Governance: what happens when a director neglects his duties?

The Australian Securities and Investments Commission, the company regulator, disqualified Quinlivan from managing corporations for three years from November 2008. He appealed and yesterday the Administrative Appeals Tribunal (AAT) not only agreed with ASIC but extended the period of disqualification from three years to five years, the maximum period prescribed for an administrative banning under the Corporations Act 2001.

A statement from ASIC says "On 21 November 2008, ASIC disqualified Mr Quinlivan from managing corporations for three years pursuant to section 206F of the Act. Mr Quinlivan was disqualified because of his involvement in fourteen companies that were wound up in insolvency between 2002 and 2007: National Consolidated Investments Pty Ltd, Coastal Administration Services Pty Ltd, Remi Morgan Burns Pty Ltd, Australian Financial Management Corporation Pty Ltd, Consolidated Property Investments Pty Ltd, Manorbase Pty Ltd, First Home Buyer (Aust) Pty Ltd, Ausblue Pty Ltd, Shellston Pty Ltd, Coventry Finance Pty Ltd, Rental Options Pty Ltd, Statefort Pty Ltd, Freedom Mortgages Pty Ltd and Scottsdale Homes No 10 Pty Ltd."

It was the scale of his neglect that beggars belief. ASIC found, and the AAT agreed that there were " a number of serious concerns, in relation to Mr Quinlivan’s conduct as a director, including:(a) a failure to keep proper records of intercompany arrangements;(b) a failure to keep proper accounts;(c) a failure to select and supervise competent subordinates;(d) a failure to remain familiar with the affairs of the various companies;(e) a failure to attend to taxation obligations; and(f) permitting companies to trade while insolvent.In addition, the AAT found that there was a significant risk that Mr Quinlivan would fail to live up to his commitments as a director and that the public needed to be protected against that possibility.