NSW ABN - Legal Concerns Regarding Being a Temporary Director?

Discussion in 'Commercial Law Forum' started by TouchofStyle, 21 February 2018.

  1. TouchofStyle

    TouchofStyle Member

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    I got approached by a friend to assist with him opening an import/export company in Australia for Airplane parts, with myself acting as temporary director and due to advice he received below:

    ********

    "To apply for an ABN number with the minimum of hassle, I would recommend you appoint a temporary director to your company that is Australia resident that has a Tax File Number. Because you are non resident and do not have a TFN number it will take about two month to get the company a ABN number.


    So this is what the accountant has recommended and makes it 100% legal.

    1) Appoint a friend or someone you know to be a director with the agreement that they will resign after two months leaving as sole direct.

    2) When your friend or someone you know is add as a second director use their TFN number to apply for the company ABN number.

    3) An indemnity letter that no trading or bank accounts to be opened until the proposed director has resigned and has been removed as director.

    4) When your ABN number arrives, your friend will resign as director so he is out it.




    *******

    I do have a concern here with protecting myself both legally and financially both during the period I am director and once I’ve resigned.

    I don’t have the knowledge to know all the legal and financial consequences regarding company directors.

    Here is a link the indemnity letter draft, I’ve removed person details https://i.imgur.com/FTvRhf6.jpg
     
  2. Rob Legat - SBPL

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    You can possibly be held liable for things that go wrong while you are a director of the company, and an indemnity is only as good as the backing of the person giving it. You still have to wear the potential liability in the first place, and an indemnity can't protect you against everything (e.g. reputational damage).

    The short answer is: If you're feeling uneasy about it, don't do it.
     
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  3. Clancy

    Clancy Well-Known Member

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    This is why people often put a spouse as a director of the company. So if the company goes broke the spouse can declare bankruptcy and they can be free to start a new business - often with significant assets 'shifted' from the bankrupt company!

    What happens where i work - we sell scaffolding to the building industry on credit terms. They take the scaffolding, sell the scaffolding without us knowing, bank that money somewhere unknown, then bankrupt the company and we have to write off the debt. So basically they have stolen hundreds of thousands of dollars and cannot be touched.

    But there are all kinds of other ways of abusing the bankruptcy system to steal money. And while it is technically illegal, it is almost impossible to prove/enforce.
     
  4. Rob Legat - SBPL

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    A company 'going broke' does not automatically lead to a director going bankrupt. That's usually a consequence of director's guarantees being called on. Two separate things. They may often be the case and related, but the latter does not happen simply because the former does.
     
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  5. Rod

    Rod Lawyer
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    There are legal ways to 'touch them'. Criminal - financial advantage by deception or fraud, possibly theft, is one way. And going after the directors as individuals. Having them made bankrupt slows down their ability to re-offend.
     
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  6. Clancy

    Clancy Well-Known Member

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    Apparently it is not hard to dodge those land mines because i have seen them do it.

    I do not know if this is just a coincidence or not, but since the new Phoenix laws came out, none of our customers have pulled anything like this again so far?
     
  7. Rob Legat - SBPL

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    I know ASIC has an active campaign on at the moment to focus on phoenix activity.
     
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