Mark Gustavsson Lawyers and Solicitors

Nobody expects the Spanish Inquisition – except during examination: A director’s guide to public examination under the Corporations Act

Public examinations are a process under the Corporations Act 2001 (Act) by which a liquidator, administrator or other eligible applicant can examine persons about a corporation’s “examinable affairs”.

What are public examinations?

Public examinations are a process under the Corporations Act 2001 (Act) by which a liquidator, administrator, or other eligible applicants can examine persons about a corporation’s “examinable affairs”.

The “examinable affairs” of a company are interpreted broadly by the courts, allowing an eligible applicant to examine a director regarding:

  • The promotion, formation, management, administration, or winding up of a corporation
  • Any other affairs of the corporation
  • The business affairs of a connected entity to the corporation

A public examination is essentially a process where you will be asked a series of questions in court under oath. The examiner will ask relevant questions as they see fit and use the information they gather accordingly. It is important to know which questions you must answer and which questions you are not required to answer.

Why have I been summoned?

If you have received a summons for a public examination, it is likely that you have been involved in a company that has entered external administration or some other insolvency process. Alternatively, you may be related (such as by marriage) to a person who has been involved in such a company.

Generally, a public examination arises from the need of a person (such as a liquidator) to gather information about a company and its affairs. This might be necessary where:

  • A company’s books and records are insufficient or incomplete; or
  • It is difficult to obtain information because of uncooperative persons or because relevant documents are not available.

What types of public examinations are there?

There are mainly two types of public examinations under the Corporations Act 2001 (Cth):

  • Mandatory examinations under section 596A; and
  • Discretionary examinations under section 596B.

Summons for mandatory examinations are generally issued to directors or officers (or former directors or officers) of the company. Summons for discretionary examinations are generally issued to persons who might not have been a director or officer but who might have been involved in the examinable affairs of the company.

Can a public examination happen in private?

Normally, a public examination will be public – that is, your answers will be available in writing for public inspection. However, section 597(4) of the Act provides that an examination may be held in private where or to the extent that the court considers it desirable because of ‘special circumstances’.

To satisfy the court that an examination ought to be held in private, the circumstances must be such that there is a real or substantial risk that a publication will cause an interference with the administration of justice of a kind which might cause serious injustice to the examinee. The recent decision of Gleeson J in In re Plutus Payroll Australia Pty Ltd provides an example of a case in which a private examination was ordered by the court. In that case, there was a pending prosecution, the defense to which might be prejudiced by what transpired in the examinations; the examinations were to take place in March 2020, and the criminal trial was listed to commence in October 2020. The court’s decision in Bazzo v Kirman tells us that the court will be hesitant to order that public examinations be held in private simply because there is something merely unusual about the circumstances; rather, the circumstances must be sufficiently ‘special’ to justify the exercise of the court’s discretion to order the private hearing of an otherwise public examination, and the ‘special’ circumstances must be real and patent, not merely speculative or theoretical. Furthermore, it is clear that the strong likelihood of the appellants facing serious criminal charges in the future was not sufficiently ‘special’ to warrant a departure from the norm.

If you wish to make an application for an examination under the Act, it is vital to define the application’s predominant purpose and show a demonstrable benefit to the corporation in question, its creditors, or contributories.

If you have received a summons for an examination, you may be able to apply to set aside the summons.

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