Joseph Gutnick of St Kilda East, Victoria, has been disqualified by ASIC from managing corporations for a period of four years following his involvement in three failed companies between June 2016 and March 2020.

Mr Gutnick was a director of:

• Axis Consultants Pty Ltd (Deregistered) A.C.N. 006 804 708 (Axis), 
• Merlin Diamonds Limited (In Liquidation) A.C.N. 009 153 119 (Merlin), 
• Legend International Holdings, Inc. (In Liquidation) A.C.N. 120 855 352 (Legend).

In making its decision, ASIC found that Mr Gutnick acted improperly and failed to meet his obligations as director, in that he:

• exercised his powers as a director of Legend after it was wound up,
• allowed Merlin to lend funds totalling $13,752,124.78 to Axis in circumstances where the loans caused detriment to Merlin and gave an advantage to Axis,
• allowed Merlin to trade while insolvent,
• failed to ensure Merlin maintained complete financial records,
• failed to ensure Merlin complied with its obligations as a public company,
• allowed Axis to lend money to related parties in circumstances where the loans were undocumented, not fully supported and verified with documentation,
• failed to monitor and oversee Axis’s financial affairs, and
• failed to assist the liquidator of Axis when requested.

Legend and Merlin owed a combined total of $43,209,965 to unsecured creditors, including to the Mount Isa City Council, Northern Land Council, Northern Territory Department of Transport, Queensland Department of Transport, Shire of Wyndham/East Kimberley, Department of Primary Industry and Resources, Western Australian State Revenue Office and Western Australian Department of Mines, Industry.

In disqualifying Mr Gutnick, ASIC relied upon the supplementary reports lodged by liquidators Shane Cremin of Rodgers Reidy, Timothy Norman and Salvatore Algeri of Deloitte, and Craig Shepard and Mark Korda of KordaMentha.

ASIC assisted Mr Cremin to prepare his statutory report by granting approval for funding from the Assetless Administration Fund.

Mr Gutnick is disqualified from managing corporations until 3 March 2028.

Mr Gutnick has the right to seek a review of ASIC’s decision by the Administrative Appeals Tribunal.

Background

On 2 April 2020, following a successful ASIC application, the Federal Court of Australia made orders to wind up Merlin on insolvency grounds (20-077MR).

Section 206F of the Corporations Act allows ASIC to disqualify a person from managing corporations for a maximum period of 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 each of the company’s inability to pay its debts.

Through enforcement action against selected directors who contravene s206F, ASIC demonstrates that there are appropriate consequences for the mismanagement of small and large companies. ASIC will take targeted action against individual directors to protect the wider public, employees and other businesses against the future mismanagement of companies.

ASIC 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.