The Australian Securities & Investments Commission issued a reminder to small business directors that company money and assets must be managed in the company’s best interests and not used for personal gain, warning that misuse can contribute to insolvency and harm other small businesses that are creditors. The reminder follows recent action taken against directors after ASIC investigations. ASIC emphasised directors’ duties to act in good faith, avoid improper use of position and consider the interests of the company as a whole, including shareholders, customers, suppliers and employees. It cited registered liquidator reports indicating poor financial control, including personal use of company assets, was a cause of failure for 36% of companies in 2023-24, and gave examples such as using company funds for school fees or holidays. Recent cases referenced include court charges against a director of two construction-related companies accused of transferring company funds to a credit card and other accounts for personal use, and a guilty finding against a beverage distribution company director who used company funds to pay legal fees and other costs to annul his personal bankruptcy; ASIC noted breaches can lead to civil and criminal penalties and director disqualification. The release also flagged other consequences, including Australian Taxation Office action against directors personally for unpaid company tax debts in some cases, and liquidators investigating collapses and potentially suing directors for compensation. ASIC reported that between 1 January 2025 and 31 March 2025 it prosecuted 34 individuals for 67 offences for failing to assist registered liquidators, resulting in AUD 244,500 in fines and AUD 4,360 in costs.
Australian Securities & Investments Commission 2025-05-12
Australian Securities & Investments Commission warns small business directors on misuse of company funds and highlights recent enforcement outcomes
The Australian Securities & Investments Commission (ASIC) urged small business directors to manage assets responsibly, warning against misuse that can cause insolvency and harm creditors. ASIC emphasized directors' duties to act in good faith, citing liquidator reports that poor financial control caused 36% of company failures in 2023-24. Recent cases include court charges for fund misuse, with breaches leading to penalties. From January to March 2025, ASIC prosecuted 34 individuals for 67 offences, resulting in AUD 244,500 in fines and AUD 4,360 in costs.