A Port Macquarie man has been convicted of managing a company while bankrupt and fined $1100 in a local court, after his daughter was found to have been taking instructions from him on how to run the business.
Macquarie Local Court confirmed to SmartCompany Grant John Hives pleaded guilty on June 18 to making business decisions while being a disqualified person between June 26, 2013, and March 7, 2014.
Hives had become bankrupt as a result of a creditor’s petition in May 2013, meaning he was disqualified from being a director of his civil excavation and haulage company, TH Tippers Pty Ltd.
But after filing for bankruptcy, Hives nominated his 18-year-old daughter as the sole director of TH Tippers.
A subsequent investigation by the Australian Securities and Investments Commission found Hives had communicated instructions or wishes to his daughter knowing that she would act in accordance with them.
As such, ASIC found Hives was making the decisions that affected the whole or a substantial part of the business and was in breach of the Corporations Act.
Rohan Harris, partner at law firm Russell Kennedy, told SmartCompany bankrupts are not eligible to be a director of a company and it is an offence to manage a corporate entity whilst bankrupt.
“Managing can also include effectively managing the company through the involvement of the other person,” Harris says.
Harris says ASIC keeps across all new director appointments and would generally take notice when a director is appointed who is seemingly related to a disqualified person.
“In situations where someone with the same surname as the person who is disqualified is added, there is an obvious case where that person could be a close relation to the disqualified person and have the potential to help them manage the company,” he says.
Harris says business owners need to let go of control of a company if they declare bankruptcy.
“You do need to step back. There are serious consequences that flow from a bankruptcy,” he says.
“Some people think they can declare bankruptcy and walk away unscathed because they think, ‘there’s no assets personally in my name’. They see it as a get out of jail free card, but if you’re in the business of of managing corporations, then it’s a serious impediment on your ability to do that – unless you’re prepared to break the law.”
SmartCompany attempted to contact TH Tippers but the company could not be reached.