Chapter 2
Administration and Regulation of Company Law
Chapter Summary
1
ADMINISTRATION OF COMPANY LAW
1.1
Role and functions of ASIC
ASIC’s overall function of ASIC is to regulate Australian companies and the Australian securities
industry. ASIC has the functions and powers conferred on it under the corporations legislation: ASIC Act,
s 11 (1).
ASIC has a statutory role to balance company performance and efficiency against market confidence,
investor protection and enforcement. ASIC has additional functions and powers under s 12A of the ASIC
Act in relation to the insurance and superannuation industries, and the financial payments system. These
are outside the scope of this course.
1.2
Statutory role
Section 1(2) of the ASIC Act sets out ASIC’s statutory role: In performing its functions and exercising its
powers, ASIC must strive to:
(a) maintain, facilitate and improve the performance of the financial system and the entities within that
system in the interests of commercial certainty, reducing business costs, and improving the business
efficiency and development of the economy; and
(b) promote the confident and informed participation of investors and consumers in the financial system;
and
(c) administer the laws that confer functions and powers on it effectively and with a minimum of
procedural requirements; and
(d) receive, process and store, efficiently and quickly, the information given to ASIC under the laws that
confer functions and powers on it; and
(e) ensure that information is available as soon as practicable for access by the public; and
(f) take whatever action it can take, and is necessary, in order to enforce and give effect to the laws of the
Commonwealth that confer functions and powers on it.
1.3
Administrative functions
The administrative functions of ASIC include:
 registration of companies
 monitoring of financial reporting, audits, annual returns and registers
 registration of company auditors and liquidators
 licensing of securities industry dealers and advisers
 provision of information to the public.
1.4
Regulatory functions
The regulatory functions of ASIC include:
 investigation and enforcement of the Corporations Act 2001
 regulation of fundraising
 regulation of financial products and services.
1.5
Contempt of ASIC
A person who ‘engages in conduct that results in the obstruction or hindering of ASIC or a member in the
performance or exercise of any of ASIC’s functions and powers’: ASIC Act, s 66(1)(a). This is contempt
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of ASIC, and carries a penalty of 50 penalty units or imprisonment for one year, or both. Under s 4AA(1)
of the Crimes Act 1914 (Cth), a penalty unit means $110.
1.6
Liability for damages
Section 246 of the ASIC Act provides that the minister, ASIC, a member of ASIC, a staff member of
ASIC, a delegate of ASIC or a person authorised to perform a function or power on behalf of ASIC is not
liable to proceedings for damages in relation to an act done or omitted in good faith in the performance or
purported performance of any function or power conferred by the corporations legislation. This was
upheld in Re Buddies Investments Pty Ltd (however ASIC was ordered to pay costs of the application).
1.7
Provision of information to the public
ASIC maintains a national database of information on corporations and persons required to report
information under the Corporations Act. The database includes information on companies relating to
directors and other officers, financial information, charges over assets, principal functions and the location
of registered offices, details of persons prohibited under the Corporations Act from managing a company,
and information on company auditors and liquidators is included. The public may search and access this
information, and ASIC policy statements and practice notes, on www.asic.gov.au.
2
REGULATION OF COMPANY LAW
2.1
Enforcement
ASIC has primary responsibility for investigating and enforcing the Australian Securities and Investments
Commission Act 2001 and the Corporations Act 2001. It investigates complaints against company
directors, officers, auditors and liquidators, securities market sharebrokers and investment advisers. To do
this, ASIC liaises with the Australian Federal Police (AFP) and the Commonwealth Director of Public
Prosecutions (DPP).
Following an investigation into either a suspected contravention of the corporations legislation (defined in
section 5 to mean the Corporations Act and the ASIC Act) or after receipt of a report from a receiver or a
liquidator, ASIC may (and must, if so directed by the Minister) prepare a final report on the investigation
under s 17(1) of the ASIC Act. Under s 18(2) of the ASIC Act, where such a report or part of a report
relates to a serious contravention of a law of the Commonwealth, or of a State or Territory, ASIC may
give a copy of the whole report or a part of the report to the following for further investigation to the AFP,
National Crime Authority or the DPP.
Under s 49 of the ASIC Act, ASIC may lay charges against a person who appears to have committed an
offence against the corporations legislation. ASIC has an arrangement with the DPP whereby only the
DPP will deal with the prosecution of serious offences: ASIC Policy Statement 52.20.
