SPCS

SOCIETY FOR PROMOTION OF COMMUNITY STANDARDS INC.

Offences by bankrupt in relation to management of companies – and penalties

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The Insolvency Act 2006 sets out Offences in relation to the management of companies by those persons who have been adjudicated bankrupt.

Offences in relation to management of companies

436 Offence by bankrupt in relation to management of companies

(1) A bankrupt commits an offence if he or she—

  • (a) acts as a director of a company; or

  • (b) fails without reasonable excuse to comply with section 149.

(2) Despite anything to the contrary in section 25 of the Criminal Procedure Act 2011, the limitation period in respect of an offence under subsection (1) ends on the date that is 2 years after the date on which the offence was committed.

437 Penalties for offence in relation to management of companies

Penalties for offence in relation to management of companies

  • A person who commits an offence under section 436 is liable, on conviction, to imprisonment for a term not exceeding 2 years.

    Note: It is at the Official Assignee’s discretion that prosecution can proceed. S. 438 makes it clear that this can proceed if reasonable grounds are certified by the Crown Solicitor. 

 

Bankrupt company director’s duties to Official Assignee

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The Insolvency Act 2006 sets out the “Duties [of a bankrupt] to provide information” to the Official Assignee. 

S. 142 Bankrupt must give Assignee accounting records and other documents

  • (1) As soon as practicable after adjudication, the bankrupt must—
    • (a) deliver to the Assignee, at the Assignee’s office, relevant documents that are in the bankrupt’s possession or control; and
    • (b) notify the Assignee of relevant documents that are in the possession or control of any other person.

(2) In subsection (1), relevant documents means all accounting records, papers, deeds, instruments, and other documents relating to the bankrupt’s estate.

Other duties that must be undertaken are spelt out, including:

143  Bankrupt must give Assignee information relating to property

144  Bankrupt must give Assignee information relating to income and expenditure

145  Bankrupt must notify Assignee of change in personal information

146  Bankrupt must give Assignee financial information

Prosecution of company directors in breach of s. 261 of Companies Act 193

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Under s. 261 of the Companies Act 1993 a liquidator of a company has powers to obtain documents and information from a former director of the failed company. Failure to provide that information to the liquidator can result in the director being prosecuted and if convicted of an offence under s. 261, he or she “liable to a fine not exceeding $50,000 or to imprisonment for a term not exceeding 2 years”.

If the company director has been adjudicated as a bankrupt at the time of sentencing a judge would be compelled to impose a prison sentence rather than impose a fine. If the offending involved long-term and systematic refusal to supply documents to a number of liquidators involving multiple companies of which he/she had been a director, and the non-compliance showed a pattern of flagrant disregard for the law, a judge would no doubt be compelled to impose a maximum sentence. For to do so would be in the public interest because the law has a pedagogical role in addition to a punitive element designed to bring offenders to their senses regarding the rule of law as it prescribes and defines criminal behaviour.

Section 261 of the Companies Act entitled “Power to obtain documents and information” includes: [Read more…]

Financial Markets Authority warns St Laurence directors

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The Financial Markets Authority has warned the directors of failed finance company St Laurence instead of taking court action.

St Laurence collapsed into receivership in 2010 owing $212 million to more than 9000 debenture-holders, of which its receivers recovered 16.7 cents in the dollar ($35.4m). It is in liquidation.

The authority has closed its investigation into the company and has formally warned eight directors over what it describes as potential breaches of the Securities Act.

It said that based on the evidence it had seen, it considered that St Laurence’s September 2007 prospectus failed to properly disclose information about loan quality and liquidity for the period from March to June 2008. [Read more…]

E-Gas managers jailed over fraud

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The former managers of retail gas supplier E-Gas have been imprisoned for three years, and 3-1/2 years respectively, for fraud of at least $9.75 million.

Sydney Lio John Hunt, 46, and Ronald Peter Rosenberg, 73, were last month found guilty on multimillion-dollar fraud charges for under-reporting the amount of gas supplied to customers.

Wellington District Court judge Bruce Davidson today sentenced Hunt to 3-1/2 years’ jail, and Rosenberg to three years.

Rosenberg was also ordered to pay $400,000 reparation within 28 days.

The Serious Fraud Office (SFO) alleged during the month-long trial that E-Gas under-reported consumption by about 950,000 gigajoules, worth about $8.7m, and penalties were avoided to the value of about $8.6m between May 2003 and October 2008.

To see full story published 30/05/14 go to:

http://www.stuff.co.nz/business/industries/10099038/Jail-terms-for-E-Gas-managers