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Wednesday 18 August 2021

21-219MR ASIC disqualifies director from managing companies for five years

Duncan McLeod of Blacktown, NSW, has been disqualified from managing companies for five years for his involvement in the failure of two companies.

Mr McLeod was a director of two companies that went into liquidation between November 2016 and February 2019, namely:

  • SGB Trading Pty Ltd (A.C.N. 166 030 306) (SGB Trading); and
  • RC Detailed Joinery Pty Ltd (A.C.N. 147 009 390) (RC Joinery).

SGB Trading operated as an importer and wholesaler of solar power products. RC Joinery traded as a kitchen joinery business.

In making its decision to disqualify Mr McLeod, ASIC found that he:

  • failed to ensure SGB Trading and RC Joinery complied with their statutory obligations and pay tax liabilities;
  • failed to keep written financial records that explain its transactions and financial position and performance for reporting and audit purposes;
  • failed to provide the liquidator of SGB Trading with the company’s books and records;
  • allowed SGB Trading to incur debts when there were reasonable grounds to suspect it was not in a position to pay them;
  • failed to prevent SGB Trading from incurring debts when it was insolvent;
  • used his position as the director of RC Joinery to gain an advantage for the previous director, or cause detriment to the company;
  • failed in his duty as the sole director of RC Joinery from 30 September 2014 to monitor the company’s transactions and to control its bank accounts; and
  • transferred RC Joinery’s business to United Joinery Pty Ltd A.C.N 615 437 664 to enable its business to continue unburdened by debt – a practice commonly known as illegal phoenix activity.

The total amount owed to creditors of the two companies was $1,073,227.000.

In deciding to disqualify Mr McLeod, ASIC relied on supplementary reports lodged by the liquidators of SGB Trading, Clifford Sanderson of Dissolve, and the liquidator of RC Joinery, Neil Cussen of Deloitte. ASIC assisted both liquidators to prepare supplementary reports by providing funding from the Assetless Administration Fund.

Mr McLeod is disqualified from managing corporations until 3 August 2026.

Background

Section 206F of the Corporations Act gives ASIC the power to disqualify a person from managing corporations for a maximum period five years if, within a seven year period, the person was an officer of two or more companies, and those companies were wound up and a liquidator provides a report to ASIC about the company’s inability to pay its debts.

ASIC also maintains a banned and disqualified persons register that provides information about people who have been disqualified from:

  • involvement in the management of a corporation;
  • auditing self-managed superannuation funds (SMSFs); or
  • practising in the financial services or credit industry.

ASIC is a member of the Phoenix Taskforce, which comprises federal, state and territory government agencies who collaborate to combat illegal phoenix activity. The aim of the Phoenix Taskforce is to provide a whole-of-government approach to identify, disrupt and prosecute those who engage in or facilitate illegal phoenix activity.

Suspected phoenix activity can be reported to the Phoenix Hotline on 1800 060 062 or online at the ATO website.

Last updated: 18/08/2021 02:25