This arrangement works as follows: under s 49, ASIC lays all charges for an offence committed against
the corporations legislation. ASIC prosecutes those that may be dealt with by way of summary
prosecution, for example:
 persons who continue to act as an officer of a company after a liquidator is appointed
 company officers who fail to assist insolvency practitioners in the administration of companies,
thus risking potential returns to liquidators and creditors
 company officers and their companies for failing to update ASIC registers with the addresses of
the companies and
 the company officers which can hinder the process of debt recovery by creditors
 persons who use company structures that are not registered by ASIC.
The DPP will prosecute serious offences, for example:
 intentional misuse of position by a company director to obtain financial gain
 the decision by directors to continue trading when the company is insolvent
Section 1316 of the Corporations Act provides that criminal proceedings for an offence against the Act
may be commenced within 5 years after the alleged commission of the offence. Proceedings may,
however, be commenced at any later time with the consent of the minister: s 1316. The policy reason for
such a limitation is unclear.
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3
POWERS OF ASIC
ASIC uses its incidental powers to carry out administrative functions and specific powers for corporate
regulation.
3.1
Incidental powers
The ASIC law does not list ASIC’s incidental powers, but s 11(4) of the ASIC Act allows ASIC to do
whatever is reasonably necessary from an administrative point of view to ensure company registration and
financial reporting is in accordance with the Corporations Act.
For example, in MERCANTILE MUTUAL V ASC (1992-1993) 112 ALR 463; (1993) 11 ACLC 235;
(1993) 10 ACSR 140, the Court held that the ASC had the power, under s 11(4), to allow a person to
apply to the court for orders enabling examination of specific persons. This was incidental to ASC’s
specific s 597 function to authorize a persons to apply to the court for an order under s 597. The Court
drew a very clear distinction between ASC’s functions and ASC’s powers.
3.2
Specific powers
3.3
Investigations
An ASIC investigation:
 may be commenced under its general powers of investigation in s 13;
 must be commenced if so directed by Minister;
 may be commenced following the report of a receiver or liquidator.
ASIC then has powers to produce interim and final reports on the investigations (ss 16 and 17).
Any investigation by a regulatory body such as ASIC relies upon information from persons with
knowledge of possible breaches of the law. As auditors and liquidators have a statutory obligation under
the Corporations Act to report suspected contraventions to ASIC, they are protected from defamation
proceedings by statutory qualified privilege.
This qualified privilege does not extend to voluntary informants. Section 92 of the ASIC Act provides that
a person is neither liable to a proceeding, nor subject to a liability, merely because the person has
complied, or proposes to comply, with a requirement made, or purporting to have been made, by ASIC
under Part 3 of the Act. Thus protection under s 92 is available only to a person who has responded to a
requirement made, or purported to have been made, by ASIC under Part 3.
3.4
General power of investigation
Section 13 of the ASIC Act provides ASIC with general powers of investigation. ASIC has discretion
under s 13(1)(a) to commence an investigation where it has reason to suspect that a contravention of the
corporations legislation may have been committed.
ASIC may investigate matters other than those initially suspected of constituting a contravention (because
ASIC may obtain information that changes the direction of the investigation).
ASIC must have ‘reason to suspect’ a contravention of the Corporations Act before starting an
investigation under s 13(1)(a). Although actual belief is not required, there must be some reasonable basis
for the suspicion. An investigation under s 13(1)(a) must also be in relation to a contravention that ‘may
have been committed’. In other words, ASIC cannot commence an investigation to obtain evidence in
respect of a matter that is already subject to legal proceedings.
ASIC may also commence an investigation under s 13(2) where it has reason to suspect that unreasonable
circumstances have, or may have, occurred in relation to a takeover.
3.5
Minister directed investigations
ASIC must comply with a ministerial direction to investigate a matter: s 14(1) ASIC Act. Matters
potentially subject to a ministerial direction include matters relating to:
 alleged or suspected contraventions of the corporations legislation
 the affairs, or particular affairs, of a corporation.
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3.6
Investigation after report of receiver or manager
ASIC may exercise discretion in deciding whether to investigate a matter under s 15 of the ASIC Act after
receiving a report from a receiver or a liquidator. Under s 422 of the Corporations Act, a receiver must
lodge a report with ASIC where it appears that an officer or a member of a company has committed an
offence in relation to the company. Similarly, a liquidator must also lodge a report with ASIC where it
appears that there has been a contravention under s 533 of the Corporations Act.
