Bankruptcy and Business Management

Background

Mr Watts, an undischarged bankrupt, was disqualified from managing companies.  He applied to the court for a special order that he be allowed to act as director or secretary of several companies, stating his very livelihood was dependent upon his successful application.  Mr Watts was 62 years of age and argued that he would find it very difficult to find another job.  In support of his application, he said that the shareholders of the companies were supportive of his application.

Decision

Mr Watts’ application was refused as he failed to provide any evidence to support his claims.

Under the Corporations Act 2001 (Cth) a person is disqualified from managing a company if they are an undischarged bankrupt.  However in special circumstances, the Act allows a disqualified person to apply to the court for leave to manage a company. In doing so, a person must establish that an exception should be made in their case.

Comment

This case confirms that the consequences of bankruptcy are serious.  It is important to know your rights and limitations if entering into bankruptcy and while a bankrupt.  For further information regarding the obligations of a bankrupt, please read How long am I to be declared a bankrupt?

That said, under certain circumstances, there are grounds under which an undischarged bankrupt can apply to the court for permission to manage a corporation.

For further advice regarding bankruptcy, and directors duties please contact:
Matthew Bridger | e: mbridger@elringtons.com.au | p: 02 6206 1300 http://elringtons.com.au/wp-content/uploads/2011/07/Specialist-accreditaion.jpg