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Fact File - ASIC

Releases insolvent trading results

ASIC has released initial results of ‘Directors Insolvent Trading pilot’, a pilot program targeted at insolvent trading.

The pilot program aims to make company directors aware of their company’s financial position, to encourage them to seek advice from insolvency professionals and where necessary, to take action to appoint voluntary administrators or liquidators to companies that are insolvent.

The ASIC National Insolvency Co-ordination Unit has been working with senior insolvency specialists from PricewaterhouseCoopers and Ernst & Young, to target directors involved with companies suspected of insolvent trading.

The companies targeted in the program range in size from small proprietary companies to listed entities. They have been identified through a range of sources, including complaints received from the public, as well as referrals from other programs within ASIC.

To date, ASIC has conducted solvency reviews of 130 companies associated with 35 directors, including a number of large corporate groups.

This has resulted in directors taking action to consider appointing voluntary administrators or liquidators to ten companies.

ASIC has identified key operational and financial practices which, in combination with other practices, indicate a company is at significant risk of insolvency.

These include:

• poor cash flow, or no cash flow forecasts;

• disorganised internal accounting procedures;

• incomplete financial records;

• absence of budgets and corporate plans;

• continuing loss-making activity;

• accumulating debt and excess liabilities over assets;

• default on loan or interest payments;

• increased monitoring and/or involvement of financier;

• outstanding creditors of more than 90 days;

• instalment arrangements entered into to repay trade creditors;

• judgement debts received;

• significant unpaid tax and superannuation liabilities;

• difficulties in obtaining finance;

• difficulties in realising current assets (eg stock, debtors); and

• loss of key management personnel.

Increases conditions on dealers’ licences

ASIC has imposed additional conditions to the securities dealers’ licences of Permanent Trustee Company Limited and Permanent Investment Management Limited.

PTCL and PIML must engage a compliance consultant to review and report on remedial actions undertaken to address breaches identified in the compliance plan audit report of the Permanent Cash Management Fund, and the audit report of the Investor Directed Portfolio Service respectively.

The compliance consultant will report on the adequacy of, and compliance with, the updated policies and procedures, and provide three quarterly reports to ASIC and the companies’ boards.

Hears guilty plea

Parktrend Holdings Pty Ltd director Patrick Lonergan has pleaded guilty to a charge of lodging a false or misleading document with the ASIC, and been fined $2,000.

Despite a $34,130 ongoing claim before the Building Disputes Tribunal, Mr Lonergan sought to deregister Parktrend, saying it was not subject to any legal proceedings.

As a result of the conviction, Mr Lonergan is also disqualified from managing any corporation for five years without leave of the Joondalup Court of Petty Sessions.

Parktrend Holdings was a registered builder’s business, trading under Neal’s Home Improvements.

Provides managed investments fee calculator

Fee estimations and the affects of different fee structures on managed fund investments are now available on www.fido.asic.gov.au.

 

Upgrades database security

ASIC has upgraded surveillance and security measures, following increased concern on the growing significance of identity fraud in criminal activity, including credit card fraud and money laundering.

ASIC is monitoring the activities of persons believed to be involved in bogus company registrations and filings, and as a consequence, has made a Queensland arrest.

Initiatives to increase security of ASIC’s public database include:

• a new system from July 1, for verifying changes lodged on behalf of companies will be introduced;

• requiring company PINs to be quoted before changes can be made to existing company records; and

• linking the incorporation of new companies with the concurrent issue of an ABN by the ATO, to increase the level of scrutiny applied to company registrations.

ASIC’s public database on companies in Australia includes details on:

• 1.25 million companies;

• 2.5 million directors;

• 3000 managed investment schemes; and

• professional registers of 60,000 professionals (for example, liquidators, auditors).

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