3.7
Examination of persons
To question a person where it suspects the person can assist an investigation, ASIC may serve the person
with a s 19 notice, requiring them to be examined on oath or affirmation by an ASIC inspector: ASIC Act,
s 21(1). Under s 21(3), the inspector may require the examinee to answer a question that is put to the
examinee at the examination and is relevant to a matter that ASIC is investigating, or is to investigate.
A person must not, without reasonable excuse, intentionally or recklessly fail to comply with a
requirement made under s 21(3): ASIC Act, ss 63(1) & (5). The penalty for non-compliance is 100 penalty
units ($11,000) or imprisonment for two years, or both. The person so examined is the examinee: ASIC
Act, s 20. The examinee has a statutory obligation to assist ASIC in its investigation: ASIC Act, s 19(2)(a).
Under s 22(1) of the ASIC Act, these examinations take place in private. The s 19 notice must state:
 the general nature of the matter under investigation
 the examinee’s right to legal representation
 the examinee’s right to the privilege against self-incrimination
 the examinee’s right to the privilege against self-exposure to a civil penalty.
Johns v Connor (1992) 35 FCR 1; (1992) 107 ALR 465; (1992) 10 ACLC 774; (1992) 7 ACSR 519
discusses these requirements. In that case, the notice was invalid because it did not give the examinee
some general idea of the circumstances. In contrast, the notice in ASC v Avram [1996] 1009 FCA 1;
(1996) 70 FCR 481; (1997) 15 ACLC 70; (1996) 22 ACSR 307 was valid because it referred to a specific
offence under a particular section of the Corporations Law.
3.8
Right to legal representation
An examinee has the right to legal representation under s 23 of the ASIC Act. This may be denied if an
ASIC inspector believes the examinee’s lawyer is trying to obstruct the examination: ASIC Act, s 23(2).
The penalty for non-compliance here is five penalty units: ASIC Act, s 63(4).
An ASIC inspector has the power to decide who may be present during an examination under s 22 of the
ASIC Act. Therefore, even though a lawyer representing an examinee may not be attempting to hinder an
examination, does an inspector have a general right under s 22 to exclude legal representation? This
question was considered in the following case examples.
In Bell v ASC (1991) 9 ACLC 1,246, an ASIC inspector excluded the lawyer because he believed that the
lawyer’s presence could compromise confidentiality (because he represented more than one examinee, and
also because he might himself be called as an examinee). However, the court set aside this decision on
the basis that an ASIC inspector does not have a general right under s 22 to exclude legal representation.
If an inspector had such a general right, the specific power under s 23 to exclude an examinee’s lawyer
trying to obstruct an examination would not be necessary. The court noted that a lawyer should not act for
an examinee where that lawyer’s own conduct was under investigation by ASIC.
This was followed by the Supreme Court of Victoria in Re Macquarie Advisory Group v ASIC [1999]
VSC 403; (2000) 18 ACLC 9; (1999) 33 ACSR 106. The court summarised the principles as follows:
 An ASIC inspector can refuse the presence of a particular person notwithstanding the right of an
examinee under s 23 of the ASIC Act to have a lawyer present during an examination.
 As a condition of attendance at an examination, the inspector may give an examinee’s lawyer a
direction of confidentiality.
 Where an inspector has reasonable grounds to believe that the presence of an examinee’s lawyer
could prejudice an ASIC investigation, the inspector may determine that the lawyer cannot be
present under s 22(1) of the ASIC Act.
 Where an examinee’s lawyer is excluded from an examination, the validity of that decision may
be challenged in the courts. In a court challenge, the onus is on the inspector to show that there
were reasonable grounds for the decision to exclude the examinee’s lawyer.
The court held that in this case, the inspector’s decision was not based on reasonable grounds.
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3.9
Privilege against self-incrimination
Section 68 of the ASIC Act modifies the common law privilege in relation to investigations, examinations,
inspection of books, proceedings after an investigation and hearings. It provides that it is not a
reasonable excuse for a person to refuse or fail to give information, sign a record or produce a book when
required to do so by ASIC on the basis that it might tend to incriminate the person. In relation to an ASIC
examination, s 5 of the ASIC Act defines ‘record’ to mean the whole or part of a record made at the
examination. Section 5 of the ASIC Act defines ‘books’ widely.
