When ‘Just Closing the Doors’ Turns into a Conviction

ASIC’s recent prosecution of a Sydney gym director is a timely warning for anyone thinking they can quietly “shut down” a business without properly addressing debts.

In this case, the director lodged a deregistration form stating the company had no liabilities. In reality, there were more than $70,000 owing to the ATO and a landlord. That single misstatement, whether careless or deliberate, was enough to secure a conviction under the Corporations Act. The outcome? A criminal record and a 12-month good behaviour bond.

On the surface, deregistration can look simple. Fill in a form, pay a small fee, and walk away. But as this case shows, when liabilities still exist, it’s not just a technicality, it’s a breach of the law. What seems like a shortcut can put directors at personal risk, damage reputations, and in some cases, end careers.

You will recognise how often your clients say, “Can’t I just close the business and move on?” It’s an understandable thought when cash flow is tight and pressure is high. But when debts remain, tax arrears, lease obligations, supplier claims, “DIY exits” are a trap. Clients who try to save on costs by handling it themselves can end up paying far more in legal consequences.

This is exactly why you as advisors should bring in specialists early. At de Jonge Read, we work alongside accountants, bookkeepers, and lawyers to ensure your clients understand their real options. In many cases, deregistration is not even possible, and safer alternatives such as restructuring, a VA/DOCA, or managed wind-down may deliver far better results. More importantly, we ensure that any path taken is compliant and defensible, protecting not only the client but also your reputation as their trusted advisor.

The Sydney case is not an outlier. ASIC is increasingly scrutinising directors who misrepresent company liabilities. By steering clients to expert guidance before they act, you protect them from criminal exposure and protect yourself from being caught up in the fallout.

Your role isn’t to shoulder insolvency or regulatory risk; it’s to protect your clients and guide them to the right expertise when the stakes are high. That’s where we come in, providing no-cost, no-obligation advice that sets out the risks clearly and gives your clients a roadmap forward.