If ASIC knocks on your door to inspect your company’s books and records, you need to understand your legal rights and obligations
For most companies, a surprise inspection by the Australian Securities and Investment Commission (ASIC) isn’t ideal. But if it happens to you, it’s best to know whether you must comply with a request to inspect or produce records or books, and when to seek legal advice about ASIC’s powers of inspection.
Do I have a lawful right to refuse ASIC’s request to inspect?
If you receive a request to inspect, the first thing you should do is ask to inspect the officers’ delegation of authority under the ASIC Act. Whilst ASIC has the power to delegate any of its functions or powers, it’s important to check that the person asking to look at your books is who they say they are.
In the execution and performance of their duties, an ASIC officer must act in good faith to rely upon the protection of the statutory immunity contained in the ASIC Act.
So, must ASIC have an investigation on foot for it to be able to inspect a company’s books and records?
The answer is no.
Must I comply with ASIC’s request to inspect books and records?
If you fail to make your company books available for inspection, you can be charged with a criminal offence. If convicted, you face up to 3 months’ imprisonment.
Failure to comply is permitted only if you have a reasonable excuse. A reasonable excuse refers to any physical or practical difficulties which you may experience in complying with the request. Some examples include:
- The books being located at another site to which access is not immediately possible over which the person has no control
Self-incrimination isn’t an acceptable reason for refusing to comply.
Must I comply with ASIC’s request to produce books and records?
Under ASIC’s powers of inspection, it may issue a Notice to Produce Books to a body corporate or a person. This Notice requires a specific staff member to produce a specific book at a specific time and place. In the accompanying letter, ASIC will typically state:
The Notice should not be construed as an indication by ASIC that a contravention of the law has occurred, nor should it be considered a reflection upon any person or entity.
Additionally, the Notice must also state why ASIC is making the request.
However, a failure by ASIC to comply with this requirement won’t necessarily render the Notice invalid. A Notice will only become invalid if, by failing to state the nature of the matter to which the request relates, the recipient would be unable to assess whether the Notice was within ASIC’s power.
You (or your company) can’t refuse to produce a book on the grounds of self-incrimination. But you can make a claim for privilege against self-incrimination or privilege against penalty. The production of any documents to ASIC should be accompanied with clear Notice that the documents are privileged to prevent them being used as evidence against the person:
- In a criminal proceeding, or
- A proceeding for the imposition of a penalty
This exception does not include any proceedings in connection with making a false statement or signing a record that contains a false statement.
Failure to comply with a Notice to produce books without reasonable excuse may attract a penalty of up to 2 years’ imprisonment. A ‘reasonable excuse’ has a technical meaning at law.
ASIC may apply to the Court for orders as well as make an application for its costs. We can advise you about your compliance obligations under a Notice.
The final word
Statutory powers of inspection allow ASIC to request that books and records are produced or made available for inspection. Failure to comply can attract serious penalties if you don’t have a reasonable excuse. If you find yourself in this position, you’ll need our urgent legal advice.
For more information about ASIC’s powers of inspection, contact Garth Fountain-Smith on 03 9670 5000.
DISCLAIMER: We accept no responsibility for any action taken after reading this article. It is intended as a guide only and is not a substitute for the expert legal advice you can receive from marshalls+dent+wilmoth and other relevant experts.