Section 68(2) provides that prior to making a statement or signing a record, if a person claims that the
statement or the signing of the record might tend to incriminate them, then the statement and the signed
record cannot be used in evidence against the person in any subsequent criminal proceedings.
Subject to the rules of evidence, s 68 does not, however, prevent the statement or signed record from
being used in evidence in criminal proceedings against another person. Criminal proceedings may also be
commenced against the person who provided the statement or signed the record on the basis of additional
evidence obtained as a consequence of any information or record provided by the person. Privilege can
only be claimed in respect of the actual statement and signed record. If a person does not claim privilege
under s 68(2), then the statement or signed record may still be used in evidence in criminal proceedings
against that person. As stated above, the right to claim privilege is not available in respect of the
production of books.
Section 1316A cancels the privilege against self-incrimination for companies.
3.10 Privilege against self-exposure to a civil penalty
Section 68 of the ASIC Act changes the operation of this privilege in the same way that it changes the
operation of the privilege against self-incrimination.
3.11 Non-compliance
Subsection 63(1) of the ASIC Act provides that a person must not, without reasonable excuse, fail to
comply with a requirement made under s 19. The penalty for non-compliance is 100 penalty units or
imprisonment for two years, or both: s 63(1).
3.12 False information
Section 64(1) of the ASIC Act provides that in the course of an examination a person must not give
information, or make a statement, that is false or misleading in a material particular. The penalty for s
64(1) is 100 penalty units or imprisonment for two years, or both. It is a defence if it is proved that the
defendant, when giving the information or evidence or making the statement, believed on reasonable
grounds that it was true and not misleading: ASIC Act, s 64(3).
3.13 Inspection of books
A company or an eligible person in relation to a company must produce specified company books to ASIC
if given a notice in writing under s 30 of the ASIC Act. Section 5 (1) of the ASIC Act defines an ‘eligible
person’ as a person who is or who has been an officer, employee, agent, banker, solicitor or auditor.
ASIC may seek a warrant to seize books under s 35 of the ASIC Act where a person fails to comply with a
s 30 notice. ASIC may also seek a court order under s 70 to enforce compliance with a s 30 notice.
This applies even if the books are the property of the recipient of the notice: ASC v Lucas (1992) 36 FCR
165; (1992) 108 ALR 521; (1992) 10 ACLC 888; (1992) 7 ACSR 676.
ASIC may give written notice under s 33 of the ASIC Act to a person requiring production of specified
books that they have in their possession. ‘Person’ is not defined for the purposes of s 33. ASIC may
therefore require production of books from any person who has possession. Under s 35 of the ASIC Act,
ASIC may seek a warrant to seize books where a person has failed to comply with a s 33 notice.
Possession does not require actual physical custody: ASC v Dalleagles Pty Ltd (1992) 36 FCR 350;
(1992) 108 ALR 305; (1992) 10 ACLC 1,104; (1992) 8 ACSR 109.
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The case of INTEGRATED FINANCIAL GROUP PTY LTD V ASIC [2004] WASC 75; (2004) 22 ACLC
987 held that:
 It does not matter that a person who has possession may not have a legal right to possession.
 The notice needs to specify, with sufficient particularity to demonstrate what is required.
However, it is to be expected that the investigators will not necessarily know in any detail or with
any great particularity precisely which documents are available or what is in them.
Section 63(1) of the ASIC Act provides that a person must not, without reasonable excuse, fail to comply
with a requirement made under ss 30 or 33. The penalty for non-compliance is 100 penalty units or
imprisonment for two years, or both: s 63(1). ASIC may also seek a court order to enforce compliance
with a notice under either s 30 or s 33: ASIC Act, s 70.
3.14 Concealing books relevant to an investigation
Where ASIC is investigating, or is about to investigate, a matter, a person must not conceal, destroy,
mutilate or alter a book relating to that matter: s 67(1)(a) ASIC Act. If a book relating to that matter is in a
particular State or Territory, a person must not take or send the book out of that State or Territory: ASIC
Act, s 67(1)(b). The penalty for contravention of s 67(1) is 200 penalty units or imprisonment for five
years, or both. It is a defence if it is proved that the defendant intended neither to defeat the purposes of
the corporations legislation, nor to delay or obstruct an investigation, or as proposed in investigation, by
ASIC: ASIC Act, s 67(2).
