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:
(1) A liquidator may, from time to time, by notice in writing, require a director or shareholder of the company or any other person to deliver to the liquidator such books, records, or documents of the company in that person’s possession or under that person’s control as the liquidator requires.
(2) A liquidator may, from time to time, by notice in writing require—
- (a) a director or former director of the company; or
- (b) a shareholder of the company; or
- (c) a person who was involved in the promotion or formation of the company; or
- (d)a person who is, or has been, an employee of the company; or
- (e) a receiver, accountant, auditor, bank officer, or other person having knowledge of the affairs of the company; or
- (f) a person who is acting or who has at any time acted as a solicitor for the company—
to do any of the things specified in subsection (3).
(3) A person referred to in subsection (2) may be required—
- (a) to attend on the liquidator at such reasonable time or times and at such place as may be specified in the notice:
- (b) to provide the liquidator with such information about the business, accounts, or affairs of the company as the liquidator requests:
- (c) to be examined on oath or affirmation by the liquidator or by a barrister or solicitor acting on behalf of the liquidator on any matter relating to the business, accounts, or affairs of the company:
- (d) assist in the liquidation to the best of the person’s ability.
Section 261 (6A):
A person who fails to comply with a notice given under this section commits an offence and is liable on conviction to the penalty set out in section 373(3).
Part 21 of the Act – “Offencdes and Penalties” includes s. 373 Penalty for failure to comply with Act
s. 373 (3) states:
A person convicted of an offence against any of the following sections of this Act is liable to a fine not exceeding $50,000 or to imprisonment for a term not exceeding 2 years:
[Non-compliance by a company director does apply] …..
section 261(6A) (which relates to the power of liquidators to obtain documents and information)