Dealing with a DPN post-resignation

Former directors who receive a Director Penalty Notice (“DPN”) in respect of a company’s tax or superannuation liabilities are often placed in a difficult situation, especially where the current management of the company is not cooperative.

The Federal Court’s decision in Hall v CAP Security Services Pty Ltd [2023] FCA 1237 highlights a potential pathway for former directors who receive a DPN after their directorship has ended.

The case involved Mr. Hall, a former director and claimed creditor of the company, and Tallicat Pty Ltd, a shareholder and contributory, seeking urgent orders from the Federal Court for the company to be wound up. The urgency was propelled by Mr. Hall receiving a DPN related to the company’s GST liabilities in the sum of $208,574, pushing for an immediate resolution to circumvent potential personal liability.

Demonstrating the Court’s flexibility in these types of urgent matters, procedural requirements such as advertisement of the application and service time were dispensed with. Leave was also granted for Tallicat to seek orders the company be wound up in insolvency (it required leave as it was a contributory, and not a creditor).

Despite the absence of a statutory demand, which usually precedes insolvency assumptions, the Court found substantial evidence of insolvency. The company’s abandonment of its business premises and failure to display its financial standing were critical factors. Furthermore, Mr. Hall and Tallicat provided compelling evidence of the company’s debts to various parties, including a significant GST liability and unpaid rent.

The Court also resolved to wind the company up on just and equitable grounds due to a lack of confidence in the management of the affairs of the company, and the public interest in preventing an insolvent company to continue trading.

In light of the above, the Court’s orders that CAP Security Services be wound meant that Mr Hall was able to avoid the significant consequences of the DPN expiring without the company being put into liquidation.

Here at Rose Litigation Lawyers, we have recent experience in successfully dealing with these types of matters on behalf of former directors.

Strict timeframes apply in these types of matters, and it is crucial that you receive specialist advice from a lawyer with expertise. If you are a former director that has received a DPN, contact our team of specialist insolvency lawyers with a track record of success in this field today.

The content of this publication is intended to provide a summary and commentary only. It is not intended to be comprehensive nor does it constitute legal advice, and has been prepared based on applicable legislation and case authority at the date of publication. You should seek legal advice on specific circumstances before taking any action.