3.15 Warrant
A warrant to seize books may be sought by ASIC where there has been a failure to comply with either a s
30 notice or a s 33 notice: ASIC Act, s 35. A magistrate may grant a warrant under s 36 of the ASIC Act if
satisfied that there are reasonable grounds to suspect that there are, or may be within the next three days,
particular books on particular premises that are required to be produced by ASIC and have not been
produced: ASIC Act, s 36(1). Under s 36(2) of the ASIC Act, a magistrate may issue a warrant authorising
a member of the Australian Federal Police, together with any other person named in the warrant, to use
such force as is necessary and reasonable to:
 enter on or into the premises; and
 search the premises; and
 break open and search anything, whether a fixture or not, in or on the premises; and
 take possession of, or secure against interference, books that appear to be any or all of the books
covered by the warrant.
In the warrant, the magistrate must set out the grounds that they have relied on to justify the issue of the
warrant: ASIC Act, s 36(3). Section 36(4) provides that the warrant must:
 specify the particular premises and books covered by the warrant; and
 state whether entry is authorised to be made at any time of the day or night or only during
specified hours; and
 state that the warrant ceases to have effect on a specified day that is not more than seven days
after the day of the issue of the warrant.
A person must not, without reasonable excuse, obstruct or hinder a person executing a warrant issued
under s 36: ASIC Act, s 65(1)(b). The penalty for obstruction or hindrance is 100 penalty units or
imprisonment for two years, or both.
The occupier, or person in charge, of premises that a person enters under a warrant must provide all
reasonable facilities and assistance for the effective exercise of the powers under the warrant: ASIC Act, s
65(2). The penalty for failing to provide all reasonable facilities and assistance is 25 penalty units or
imprisonment for six months, or both.
3.16 Proceedings after an investigation
ASIC may lay charges where it appears that a person may have committed an offence against the
corporations legislation and it appears that the person ought to be prosecuted: ASIC Act, s 49(1).
Under s 49(2), ASIC may cause a prosecution of the person for the offence to be begun and carried on.
ASIC has an arrangement with the DPP whereby the DPP continues with the prosecution of serious
offences. S 49(5) provides that s 49 does not affect the operation of the Director of Public Prosecutions
Act 1983. Under this arrangement, after laying charges ASIC continues with the summary prosecution of
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less serious offences.
Under s 49(3) ASIC may require a person to give all reasonable assistance in connection with a
prosecution if ASIC, on reasonable grounds, suspects or believes that the person can give information
relevant to the prosecution of the offence.
3.17 ASIC may cause civil proceedings to be begun
ASIC may commence and carry on civil proceedings under s 50 of the ASIC Act:
 in the name of a company where, as a result of an investigation or an examination, it appears to
ASIC to be in the public interest to do so; and
 in the name of a person where it obtains the written consent of that person.
ASC V DELOITTE TOUCHE TOHMATSU [1996] 753 FCA 1; (1996) 138 ALR 655; (1996) 14
ACLC 1,486; (1996) 21 ACSR 332 is an example of this use of ASIC’s powers. The Full Court of the
Federal Court held that ‘it appears to the ASC’ means that the ASC’s discretion under s 50 was subjective
in character. It was up to the ASC, acting in good faith, to alone determine whether it should use s 50.
3.18 ASIC’s power to intervene in proceedings
In addition to its power to commence civil proceedings under s 50 of the ASIC Act, ASIC has power under
s 1330(1) of the Corporations Act to intervene in civil proceedings that relate to a matter arising under the
Corporations Act (and it is then taken to be a party to the proceeding, with all the rights, duties and
liabilities of such a party: Corporations Act, s 1330(2)). ASIC may exercise its intervention power under
s 1330 without having previously carried out an investigation.
ASIC Policy Statement 4 [PS 4], ‘Intervention’, sets out the policy considerations taken into account.
ASIC may also intervene in purely commercial proceedings in the following circumstances (PS 4.3):
 Where ASIC considers a matter to be of national significance which could affect the integrity of
financial markets.
 Where ASIC could make submissions which would assist in the judicial interpretation of the
Corporations Act.
 Where ASIC has information it has acquired through investigations that could assist the court in
particular proceedings.
4
HEARINGS
ASIC may hold hearings under s 51(1) of the ASIC Act for the purposes of the performance or exercise of
any of its functions or powers under the Corporations Act. (ASIC does not have the power to conduct a
hearing into a suspected contravention of the Corporations Act).
