Business and Corporations Law Question

What sections of the Corporations Act deal with disqualification and what do you think is the rationale (reason) for the power of disqualification in the Corporations Act? Use the article to illustrate relevant issues where appropriate. Media Report: Thursday 11 April 2019 19-087MR ASIC disqualifies former Uglii Group directors ASIC has disqualified Ms Heather Knorr of Traralgon, Victoria and Ms Ge Zhu of Hurstville, New South Wales from managing corporations for four years. The disqualification follows an ASIC investigation into the affairs of six companies within the Uglii Group that led to orders being made by the Federal Court of Australia for their wind up in 2016 and 2017. Each of the six Uglii Group companies were wound up with a deficiency, with Uglii entering into liquidation with approximately 2,400 shareholders who received no return. An ASIC delegate found Ms Knorr (director of Uglii and Global Ads) failed to prevent Uglii from incurring further debts once it was insolvent; failed to act with due care and diligence by failing to make enquiries as to the financial position of Uglii with regards to loans made by and to it, the terms of those loans, the debts incurred by the company and the origin of monies that were used to repay those debts; failed to discharge her powers and duties with the requisite care and diligence in failing to ensure that funds raised by Uglii through the sale of 'fighting fund shares' was used for the purpose for which it was raised; failed to act with the requisite standard of care and diligence in failing to take an interest in how funds raised by the sale of Uglii shares purportedly for a 'fighting fund' were used; failed to take all reasonable steps to secure Uglii's lodgement of its financial reports for the years ending 30 June 2014 and 30 June 2015 and half years for the periods ending 31 December 2014 and 31 December 2015, and failed to understand the roles of role and duties of a director. The delegate found that Ms Zhu (director and officer of Uglii and officer of Global Ads TTH, Uglii Find, Bizmio and Project Discovery): failed to prevent Uglii from incurring further debts once it was insolvent; failed to exercise her powers and discharge her duties with the required due care and diligence by failing to ensure that funds raised by Uglii by the sale of 'fighting fund shares' were used for the purpose for which they were raised and that shareholders were not misled as to how the funds would be utilised; failed to act with the requisite level of care and diligence by failing to ensure the lodgement by Uglii of its financial reports for the years ending 30 June 2014 and 30 June 2015 and the half years ending 31 December 2014 and 31 December 2015; failed to act with the requisite level of care and diligence by failing to ensure the lodgement by TTH and Bizmio of their financial reports for the year ending 30 June 2015, and failed to perform, or perform adequately, the duties of a company officer. Ms Knorr's disqualification commenced on 4 April 2019 and will continue until 3 April 2023. Ms Zhu's disqualification commenced on 22 March 2019 and will continue until 21 March 2023. In making the decision, the delegate relied upon reports that were lodged by the liquidators of the failed companies. ASIC provided the liquidators with funding from the Assetless Administration Fund to prepare those reports. Background On 6 December 2016, the Federal Court of Australia, upon the application of ASIC, ordered the wind up of Uglii Corporation Limited, Traralgon Technology Holdings Limited, Uglii Find Australia Limited, BizMio Limited and Projects Discovery Services Pty Ltd and appointed Robyn Erskine and Adrian Hunter of Brooke Bird as liquidators. On 2 March 2017, the Court ordered that Uglii Ads System Pty Ltd be wound up and that Ms Erskine and Mr Hunter be appointed as liquidators (16-196MR). Section 206F of the Corporations Act empowers ASIC to disqualify a person from managing corporations for up to five years if, within a seven-year period, the person was an officer of two or more companies, and those companies were wound up and a liquidator provides a report to ASIC about the company's inability to pay its debts. *The six companies include: Uglii Corporation Limited (Uglii), Global Ads System Pty Ltd (Global Ads) (formerly known as Uglii Ads System Pty Ltd), Traralgon Technology Holding Limited (TTH), Uglii Find Australia Limited (Uglii Find), Bizmio Limited (Bizmio) and Project Discovery Services Pty Ltd (Project Discovery). What sections of the Corporations Act deal with disqualification and what do you think is the rationale (reason) for the power of disqualification in the Corporations Act? Use the article to illustrate relevant issues where appropriate. Media Report: Thursday 11 April 2019 19-087MR ASIC disqualifies former Uglii Group directors ASIC has disqualified Ms Heather Knorr of Traralgon, Victoria and Ms Ge Zhu of Hurstville, New South Wales from managing corporations for four years. The disqualification follows an ASIC investigation into the affairs of six companies within the Uglii Group that led to orders being made by the Federal Court of Australia for their wind up in 2016 and 2017. Each of the six Uglii Group companies were wound up with a deficiency, with Uglii entering into liquidation with approximately 2,400 shareholders who received no return. An ASIC delegate found Ms Knorr (director of Uglii and Global Ads) failed to prevent Uglii from incurring further debts once it was insolvent; failed to act with due care and diligence by failing to make enquiries as to the financial position of Uglii with regards to loans made by and to it, the terms of those loans, the debts incurred by the company and the origin of monies that were used to repay those debts; failed to discharge her powers and duties with the requisite care and diligence in failing to ensure that funds raised by Uglii through the sale of 'fighting fund shares' was used for the purpose for which it was raised; failed to act with the requisite standard of care and diligence in failing to take an interest in how funds raised by the sale of Uglii shares purportedly for a 'fighting fund' were used; failed to take all reasonable steps to secure Uglii's lodgement of its financial reports for the years ending 30 June 2014 and 30 June 2015 and half years for the periods ending 31 December 2014 and 31 December 2015, and failed to understand the roles of role and duties of a director. The delegate found that Ms Zhu (director and officer of Uglii and officer of Global Ads TTH, Uglii Find, Bizmio and Project Discovery): failed to prevent Uglii from incurring further debts once it was insolvent; failed to exercise her powers and discharge her duties with the required due care and diligence by failing to ensure that funds raised by Uglii by the sale of 'fighting fund shares' were used for the purpose for which they were raised and that shareholders were not misled as to how the funds would be utilised; failed to act with the requisite level of care and diligence by failing to ensure the lodgement by Uglii of its financial reports for the years ending 30 June 2014 and 30 June 2015 and the half years ending 31 December 2014 and 31 December 2015; failed to act with the requisite level of care and diligence by failing to ensure the lodgement by TTH and Bizmio of their financial reports for the year ending 30 June 2015, and failed to perform, or perform adequately, the duties of a company officer. Ms Knorr's disqualification commenced on 4 April 2019 and will continue until 3 April 2023. Ms Zhu's disqualification commenced on 22 March 2019 and will continue until 21 March 2023. In making the decision, the delegate relied upon reports that were lodged by the liquidators of the failed companies. ASIC provided the liquidators with funding from the Assetless Administration Fund to prepare those reports. Background On 6 December 2016, the Federal Court of Australia, upon the application of ASIC, ordered the wind up of Uglii Corporation Limited, Traralgon Technology Holdings Limited, Uglii Find Australia Limited, BizMio Limited and Projects Discovery Services Pty Ltd and appointed Robyn Erskine and Adrian Hunter of Brooke Bird as liquidators. On 2 March 2017, the Court ordered that Uglii Ads System Pty Ltd be wound up and that Ms Erskine and Mr Hunter be appointed as liquidators (16-196MR). Section 206F of the Corporations Act empowers ASIC to disqualify a person from managing corporations for up to five years if, within a seven-year period, the person was an officer of two or more companies, and those companies were wound up and a liquidator provides a report to ASIC about the company's inability to pay its debts. *The six companies include: Uglii Corporation Limited (Uglii), Global Ads System Pty Ltd (Global Ads) (formerly known as Uglii Ads System Pty Ltd), Traralgon Technology Holding Limited (TTH), Uglii Find Australia Limited (Uglii Find), Bizmio Limited (Bizmio) and Project Discovery Services Pty Ltd (Project Discovery)