2. Defining Insolvency Terms

Corporations Act s206F Breach

Section 206F of the Corporations Act allows ASIC to disqualify a person from managing corporations for up to five years if, within a seven-year period, the person was an officer of two or more companies that were wound up and the liquidators lodge reports with ASIC about each company’s inability to pay its debts or alleges misconduct.

It is extremely rare for a liquidator not to lodge a report with ASIC.

Under s206F(1) of the Corporations Act ASIC may disqualify a person who has been a director of two or more failed companies from
managing corporations. ASIC will give a notice in the prescribed form which requires the director to “demonstrate ” why disqualification for a period of up to five years is not justified. Whilst disqualification can only be made after the director has been given an opportunity to be heard – the proceeding is inquisatorial and normal rules of evidence do not apply. Further information can be found here.