Key Takeaways
- Section 184 of the Corporations Act 2001 (Cth) creates criminal liability for directors who dishonestly use their position — punishable by up to 5 years imprisonment and fines of up to 2,000 penalty units (~$728,000 at the 2026 rate)
- Section 206A makes it a criminal offence to manage a corporation while disqualified — each day of involvement is a separate offence
- On 2 July 2026, a Western Australian director was convicted by a jury on three counts under s 184 and one count under s 206A after an ASIC investigation into phoenix-style asset transfers between related entities
- In FY2025-26, ASIC secured 25 criminal convictions with 21 custodial sentences — director criminal liability is at record enforcement levels
- If you are a disqualified director, you must not manage, instruct, or informally influence company decisions — even as an “advisor” or behind the scenes
What the 2 July 2026 Conviction Tells Us
On 2 July 2026, a Western Australian director — referred to publicly as “JJP” — was convicted by a jury in the District Court of Western Australia on criminal charges under the Corporations Act 2001 (Cth). The conviction arose from an ASIC investigation into phoenix-style activity: the transfer of assets between related entities to defeat creditors of a failing company.
The charges were serious. Three counts alleged that JJP dishonestly used her position as a director in breach of s 184(1) of the Corporations Act. One count alleged that she managed a corporation while disqualified from doing so, in breach of s 206A.
The case is a sharp reminder of something that gets lost in the noise about civil penalties and administrative banning orders: the Corporations Act contains criminal offences with real prison sentences. ASIC is actively enforcing them. In FY2025-26, ASIC secured 25 criminal convictions with 21 custodial sentences — a record year for corporate criminal enforcement in Australia.
Most directors think about director duties in civil terms — the risk of a compensation order, a personal contribution to a liquidation, or ASIC administrative banning. The criminal pathway is different. It is prosecuted by the Commonwealth Director of Public Prosecutions. It results in a criminal record. It can mean prison.
Section 184: The Criminal End of Director Duties
Sections 180 to 184 of the Corporations Act form a spectrum of director duties, moving from civil obligations to criminal liability.
Sections 180 and 181 impose civil duties of care and good faith. A breach gives rise to a civil penalty — a fine payable to ASIC, not prison.
Sections 182 and 183 address improper use of a director’s position or information. These can be either civil or criminal, depending on the degree of culpability.
Section 184 is the serious end of the spectrum. It applies where a director or officer:
- Acts dishonestly and intends to gain an advantage for themselves or someone else, or intends to cause detriment to the corporation (s 184(1)); or
- Uses company information dishonestly to gain an advantage or cause detriment (s 184(2))
The critical difference from ss 180 to 183 is the word “dishonestly.” Under s 184, there is no civil penalty pathway. It is criminal only. The maximum penalties are:
- Imprisonment: up to 5 years
- Fine: up to 2,000 penalty units — approximately $728,000 at the current 2026 rate of $364 per unit
What makes conduct “dishonest” rather than merely negligent or reckless? The test is whether the director acted without an honest belief that their conduct was in the best interests of the corporation. Courts have held that a director who causes the company to transfer assets primarily to defeat its own creditors — knowing the company cannot pay those creditors — acts dishonestly. That is exactly what the JJP case involved.
The prosecutorial pathway is also different. Civil penalties are enforced by ASIC through civil proceedings in the Federal Court. Criminal charges under s 184 are referred to the Commonwealth Director of Public Prosecutions (CDPP). The CDPP is independent of ASIC and has its own test for prosecution. Once a criminal brief is referred, the director is dealing with a criminal process — not a regulatory negotiation.
Section 206A: The Disqualified Director Trap
Section 206A of the Corporations Act makes it a criminal offence for a person who is disqualified from managing corporations to manage, or take part in the management of, a corporation.