Hearings are often conducted by ASIC to gather information concerning current commercial practices or
to assist in policy initiatives.
ASIC may use discretion under s 52 of the ASIC Act to determine whether a hearing is held in public or in
private. In exercising this discretion, ASIC must take account of whether:
 evidence at the hearing may be of a confidential nature;
 any unfair prejudice to a person’s reputation may be caused if the hearing took place in public;
 it is in the public’s interest that the hearing take place in public; and
 any other matter is relevant.
ASIC may, by written notice, summons a person to appear before a hearing to give evidence or produce
documents: ASIC Act, s 58(1). Evidence at the hearing may be taken on oath or affirmation: ASIC Act, s
58(2). Hearings must be conducted by ASIC with as little formality and technicality as possible: ASIC Act,
s 59(1). At the hearing ASIC is not bound by the rules of evidence: ASIC Act, s 59(2)(a). ASIC must,
however, observe the rules of natural justice: ASIC Act, s 59(2)(c).
A person must not, at a hearing, give evidence that is false or misleading in a material particular: ASIC
Act, s 64(2). The penalty for giving false or misleading evidence is 10 penalty units or imprisonment for
three months, or both. It is a defence to a prosecution for a contravention of s 64(2) if it is proved that the
defendant, when giving the information or evidence or making the statement, believed on reasonable
grounds that it was true and not misleading: ASIC Act, s 64(3).
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A person must not disrupt a hearing: ASIC Act, s 66(1). The penalty for disruption of a hearing is 50
penalty units or imprisonment for one year, or both. The offence of disruption of a hearing is punishable
on summary conviction by a magistrate: ASIC Act, s 66(3).
5
DUTIES OF ASIC
5.1
Disclosure of conflicts of interests
The ASIC Chairperson must give written notice to the minister of any direct or indirect financial interest
in a corporation carrying on business in Australia: ASIC Act, s 123.
A member other than the Chairperson must disclose to the Chairperson any financial interest in a matter in
which they are involved where that interest could involve a conflict of interest: ASIC Act, s 124.
An ASIC staff member or delegate must disclose to the commission any direct or indirect financial interest
which could involve a conflict of interest with the performance of the person’s functions at ASIC: ASIC
Act, s 125(1). Section 125(3) of the ASIC Act provides for a penalty of 50 penalty units or 12 months
imprisonment (or both) for contravention of s 125(1). It is a defence if the person was not aware of the
conflict of interest at the time it occurred: ASIC Act, s 126.
5.2
Confidentiality
Under s 127(1) of the ASIC Act, ASIC must take all reasonable measures to protect from unauthorised use
or disclosure information given to it in confidence or in connection with its functions or powers.
Disclosure of information is authorised if it is:
 required or permitted by a Commonwealth law (s 127(2))
 for the purpose of carrying out a function of ASIC (s 127(3))
 to assist a government agency perform a function or exercise a power (s 127(4)).
5.3
Review of ASIC decisions
The decisions of ASIC are subject to review by the Administrative Appeals Tribunal (AAT) under both
the Corporations Act (Part 9.4A) and the ASIC Act (s 244).
For decisions which are excluded from review, see s 1317C of the Corporations Act (these include
express limits on review/appeal in the legislation; also those decisions which are declared by legislation to
be conclusive or final: s 1317C(a) & (c) of the Corporations Act respectively).
The AAT will not review a decision on the grounds that there has been an error of law.
In ASIC v Donald [2003] FCAFC 318; (2004) 22 ACLC 24 it was held that, when the AAT reviews an
ASIC decision, it has ‘may exercise all the powers and discretions” of ASIC, and hence had the power to
direct ASIC to accept an undertaking.
In Centurion Trust Company Ltd v ASIC [2003] AATA 1146; (2004) 22 ACLC 223, the AAT concluded
that whilst it had power to review ASIC’s decision, ASIC did not have power to make the original
decision. The appeal was upheld.
5.4
Other review processes
The Federal Court reviews decisions by ASIC on the grounds that an error of law has been made in the
making of the decision. An example is GRAY V ASIC [2002] FCA 745; (2002) 20 ACLC 1,233.
Decisions of ASIC are also subject to the Freedom of Information Act 1982 (Cth), the Privacy Act 1988
(Cth) and the Ombudsman Act 1976 (Cth).
6
PENALTIES FOR CONTRAVENTION
6.1
Civil penalty provisions
(Section numbers stated in this overview relate to the Corporations Act.)
