Appointment commenced by fictitious director

The IPA has completed the investigation of a concern involving members who were appointed as Voluntary Administrators to a group of companies by a director who was subsequently found to be fictitious.  Once concerns regarding the existence of the director were raised, the members applied to the court to have the validity of the appointment confirmed under s 447A of the Corporations Act 2001. ASIC also filed an application in the matter and ultimately the members were replaced with new liquidators.

The IPA has determined that no further action is warranted in this matter on the basis that:

  • the members' actions in accepting the appointment without verification of the director’s identity did not breach any existing industry guidance or requirements;
  • reasonable steps appear to have been taken by the members  to confirm and resolve the issues associated with the realisation that the director of the companies was fictitious, including close liaison with ASIC;
  • the members appear to have co-operated with ASIC’s inquiries into the matter and the replacement liquidators;
  • the members have ceased accepting referrals from the accountant who made the original referral; and
  • the members' office has amended the manner in which it operates and undertakes/accepts appointments, including reviewing identification of directors.

The IPA Code of Professional Practice is currently under review and proposes to incorporate new requirements that members must take appropriate steps to satisfy themselves of the identity of the director(s)/debtor(s) prior to accepting an appointment.