There are several ways a director can be disqualified:
- Court-ordered disqualification under ss 206C, 206D, or 206E — imposed by a court following a proven breach
- ASIC administrative disqualification under s 206F — ASIC can ban a person for up to 5 years without going to court, based on involvement in multiple failed companies
- Automatic disqualification under s 206B — which applies automatically on conviction for dishonesty offences, insolvent trading, or repeated ASIC Act breaches
The word “manage” in s 206A is broader than most disqualified directors appreciate. It is not limited to holding the formal title of director or signing board resolutions. Courts have held that a person “manages” a corporation if they:
- Make financial or operational decisions, even informally
- Instruct employees or contractors on behalf of the company
- Hold themselves out as a director or officer to third parties
- Act as a shadow director — someone whose instructions the board acts on
- Attend board meetings as an “advisor” while effectively directing outcomes
- Execute contracts or deal with suppliers or customers on the company’s behalf
The criminal penalty under s 206A is up to 1 year imprisonment per contravention. Every day of involvement is a separate contravention. A disqualified director who informally manages a company for three months could face dozens of separate criminal counts.
The most common trap: directors who are administratively banned under s 206F by ASIC believe that resignation is enough. It is not. If they continue to instruct staff, attend management meetings, or influence decisions — even if their formal appointment has ended — they commit a criminal offence on every day of that involvement.
Phoenix Activity: The Connection
The JJP conviction arose in the context of phoenix-style activity. Phoenix activity — the deliberate transfer of assets from a failing company (company A) to a new or related entity (company B) to avoid paying company A’s creditors — is now the subject of dedicated enforcement provisions in the Corporations Act.
The key provisions are:
- Creditor-defeating dispositions (Div 7A, Pt 5.7B, Corps Act): Transfers at undervalue or with the purpose of defeating creditors can be voided and clawed back by a liquidator. ASIC also has civil enforcement powers.
- Criminal referral to CDPP: Where the asset transfers are accompanied by dishonest conduct — as in the JJP case — ASIC refers the matter to the CDPP for criminal prosecution under s 184.
- Illegal phoenix offences (Pt 5.8A, Corps Act): Separate offences targeting the deliberate misuse of corporate structures to avoid creditor obligations, introduced in 2020.
ASIC has a dedicated phoenix enforcement taskforce. In FY2025-26, ASIC secured a record $830 million in civil penalties and returned $644 million to Australians — with a significant portion of that enforcement targeting directors who exploited company structures to avoid creditor obligations.
The message from the JJP case is clear: transferring assets between related entities to avoid creditors is not just a civil law risk. When it involves dishonest conduct by a director who knows the company cannot meet its obligations, it is a criminal act that can result in a jury trial and a prison sentence.
What Happens If ASIC Investigates You
ASIC has broad investigative powers under the ASIC Act and the Corporations Act. If ASIC believes a director may have committed a criminal offence, the investigation typically follows a structured pathway:
- Informal inquiries: ASIC may initially contact a director or their company for documents or information. There is no obligation to respond to informal requests, but the substance of any response is noted.
- Compulsory examination (s 19 ASIC Act): ASIC can compel a director to appear for a private examination. Attendance is mandatory. The director must answer all questions truthfully. Evidence given at a s 19 examination can be used in subsequent civil and criminal proceedings.
- Section 30A notices: ASIC can compel production of documents. Failure to comply is a criminal offence.
- Criminal brief to CDPP: If ASIC considers there is sufficient evidence of a criminal offence, it refers a brief to the CDPP. The CDPP applies a two-stage test: sufficient evidence, and whether prosecution is in the public interest. For phoenix activity, both limbs are almost always satisfied.
- Administrative action in parallel: ASIC can take administrative action (disqualification under s 206F, licence cancellation) simultaneously with or independently of criminal proceedings.
The critical point for any director who receives an ASIC notice or summons: do not respond, attend, or provide documents without first obtaining legal advice. Answers given at compulsory examinations are admissible. An ill-advised response to an early ASIC inquiry can become the foundation of a criminal brief.
What Directors Should Do Now
Whether you are an active director, a recently resigned director, or a director who has received notice of disqualification, there are practical steps that reduce your exposure to criminal liability under the Corporations Act:
- Step 1 — Check ASIC’s banned register. If you have ever been involved in multiple failed companies, check whether ASIC has taken administrative action. The register is public at asic.gov.au. Do not assume you would know if a banning order had been made — ASIC serves banning notices by post, and directors who have moved or changed addresses sometimes do not receive them.
