The Supreme Court of Tasmania in In re Gay [2014] TASSC 22 has given leave to a person convicted of insider trading (and therefore automatically disqualified from managing corporations for five years) leave to manage (and be a director of) two private companies involved in his family business.
The judgment discusses the requirements of section 206G of the Corporations Act and the principles to be applied to a grant of leave by a court.
After considering Mr Gay’s background and personal circumstances, ASIC’s objections and the interests of shareholders, creditors and employees of the two companies, Judge Pearce was satisfied that Mr Gay had discharged the onus of demonstrating that leave should be granted to him to manage the two companies.
Judge Pearce concluded:
Insider trading is a serious offence. Mr Gay’s offence was serious. It requires a sanction that achieves the purposes of protecting the public, deterring others from committing such offences and adequately punishing the offender. Even so, Mr Gay’s offence had several key features which served to distinguish it from the more usual cases of insider trading, and put it in a less serious category than many which come before the courts. His offence did not involve dishonest or deliberate conduct. I have concluded that the grant of leave, limited as it is to the two companies of the nature and structure I have described, will not unduly undermine the protective, deterrent and punitive objects that the legislature intended by the automatic disqualification provision. Mr Gay was made subject to a criminal conviction and fine. He has suffered public condemnation and loss of reputation. He will remain disqualified from managing any other company….
Although I am satisfied that the risk of future corporate misconduct is very low it would be prudent to impose a condition that Mr Gay is not sole director of either company. Thus the grant of leave for Mr Gay to manage both companies will be conditional upon there being, if he is appointed a director, at least one other director in each case.