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Section 1317E (1) sets out a list of the civil penalty provisions, which include:
 ss 180(1), 181(1) and (2), 182(1) and (2), 183(1) and (2): officers’ duties
 s 209(2): related party rules
 ss 254L(2), 256D(3), 259F(2), 260D(2): share capital transactions
 s 344(1): requirements for financial reports
 s 588G(2): insolvent trading.
If a court is satisfied that a civil penalty provision has been contravened, it must make a declaration of the
contravention: s 1317E(1), which under s 1317E(2) must specify:
 the court that made the declaration
 the civil penalty provision that was contravened
 the person who contravened the provision
 the conduct that contravened the provision
 the corporation involved in the contravention.
A declaration of a contravention is conclusive evidence of these matters: s 1317F.
Once a declaration has been made by a court:
 ASIC can seek a pecuniary penalty order of up to $200,000 under s 1317G or a disqualification
order under s 206C: s 1317E(1). At the hearing, the court applies the rules of evidence and
procedure that are applied in civil proceedings: s 1317L (ie civil standard of proof applies).
 Compensation may be ordered if the contravention materially prejudices the interests of the
corporation or its members or the corporation’s ability to pay its creditors or is serious: s 1317H.
The court may give relief from liability for contravention of a civil penalty provision under s 1317S(2)
where the person has acted honestly and having regard to all of the circumstances.
The Court may also make a compensation order for damages suffered by a company under s 1317H where
there has been contravention of a civil penalty provision, and damage has resulted: s 1317H(1). In
calculating damages, a court may take into account any profits made as a result: s 1317H(2).
Only ASIC (or the DPP) may apply for a declaration of contravention and a pecuniary penalty order, but
once this is obtained, the company, ASIC or the DPP may apply for a compensation order under s 1317J.
Proceedings for a declaration or order must be started within six years of the contravention: s 1317K.
6.2
General penalty provisions
In addition to the civil penalty regime, s 1311 is the general penalty provision of the Corporations Act. It
covers the general offences committed under the Act. These general offences that are listed in Schedule 3
of the Act do not refer to the civil penalty provisions set out in s 1317E(1).
Section 1311(1) provides that a person who:
 does an act or thing that the person is forbidden to do by or under a provision of this Act; or
 does not do an act or thing that the person is required to do by or under a provision of this Act; or
 otherwise contravenes this Act;
is guilty of an offence unless the Act provides that the person is (or is not) guilty of an offence.
Where the penalty applicable to an offence is set out in Schedule 3 of the Act, then that is the penalty for
the offence: s 1311(3). Where a provision of the Act specifies the penalty for contravention, then the
specified penalty is the penalty for the offence: s 1311(4).
In determining whether contravention of a Schedule 3 provision has occurred, criminal responsibility is
determined under the Criminal Code (Cth).
Where a particular provision of the Corporations Act is not complied with and that provision is neither
listed in a Schedule nor is a civil penalty provision, s 1311(5) provides that the fine applicable to the
offence is five penalty units.
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Where a company commits an offence, s 1312 provides that a court may impose a penalty of up to five
times the pecuniary penalty for an individual who commits the offence. A company can commit an
offence through its directors and senior management.
6.3
Civil proceedings after criminal proceedings
Section 1317M deals with the question of whether civil proceedings can be commenced after criminal
proceedings relating to essentially the same matter. A court cannot make a declaration of contravention or
pecuniary penalty order against a person if they have been convicted of a criminal offence relating to
essentially the same matter.
6.4
Criminal proceedings during civil proceedings
Under s 1317N(1), civil proceedings in relation to a civil penalty provision cannot proceed if criminal
proceedings have been commenced against the same person for the same conduct. The civil proceedings
may, however, commence if the person is not convicted of the offence: s 1317N(2).
6.5
Criminal proceedings after civil proceedings
Under s 1317P, criminal proceedings may be commenced against the person even if a declaration of
contravention, pecuniary penalty order or a compensation order has been previously made. An example is
Adler v DPP [2004] NSWCCA 352; (2004) 22 ACLC 1,460.
6.6
Evidence not admissible
Evidence given by a person in civil proceeding is not admissible in a subsequent criminal proceeding
concerning the same conduct: s 1317Q. However, this does not apply to a criminal proceeding in respect
of the falsity of the evidence given in civil proceedings for a pecuniary penalty order: s 1317Q.
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