Explained: The ASIC Assetless Administration Fund – part 3 Director Banning

This article is the third of three articles that discusses the Assetless Administration Fund. The focus of this third instalment is on the Director Banning Grant. The article uses the terms banning and disqualification interchangeably.

About the grant

The Director Banning Grant provides funding to IPs to investigate and prepare a report under section 533(2) of the Corporations Act 2001 (Cth) (Act). The primary purpose of this grant is to assist ASIC to determine whether to disqualify a person from managing corporations under section 206F or 206GAA of the Act. The disqualification period can be up to 5 years.

Eligibility criteria

The eligibility criteria for Director Banning are largely the same as the other grants. The main distinction is being able to satisfy the elements of section 206F or 206GAA of the Act.

Assessment criteria

The assessment criteria are also similar to the other grants but more refined as the focus is considerably narrower. ASIC will consider:

Market impact;
Seriousness and consequences of the misconduct;
The amount of detriment (i.e. number and value of creditors impacted);
whether banning will contribute to the Government/ASIC’s objectives;
whether the alleged misconduct is widespread or part of a growing trend;
whether an alternative course of action is more appropriate;
the time that has lapsed since the alleged misconduct occurred; and
whether admissible evidence is available;

In circumstances where the director cannot be located, is not in the country, is in jail, and/or is an undischarged bankrupt, an application is not likely to satisfy the ‘value with relevant money’ criteria. That is particularly so where a director is in jail, or bankrupt because the director will automatically be disqualified from managing a corporation in accordance with section 206B of the Act.

Funding amount

Funding under the Director Banning Grant is limited to $11,550.

Elements of 206F

A director will be a banning candidate if they:

have been an officer of two or more companies that have been wound up in the last 7 years (prior to ASIC issuing a notice);
the directorships were within 12 months of the relevant winding up; and
the liquidator lodged a report under subsection 533(1);

Review

All AAF decision can be reviewed, and a request should be submitted in writing within 28 calendar days of the date of ASIC notification of the decision.

Conclusion

The most important part of this grant is meeting the elements of section 206F. If one of the elements are not present, then the likelihood of funding diminishes. The timing element is also of importance because if there is only several months left in the 7-year period, there is a risk that the 7 year period lapses during the banning process.

Taylor David has been a leading insolvency and restructuring firm for the best part of a decade. Taylor David has the expertise to provide practical solutions to a broad range of complex legal problems. Please contact us should you require any assistance applying to the AAF. We are open to assisting on a speculative basis in certain circumstances.