By media release 16-325MR, ASIC has confirmed that while false statutory declarations and fraud are matters for other regulatory and enforcement agencies, company officers who knowingly make a false statement regarding payments to creditors may themselves end up in hot water facing criminal or civil action by ASIC.
As part of its ongoing work to curb illegal phoenix activity, ASIC completed a proactive surveillance program which monitored the integrity of the payment systems in the building and construction industry.
The program, announced by ASIC in media release 14-212MR, was undertaken following feedback received from small businesses, industry bodies and other government agencies about the endemic use of false statutory declarations in the building and construction industry.
Carried out during the 2014/15 financial year, the program targeted 8 large commercial construction projects across Queensland, New South Wales and Victoria. As part of those projects, ASIC reviewed the payment processes and systems of 40 individual building and construction companies (contractors).
The focus of ASIC’s surveillance was twofold:
- Firstly, situations where principal contractors require contractors to provide statutory declarations confirming that the contractors have paid all amounts owing (e.g. to subcontractors etc) as a precondition to the principal contractors paying the contractors invoice; and
- Secondly, situations where contractors provide signed statutory declarations to the principal contractors, in circumstances where the contractors may not have paid all amounts owning (e.g. to subcontractors etc) as at the date of swearing the statutory declaration.
Consistent with the concerns that led to the program being implemented in the first place, ASIC identified various concerns about the conduct of some companies within the building and construction sector.
Whilst ASIC issued warning letters to certain contractors who were the subject of the surveillance program, ASIC has encouraged such improper practices to be reported. This serves as a stern warning to construction companies moving forward to review their internal compliance systems and procedures and ensure everything is in order and above board.