- Step 2 — If disqualified, stop all involvement immediately. Resign formally from all director positions. Cease attending management meetings. Stop instructing employees. Document the separation — formal board resolutions confirming your removal and ASIC notification of cessation.
- Step 3 — Review all related-entity transactions. If your company has transferred assets to a related entity in the past four years — particularly at below-market value or at a time when the company was under financial stress — obtain legal advice about the risk of a liquidator claim or ASIC enforcement action before the company enters administration.
- Step 4 — Do not respond to ASIC notices without legal advice. Whether it is an informal inquiry, a s 19 examination notice, or a s 30A document production notice — engage a commercial litigation solicitor immediately. The compulsory examination process is designed to produce evidence. You need advice before you participate.
- Step 5 — If you are a co-director whose business partner is disqualified, take action. If a co-director has been disqualified and continues to be involved in managing the company, do not assume you are protected by their formal resignation. If their involvement is clear and you take no action, you may face separate liability for allowing a prohibited person to participate in management. Document your steps to exclude the disqualified person.
- Step 6 — Seek early advice at financial difficulty — not after administration begins. Phoenix prosecutions almost universally arise from conduct that occurred when the company was in financial distress but before formal insolvency. A director who seeks legal advice about restructuring options early — before creditor pressure forces a Phoenix — has dramatically better options than one who waits until the liquidator is appointed.
Frequently Asked Questions
Can a director go to prison under the Corporations Act?
Yes. Section 184 of the Corporations Act 2001 (Cth) creates criminal liability for directors who dishonestly use their position or information. The maximum penalty is 5 years imprisonment and fines of up to 2,000 penalty units (approximately $728,000 at the 2026 penalty unit rate). In FY2025-26, ASIC secured 25 criminal convictions with 21 custodial sentences for corporate offences.
What does it mean to “manage a corporation while disqualified”?
Under s 206A of the Corporations Act 2001 (Cth), a person who is disqualified from managing corporations commits a criminal offence if they manage, or take part in the management of, a corporation. This includes making management decisions, instructing employees, acting as a shadow director, or attending board meetings as an “advisor” while effectively directing outcomes. Each day of involvement is a separate offence, carrying up to 1 year imprisonment per contravention.
What is section 184 of the Corporations Act?
Section 184 of the Corporations Act 2001 (Cth) makes it a criminal offence for a director or officer to dishonestly use their position to gain an advantage for themselves or another person, or to cause detriment to the corporation. Unlike the civil duty provisions in ss 180 to 182, there is no civil penalty pathway — s 184 breaches are criminal only and are referred to the Commonwealth Director of Public Prosecutions for prosecution.
How does ASIC investigate and prosecute directors?
ASIC investigates directors using compulsory examination powers under s 19 of the ASIC Act and document production powers under s 30A. Where ASIC identifies sufficient evidence of criminal conduct, it refers a brief to the Commonwealth Director of Public Prosecutions (CDPP). The CDPP decides whether to prosecute based on sufficiency of evidence and the public interest. ASIC can also take administrative action — such as disqualification under s 206F — in parallel with or independently of criminal proceedings.
What should I do if I receive an ASIC notice or summons?
Do not respond to an ASIC notice, attend a compulsory examination, or provide documents without first obtaining legal advice from a commercial litigation solicitor. ASIC’s examination powers are broad and answers given at s 19 examinations are admissible in subsequent civil and criminal proceedings. Engage a solicitor immediately — before any response is made.
If you are a director who has received an ASIC notice, a summons, or has concerns about phoenix activity or disqualification risk, Boss Lawyers can help. Our team regularly acts in director disputes and corporate litigation in Queensland. Call us on 1300 267 711 or contact us online today.
If you are concerned about your personal liability as a director, or are navigating insolvency proceedings, Boss Lawyers’ experienced team can help. Contact our insolvency lawyers Brisbane for advice specific to your circumstances.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
Mark Harley
Principal Solicitor, Boss Lawyers Pty Ltd
17+ years’ experience in commercial litigation and insolvency law
