Offences for Failure to Comply With Statutory Duties

ASIC Interview

You should seek legal advice from an experienced criminal lawyer as soon as you are aware that you are under investigation for Offences for Failure to Comply With Statutory Duties. Your criminal lawyer will explain your rights to you and provide you with clear advice about how best to conduct yourself in the interview with ASIC.

One of our lawyers can also attend the interview with you if you feel more comfortable having someone present to look after your interests. It is important to have a lawyer present because they can get a sense of the case against you.

Pleading Not Guilty

It is important to engage an expert criminal lawyer at an early stage if you have been charged with Offences for Failure to Comply With Statutory Duties and you wish to plead not guilty. One of our criminal defence lawyers will prepare a defence strategy for you and carefully analyse the brief of evidence. Our criminal defence lawyers are pro-active in their approach and will look for evidence which may show that the ASIC is incorrect in accusing you.

The Court process for pleading not guilty can be a long and difficult one. It is important to engage an experienced and trusted criminal lawyer to advocate on your behalf at each step of the proceedings.

Pleading Guilty

If you are pleading guilty to Offences for Failure to Comply With Statutory Duties, a criminal lawyer’s role is slightly different, but no less important. For example, it may be particularly important for your current or future employment that you are not convicted of the offence. In those circumstances, an experienced criminal lawyer will make detailed submissions to the Court about why you should not be convicted of Offences for Failure to Comply With Statutory Duties, and advocate on your behalf for the best possible outcome.

Examples of Offences for Failure to Comply With Statutory Duties (Duties of the Borrower)

• A borrower intentionally fails to make all of its financial records available for inspection by the trustee.
• A borrower deliberately fails to take all reasonable steps to replace the trustee as soon as practicable after the borrower becomes aware that the trustee has ceased to exist.
• A borrower creates a security interest and recklessly fails to give the trustee written details of the security interest within 21 days after it is created.

What is the legal definition of Offences for Failure to Comply With Statutory Duties (Duties of the Borrower)?

The borrower commits an offence if it intentionally or recklessly contravenes section 283BB, 283BC, 283BD, 283BE, 283BF or 283EA [of the Corporations Act 2001].

Legislation

The relevant legislative provision for this offence is section 283BI of Corporations Act 2001 (Cth) (the Act).

Elements of the offence

For a person to be found guilty of this offence, the prosecution must prove the following elements beyond a reasonable doubt:

1. The accused is a borrower;
2. The accused failed to comply with a relevant statutory duty;
3. The accused acted intentionally or recklessly.

Element 1: The accused is a borrower
To satisfy the first element of the offence, the accused must be a borrower.

‘Borrower’ is defined in the Act as ‘in relation to a debenture, means a body that is or will be liable to repay money under the debenture’.¹

Element 2: The accused breached a relevant statutory duty
To satisfy the second element of the offence, the accused must have failed to comply with a relevant statutory duty.

The duties of the borrower are stated in Part 2L.2 and Section 283EA of the Act. The duties of the borrower are:

• General duties, which require the borrower to:²
  • Carry on and conduct its business in a proper and efficient manner; and
  • If they request a copy, to provide a copy of the trust deed to:
    • A debenture holder; or
    • The trustee;
  • Make all of its financial and other records available for inspection by and provide relevant information, explanations or other assistance to:
    • The trustee; or
    • An officer or employee of the trustee to carry out the inspection; or
    • A registered company auditor appointed by the trustee to carry out the inspection.
• Duty to notify ASIC of information related to trustee:³
  • Within 14 days after the trustee is appointed, the borrower must lodge with ASIC a notice containing the following information:
    • The name of the trustee;
    • Any other information related to the trustee or the debentures that is prescribed by the regulations.
  • If the above information changes, the borrower must within 14 days of the change lodge with ASIC a notice containing the changed information.
  • A notice to ASIC must be in the prescribed form.

