leave within 14 days after the order is made.

206G(5)    
On application by ASIC, the Court may revoke the leave. The order revoking leave does not take effect until it is served on the person.

SECTION 206GA   INVOLVEMENT OF ACCC - LEAVE ORDERS UNDER SECTION 206G  
Scope of section

206GA(1)    
This section applies in relation to a person who is disqualified from managing corporations under section 206EA .

Notice lodged with ASIC before leave application

206GA(2)    
If the person lodges a notice with ASIC under subsection 206G(2) , ASIC must give the ACCC a copy of the notice.

Leave orders

206GA(3)    
If the person lodges a copy of an order with ASIC under subsection 206G(4) , ASIC must give the ACCC a copy of the order.

Revoking leave

206GA(4)    
If ASIC decides to apply for an order under subsection 206G(5) in relation to the person, it must consult the ACCC before making the application.

Definition

206GA(5)    
In this section:

ACCC
means the Australian Competition and Consumer Commission.

SECTION 206H  

206H   LIMITED APPLICATION OF PART TO FOREIGN COMPANIES  

This Part (except for subsection 206B(6) and section 206EAA ) does not apply in respect of an act or omission by a person while they are managing a corporation that is a foreign company unless the act or omission occurred in connection with:

(a) the foreign company carrying on business in this jurisdiction; or

(b) an act that the foreign company does, or proposes to do, in this jurisdiction; or

(c) a decision by the foreign company whether or not to do, or refrain from doing, an act in this jurisdiction.

SECTION 206HAA  

206HAA   LIMITED APPLICATION OF PART TO NOTIFIED FOREIGN PASSPORT FUNDS AND THEIR OPERATORS  
This Part (except for subsection 206B(6) and section 206EAA ) does not apply in respect of an act or omission by a person while they are managing a corporation that is either the operator of a notified foreign passport fund, or a notified foreign passport fund, unless the act or omission occurred in connection with:

(a) the operator or the fund carrying on business in this jurisdiction; or

(b) an act that the operator or the fund does, or proposes to do, in this jurisdiction; or

(c) a decision by the operator or the fund whether or not to do, or refrain from doing, an act in this jurisdiction.

SECTION 206HA  

206HA   LIMITED APPLICATION OF PART TO REGISTRABLE AUSTRALIAN BODIES  
This Part does not apply in respect of an act or omission by a person while they are managing a corporation that is a registrable Australian body unless the act or omission occurred in connection with:

(a) the body carrying on business outside its place of origin; or

(b) an act that the body does or proposes to do outside its place of origin; or

(c) a decision by the body whether or not to do, or refrain from doing, an act outside its place of origin.

SECTION 206HB  

206HB   PART DOES NOT APPLY TO ABORIGINAL AND TORRES STRAIT ISLANDER CORPORATIONS  

This Part does not apply, of its own force, to disqualify a person from managing a corporation that is an Aboriginal and Torres Strait Islander corporation.

Note 1: Subsection 279-5(5) of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 provides that a person who is disqualified from managing corporations under this Part will be automatically disqualified under Part 6-5 of that Act from managing Aboriginal and Torres Strait Islander corporations.

Note 2: Similarly, subsection 206B(5) of this Act provides that a person who is disqualified from managing Aboriginal and Torres Strait Islander corporations under Part 6-5 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 will be automatically disqualified under this Part from managing corporations.