When companies break laws that ASIC does not enforce

It explains:

• what happens when someone reports alleged misconduct to ASIC about laws that we are not responsible for (but that involves companies and company directors)
• misconduct for which ASIC is responsible
• what you should do to report misconduct for which ASIC is not responsible.

You should report misconduct to the relevant government agency that is primarily responsible for the conduct

Concerns and allegations that a company, company director or company officer has breached an obligation under a law ASIC does not enforce are best addressed by the government department or agency responsible for enforcing the relevant law.

Companies are legal entities and if they allegedly break laws, the primary regulator or agency in that area is the most appropriate one to deal with it. If that regulator or agency thinks that the actions of companies or their directors and officers are such that we should consider investigating that conduct, they will refer it to ASIC.

We can receive reports of alleged misconduct about these matters from members of the public or company insiders. Company insiders reporting these allegations to ASIC can qualify for the whistleblower protections under the Corporations Act 2001 (Corporations Act). For further information, see Information Sheet 238 Whistleblower rights and protections (INFO 238) and Information Sheet 239 How ASIC handles whistleblower reports (INFO 239).

If you bring such a matter to ASIC initially, we are likely to encourage you to refer the matter to the primary regulator or agency. In certain circumstances, we may refer the matter ourselves.

If the misconduct concerns:

• failure to comply with tax obligations, failure to pay employee superannuation entitlements or administration of self-managed superannuation funds (SMSFs) – you should contact the Australian Taxation Office. However, if you have concerns about advice received about setting up or closing an SMSF or investments made by a superannuation fund, you should also contact ASIC
• scams, misleading claims and representations, or consumer protection for non-financial goods and services – you should contact either the Australian Competition and Consumer Commission, or the Office of Fair Trading or Consumer Affairs in your state or territory
• criminal conduct that does not relate to financial services or markets – you should contact the police in your state or territory
• unpaid employee entitlements (e.g. leave), employment awards and agreements – you should contact the Fair Work Ombudsman
• environmental issues – you should contact the Environment Protection Authority in your state or territory.

This list is not exhaustive, but it is likely that for other alleged misconduct you may be able to identify the primary regulator or agency – for example, through internet searches. It may be best for members of the public to contact the primary regulator or agency in the first instance, rather than reporting to ASIC.

In some circumstances, we may be interested if a company or company officer has allegedly been involved in criminal conduct, fraud or other related matters if that conduct intentionally or unintentionally caused loss or damage to the company, or was not in the best interests of the company.

However, we apply a public interest test (see Information Sheet 151 ASIC's approach to enforcement (INFO 151)) in deciding any regulatory action. Matters of this type occurring in small proprietary companies are unlikely to satisfy this test, whereas matters that involve public companies where many shareholders are affected, or other activities affecting a wider range of people, are more likely to raise issues in the public interest.

If you fall within the statutory whistleblower definition, whether or not your concerns relate to a matter within ASIC's regulatory responsibilities, we will consider allegations that a person has:

• caused you or threatened you with detriment for reporting your concerns, or
• breached your confidentiality.

For information on how ASIC handles whistleblower reports, see INFO 239.

If the alleged misconduct results from court proceedings

A finding of contempt of court by a company director or officer does not necessarily mean that the director or officer has breached their obligations to act in the best interests of the company under the Corporations Act.

ASIC and misconduct by a company or company directors or officers

There are many different laws in Australia that companies and businesses and their directors and officers must comply with, such as those relating to workplace relations, environmental issues, work health and safety, and taxation.

ASIC is responsible for administering 11 pieces of legislation (see Laws we administer), including the Corporations Act and the Australian Securities and Investments Commission Act 2001. The Corporations Act requires many companies to prepare and lodge financial reports and meet disclosure requirements. The Corporations Act also requires directors and other company officers to (among other things) act in the best interests of the company and prevent insolvent trading.

Misconduct for which ASIC is responsible

ASIC is responsible for matters relating to companies, company directors and other company officers, including:

• failure to seek approval for a related party transaction
• misuse of the company officer's position to gain an advantage for themselves
• conduct before entering external administration aimed at defeating the interest of creditors
• misrepresentation about the company's financial position
• acting as a director of a company while bankrupt or disqualified.

Misconduct for which ASIC is not responsible

We do not generally get involved in alleged misconduct if it relates to a potential breach of a law another government department or agency enforces.

If a company, director or other company officer has breached a law another government department or agency enforces, it does not necessarily mean that the company's directors or officers have also breached their duties under the Corporations Act. Similarly, if a director or officer is found to have breached another law because their company breached that law, it does not necessarily mean that the company's directors or officers have also breached their duties under the Corporations Act. Whether a company director or officer has breached their duties under the Corporations Act by being involved in the company's breach of another law will depend on the circumstances in each case.

We may receive reports from other government departments or agencies if they suspect that a company, a director or officer may have breached the laws we enforce. However, these reports are not available to members of the public.

We will only take action on those reports when there is sufficient evidence and our action will result in a greater regulatory impact on the market that will benefit the general public more broadly.

In determining the potential regulatory impact of any action we take, we may consider any action another government department or agency has already taken about conduct and the result of such action.

Any action we take based on reports – from members of the public or other government agencies – that directors or officers have breached other laws will generally aim to protect members of the public and the market or ban directors from managing companies.

Where can I get more information?

• Visit our website for:
  • more information about our role and the laws we administer.
  • more information about other regulators.
• For information for potential whistleblowers, read:
  • INFO 238 Whistleblower rights and protections
  • INFO 239 How ASIC handles whistleblower reports.

Important notice

Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. We encourage you to seek your own professional advice to find out how the applicable laws apply to you, as it is your responsibility to determine your obligations.

You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases, your particular circumstances must be taken into account when determining how the law applies to you.