• Duty to replace trustee:⁴
  • The borrower must take all reasonable steps to replace the trustee as soon as possible after the borrower becomes aware that the trustee:
    • Has ceased to exist; or
    • Has not been validly appointed; or
    • Cannot be a trustee under section 283C of the Act; or
    • Has failed or refused to act as trustee.
• Duty to inform trustee about security interests:⁵
  • If the borrower creates a security interest, it must:
    • Give the trustee written details of the security interest within 21 days after it is created; and
    • If the total about to be advanced on the security of the security interest is determinate and the advances are not merged in a current account with bankers, trade creditors or anyone else – give the trustee written details of the amount of each within 7 days after it is made.
    • If the advances are merged in a current account the borrower must give the trustee the details in the quarterly report.⁶
• Duty to give trustee and ASIC quarterly reports:⁷
  • Within 1 month after the end of each quarter, the borrower must:
    • Give the trustee a quarterly report that sets relevant information; and
    • Lodge a copy of the report with ASIC.⁸
  • Quarterly reports must contain certain details and comply with comply with specific formalities.⁹
• Duty to call meeting:¹⁰
  • A borrower must call a meeting of debenture holders in certain situations.¹¹ The borrower must give proper notification of the meeting.¹²

“Have you failed to comply with a relevant statutory duty?”

Element 3: the accused acted intentionally or recklessly
The accused must have failed to comply with a relevant statutory duty intentionally or recklessly to satisfy the final element of this offence.

‘Intention’ and ‘recklessness’ are fault elements outlined in the Commonwealth Criminal Code Act 1995 (Cth).

‘Intention’ means:¹³

• With respect to conduct, if a person means to engage in that conduct.
• With respect to circumstance, if a person believes that the circumstance exists or will exits.
• With respect to a results, if a person means to bring the result about or is aware that the result will occur in the ordinary course of events.

‘Recklessness’ means:¹⁴

• With respect to a circumstance, if a person is aware that there is a substantial risk that the circumstance exists or will exist; and having regard to the circumstances known to them, it is unjustifiable to take the risk.
• With respect to a result, if the person is aware of a substantial risk that the result will occur; and having regard to the circumstances known to them, it is unjustifiable to take the risk.

Defences

The most common defences to this charge involve some element of the offence not being made out. These defences include:

• The accused is not a borrower;
• The accused complied with the statutory duty in question;
• The accused did not act intentionally or recklessly.

A specific defence to a duty under s 283BF (borrower’s duty to report to trustee and ASIC) is that:

• The borrower is under external administration; or a receiver, or a receiver and manager, of property of the borrower has been appointed and not ceased to act under the appointment;¹ and
• The thing to be reported is a security interest in PPSA retention of title property.²

You should ring us and discuss your case if you have been charged with this offence. Deciding on whether to plead guilty or not has significant consequences for you and should be made after proper discussion with a criminal lawyer.

Questions in cases like this

• Is the accused a ‘borrower’ according to the Corporations Act 2001 (the Act)?
• Has the accused failed to comply with their statutory duties?
• Has the accused acted intentionally or recklessly?

Maximum penalty for section 283BI of the Corporations Act 2001

The maximum penalty for Offences for Failure to Comply With Statutory Duties (s283BI of the Corporations Act 2001) is 25 penalty units (a $5250 fine) or imprisonment for 6 months.¹⁷

The value of a penalty unit will automatically increase in line with the consumer price index from 1 July 2020, and every three years after.¹⁸ As such, the maximum penalty for this offence may change.

Other important resources

• ASIC

_{[1] Corporations Act 2001 (Cth) s 9
[2] Corporations Act 2001 (Cth) s 283BB
[3] Corporations Act 2001 (Cth) s 283BC
[4] Corporations Act 2001 (Cth) s 283BD
[5] Corporations Act 2001 (Cth) s 283BE
[6] Corporations Act 2001 (Cth) s 283BF(4)
[7] Corporations Act 2001 (Cth) s 283BF
[8] Corporations Act 2001 (Cth) s 351
[9] Corporations Act 2001 (Cth) ss 283BF(4)-(8)
[10] Corporations Act 2001 (Cth) s 283EA
[11] Corporations Act 2001 (Cth) s 283EA(1)
[12] Corporations Act 2001 (Cth) ss 283EA(2)-(4)
[13] Commonwealth Criminal Code Act 1995 (Cth) s 5.2
[14] Commonwealth Criminal Code Act 1995 (Cth) s 5.4
[15] Corporations Act 2001 (Cth) s 283BG(a)
[16] Corporations Act 2001 (Cth) s 283BG(b)
[17] Corporations Act 2001 (Cth) Schedule 3, Penalties Item 97
[18] Australian Taxation Office, Commonwealth Penalty Units Increase, accessed 25/11/2018 <https://www.ato.gov.au/Business/Large-business/In-detail/Business-bulletins/Articles/Commonwealth-penalty-units-increase/>}