A Timely Reminder on Reinstating Deregistered Companies Under Section 601AH
The decision in Clancy v Australian Securities and Investments Commission serves as a useful and practical reminder of the legal principles that govern applications to reinstate a company under section 601AH of the Corporations Act 2001 (Cth). The case underscores several key points relevant to both corporate officers and legal professionals considering reinstatement applications.
1. The Legislation
Section 601AH Subsection (2) of the Corporations Act sets out the requirements for the Court to make an order for a company’s registration to be re-instated by ASIC. Under s 601AH Subsection (2) a) an application for reinstatement is made to the Court by:
Under s 601AH Subsection (2) b) of the Corporation Act, the Court may make an order that ASIC reinstate the registration of a company if the Court is satisfied that it is just that the company’s registration be reinstated.
Derrington J in Clancy concluded that the principles that bear exercise on this section are well-settled, referencing the decision in Re LCW Property Holdings Pty Ltd [2020] NSWSC 71 at [15]:
… Three matters need to be considered. First, whether the application is made by “a person aggrieved by the deregistration”. Second, the Court must be “satisfied that it is just that the company’s registration be reinstated”. Third, the Court has a residual discretion whether to make an order.
2. What Does “a person aggrieved” Mean?
The court in Clancy emphasised that a person is “aggrieved” within the meaning of section 601AH(2)(a)(i) of the Corporations Act 2001 (Cth) is to be construed liberally and determined by reference to whether the person has suffered some loss of a legal right or interest of some or potential value upon deregistration of a company. A “person aggrieved” is “not someone merely dissatisfied by an event” and the claims must not be “hopeless or bound to fail”. The extent of loss or injury necessary to meet the threshold is to be judged in context however the threshold is low and can be dealt with in a summary way.
In this case, Mr Clancy was considered to be “a person aggrieved” due to the status of the Debt. This Debt was the product of a series of judicial orders enforced against CIP, two other companies and Mr Clancy for a common obligation to pay for costs incurred by Mr Watters in proceedings against CIP. Upon deregistration of CIP, CIP was no longer liable to pay “its fair share” of the Debt. The Court concluded that this caused CIP to be “unjustly enriched”, causing detriment to the three other Defendants. This was held particularly in light of equity’s concern to ensure the burden of a common liability is borne equally (Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342, 350 – 351). In this sense, Mr Clancy suffered a grievance that was able to overcome the low bar imposed by s 601AH(2)(a)(i).
3. What Does “Just” Mean?
The requirement in s 601AH(2)(b) that reinstatement be “just” imposes no fixed limits on the Court’s discretion. The Court in Clancy emphasized that “just” is a broad, policy-oriented standard, not a principle with strict legal criteria. This allows the Court to weigh the equities and practical implications of reinstatement.
The court in Clancy considered the following considerations in order to assess whether registration was to be deemed just: the circumstances of deregistration, the purpose in seeking reinstatement and public interest consideration. In this instance, reinstatement was deemed just because it served a legitimate purpose, caused no identifiable prejudice, and did not conflict with the public interest. Legal practitioners should be mindful that the “just” requirement provides the Court with a wide evaluative lens, emphasizing fairness over formality.
4. Residual discretion
However, the Court in Clancy made clear that the conclusions as to “a person aggrieved” and a “just reinstatement”, “favour, but do not compel” re-instatement of the company. A Court does have discretion whether to reinstate even if the above factors are satisfied. However, upon Clancy’s facts, the Court opted not to exercise its residual discretion having reached a state of satisfaction that it was just to reinstate the registration and that there was no other reason to deny that outcome.
5. Legal Effect of Reinstatement
Under s 601AH(5), a reinstated company is treated as if it had never been deregistered. However, the Court was clear that this deeming provision does not automatically validate acts done on the company’s behalf during the deregistration period.
This distinction is critical: while reinstatement revives the company’s existence retroactively, it does not legitimize legal or commercial actions taken while the company was deregistered. For example, actions in litigation by a deregistered company remain invalid unless separately addressed.
6. Power to Validate Past Acts
Section 601AH(3) gives the Court power to validate acts done during deregistration upon reinstatement. The Court in Clancy exercised this power to validate steps taken by CIP Group Pty Ltd in ongoing legal proceedings, recognizing that validation would serve justice for all parties who relied on those actions.
This highlights the importance of applying for validation alongside reinstatement, particularly where the company was active in litigation or other commercial dealings during deregistration.
Conclusion
The Clancy decision reinforces the flexibility and purposive approach embedded in s 601AH. For legal practitioners, it is a reminder to:
This case provides a helpful reference point for ensuring procedural compliance and strategic clarity in reinstatement applications, particularly in the context of ongoing disputes or obligations involving a deregistered entity.
*This article was prepared with the assistance of Emma Saunders
If you have any questions about reinstating deregistered companies, contact Stipe Vuleta of our Insolvency Team on 02 9264 9111