The Australian Securities and Investments Commission (ASIC) oversees every corporate entity in the country. ASIC maintains a register that all companies and organisations are required to be a part of.
Oversight from ASIC ensures that companies and their directors are behaving ethically and legally. If a company breaches its duties or fails to comply with ASIC’s regulations, it may be investigated and penalised, or it could even be struck off the company register.
In this article, we’ll discuss when and why ASIC would initiate the deregistration of a company, and whether there’s anything you can do to stop a Strike Off Action in Progress.
The Breakdown of the Meaning
ASIC may commence a strike-off action and formally deregister a company for a variety of reasons. A ‘strike-off action in progress’ notifies everybody involved that the company will be wound up and deregistered, at which point it ceases to exist.
A strike-off action may come about in one of two ways:
- The company’s directors (or an appointed Liquidator) can voluntarily agree to deregister the company.
- ASIC can initiate the strike-off. ASIC has the authority to independently strike-off any Australian company in certain circumstances..
If the directors opt for voluntary deregistration and the company meets certain criteria, it’s possible to strike off the company without appointing a Liquidator. For example, the directors may choose to close a company that’s no longer operating. This would mean they no longer need to pay annual review fees to ASIC for a company that’s not in use.
Why Would ASIC Strike Off a Company?
ASIC has the power to deregister any Australian company. They may initiate a strike-off action for several reasons, including situations where the company:
- Has not paid its annual review fee (fees must be paid within 12 months of the due date)
- Has not responded to a Company Compliance Notice
- Has not lodged any documents in 18 months
- Is being wound up but no Liquidator has been appointed
Effectively, if ASIC believes the company is no longer in business – as evidenced by non-payment of fees, or failing to lodge paperwork – it may initiate a strike-off action.
The Process of an ASIC-Initiated Strike-Off Action
ASIC typically only deregisters companies that are no longer operational. For this reason, the strike-off process is relatively straightforward:
- ASIC issues a letter to the company’s directors (or the Liquidator, if one has been appointed) advising them that the company will be deregistered.
- ASIC updates its register to display the company as “SOFF” (Strike Off Status), showing that it’s in the process of deregistration.
- A notice is posted on the Published Notices website. This advises the public that the company will be deregistered in 2 months’ time.
- After 2 months have passed, ASIC deregisters the company and issues a confirmation notice to the directors and/or Liquidator. The company ceases to exist at this point.
Notices remain on the Published Notices website, even if the deregistration is stopped.
If you’re notified of a strike-off action in progress, you need to respond quickly to prevent your company from being deregistered. There is a two-month period during which you may be able to stop the strike-off action.
Contact the team at Business Savers immediately if you receive a strike-off action in progress from ASIC.
How to Stop an ASIC Strike-Off Action
ASIC will deregister a company 2 months after publishing a notice of deregistration. The strike-off action can be stopped by taking the appropriate action.
The action that’s required depends on why the deregistration was commenced:
- If ASIC initiated the strike-off action – Company directors can prevent deregistration by complying with ASIC’s requirements. This may involve paying annual fees, lodging the required documents, or contacting ASIC and informing them that the company is still trading. It’s important to act quickly – your response needs to be received and processed by ASIC before the deregistration is finalised.
- If the strike-off action was initiated voluntarily – Notify ASIC if you have changed your mind about deregistering the company. You’ll need to explain to ASIC why the company should not be deregistered (e.g. if it’s still carrying on business, or if the deregistration was commenced by mistake). ASIC will review your application and respond within 28 days.
A strike-off action can also be stopped by third parties, such as creditors that are conducting legal proceedings against the company. In this case, ASIC will delay deregistration to allow the third party to complete their proceedings.
The Effects of Company Deregistration
A company that is deregistered by ASIC will cease to exist. When a company is deregistered:
- It ceases to exist and can no longer act as a legal entity in its own right
- Any property owned by the company vests in ASIC
- Trust property vests in the Commonwealth, represented by ASIC
- Directors and company officers no longer have the right to deal with company property
- Legal proceedings that relate to the deregistered company cannot continue
- New legal proceedings cannot be commenced against the company
While there are a few exceptions, ASIC becomes the only party that’s able to deal with company property after deregistration. Secured creditors are generally allowed to enforce their security and recover any outstanding debts via ASIC.
How to Reinstate a Deregistered Company
A company that has been deregistered can be reinstated in some situations. You can apply to ASIC to reinstate a company if:
- You are a director, secretary or member of the company at the time it was deregistered, and
- You can confirm that the company will be able to pay its debts (as and when they are due) upon reinstatement, and
- You are not disqualified from managing a company, and
- Can provide supporting documentation showing that the company should not have been deregistered.
The supporting documents you need to provide depends on how the deregistration was initiated. If the process was voluntary, you’ll need to show that the declaration made as part of the voluntary deregistration was incorrect. If ASIC initiated the deregistration, you may need to prove that it was in error.
Third parties may also be able to reinstate a company if they commenced legal proceedings against the company before it was deregistered, and if they can provide court documentation as evidence of these proceedings.Parties that don’t meet any of these criteria can apply for a court order that compels ASIC to reinstate the company.
Manage and Respond to Strike-Off Actions with Business Savers
It’s a serious matter if ASIC commences strike-off proceedings against a company. At the end of the notice period, the company is deregistered and ceases to exist, which can have a major impact on the company and its members.
If ASIC notifies you that your company is going to be deregistered, it’s important to act quickly. The team at Business Savers can help you assess your options and respond to the notice. Whether you want to carry on trading or allow the company to be deregistered, our experts can assist you in developing a plan of action.
Contact us today to learn more about voluntary deregistration or strike-off actions by ASIC.
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