Director Liability Exposure in Voluntary Entity Strike Off
Voluntary strike off leaves personal director liability fully intact, allowing creditors and regulators to restore the company and pursue balance-sheet recovery.
Section 1006
Meaning
The statutory requirement that mandates directors to distribute a copy of the voluntary striking off application to all interested parties within seven days of filing. This obligation under section 1006 ensures that creditors, shareholders, and employees are fully informed of the pending dissolution. It allows these stakeholders to register their objections with the registrar if they have outstanding claims.
Failing to perform this duty is a criminal offence that can lead to personal liability for the directors.
Distribution Rule
Board members must trace all active stakeholders to ensure they receive the required notification. Under section 1006, the notification list must include current employees, pension trustees, and any secured or unsecured creditors. This measure prevents directors from quietly dissolving a company to escape outstanding liabilities.
Sending the copies via registered post or digital delivery provides proof of compliance if the filing is ever challenged.
Creditor Protection
Financial institutions and suppliers receive the necessary warning to take recovery action before the corporate person is dissolved.
Penal Consequence
Non-compliance with the disclosure duties exposes the responsible directors to significant legal liabilities. The prosecuting authorities can initiate criminal proceedings against board members who intentionally or recklessly fail to send the required copies. If the failure occurs with the intent to defraud creditors, the offence becomes a serious felony that carries prison sentences.
Courts can also order the directors to pay restitution to any creditor who suffered financial loss as a direct result of the lack of notification.