FAILURE TO SUBMIT REPORT AS TO AFFAIRS (RATA) OF COMPANY AND COMPANY BOOKS TO LIQUIDATOR – Consequences To Directors, Company Secretaries and “Classes Of People”
Failure to submit a RATA and company books to the liquidator or provisional liquidator, can lead to serious consequences under the Corporations Act 2001 (Cth) (“Act”)!
Who is Responsible?
Directors and secretaries of a corporation, that are being wound up in insolvency or by a court, must:
- Submit and verify a statement in writing, in the prescribed form, as to the affairs of the company to the liquidator or provisional liquidator (s 475(1) Act);
- Submit the RATA within 10 business days after the making of the winding up order (s 475(4) Act);
- Deliver to the liquidator or provisional liquidator all company books in their possession (other than books they are entitled to retain) and also advise of company books that are known to them but not in their possession (s 530A(1)(a)-(b) Act).
The liquidator can also request the following “classes of persons” to perform the same obligations:
- Persons who are or have been officers of the company;
- Persons who have taken part in the formation of the company, if the company was formed one year before the winding up order date;
- Persons who are or have been employed by the company, within one year before the winding up order date capable of giving the information required based on the liquidator’s opinion; and
- Persons who are officers of, or employed by a body corporate that is an officer of the company, within one year before the winding up order date (s 475(2) Act).
Consequences of Not Complying
The consequences of failing to submit a RATA and deliver company books to the liquidator pursuant to s 475 and s 530A of the Act are outlined in the following table.
Table 1: Consequences of failing to submit the RATA and delivering company books.
| Section of the Act | Potential Consequences |
| Section 475(4): Director and company secretary not submitting company affairs in the prescribed form within 10 days of winding up order | 50 penalty units ($10,500)
and/or 6 months imprisonment |
| Section 475(5): “Classes of persons”, when served notice by liquidator, not submitting company affairs in the prescribed form within 10 days of winding up order | 25 penalty units ($5,250)
and/or 6 months imprisonment |
| Section 530A(6): Not delivering company books to the liquidator for the purposes of winding up, as soon as practicable | 50 penalty units ($10,500)
and/or 12 months imprisonment |
The courts are generally reluctant to order imprisonment and may order the director, company secretary or other “classes of persons” to pay a fine. This will be dependent on the circumstances surrounding the offence.
What Reasonable Excuses can be used to Avoid Consequences?
A person will be deemed to have not committed the offences, if they have a “reasonable excuse” pursuant to s 475(11) and s 530A(6B) of the Act.
The term reasonable excuse refers to any “physical or practical difficulties in complying with a requirement” (Corporate Affairs Commission (NSW) v Yuill (1991) 172 CLR 319, 336 cited in
Jovanovic v Australian Securities and Investment Commission (ASIC) [2001] TASSC 6 [8]) (“Jovanovic”).
In Jovanovic, the company director’s failure to complete and lodge the RATA within 14 days was reasonably excused because he could prove that he had sufficient ignorance of the day to day operations of the company. He was also unable to access the company books which were in the possession of the earlier administrator of the company.
In Re Re Indopal Pty Ltd (1987) 5 ACLC 278 cited in Jovanovic at paragraph [9], the court said “mere ignorance can simply no be accepted as a reasonable excuse”. The court will not accept the excuse that the directors or secretary could not provide information required for the purposes of RATA, because the information was not in their possession and was kept by someone else i.e. an accountant.
BOSS Lawyers Success Story
Our client failed to submit a company RATA and company books to the liquidator and was charged with alleged breaches of s 475 and s 530A of the Act.
Boss Lawyers, were successful in having both charges dismissed resulting in our client avoiding the potential consequences outlined in Table 1 above.
CONCLUSION
Large fines and criminal penalties apply to any director, company secretary or “classes of persons”, not complying with a liquidator in submitting a RATA or delivering company books, following a wind up order. There are provisions within the Act, that allow a party to rely on a reasonable excuse as to why they have not cooperated with the liquidator but these “reasonable excuses” are confined and will depend on individual circumstances.
It is therefore in a parties’ bests interests to fully cooperate with the liquidator or provisional liquidator, to avoid monetary penalties or criminal charges.
