Falsification Of Books

The Corporations Act 2001 requires directors to carry out duties and obligations with due diligence. Directors must, at a minimum, become familiar with the fundamentals of the business, and monitor the company’s activities and finances. There is a range of offences which can be committed by a director, one of which is falsification of books.

Legislation

The offence is found at section 1307(2) of the Act:

“(2)  Where matter that is used or intended to be used in connection with the keeping of any books affecting or relating to affairs of a company is recorded or stored in an illegible form by means of a mechanical device, an electronic device or any other device, a person who:

(a)  records or stores by means of that device matter that the person knows to be false or misleading in a material particular; or

(b)  engages in conduct that results in the destruction, removal or falsification of matter that is recorded or stored by means of that device, or has been prepared for the purpose of being recorded or stored, or for use in compiling or recovering other matter to be recorded or stored by means of that device; or

(c)  having a duty to record or store matter by means of that device, fails to record or store the matter by means of that device:

(i)  with intent to falsify any entry made or intended to be compiled, wholly or in part, from matter so recorded or stored; or

(ii)  knowing that the failure so to record or store the matter will render false or misleading in a material particular other matter so recorded or stored;

contravenes this subsection.”

Penalties

The maximum penalty for falsification of books is 5 years imprisonment. This penalty is reserved for the most serious cases, however.

Common ways this offence occurs

A person may find themselves facing this charge if they:

• took the company’s documents home with them and intentionally didn’t return them or disposed of them;
• altered or deleted computer records;
• signed a document in someone else’s name.

What must be proven

In order to find a person guilty of this offence, the court must be satisfied that:

• the accused is an officer, employee or member of the company, or used to be;
• they engaged in specific acts or omissions;
• their conduct resulted in the concealment, destruction, mutilation or falsification of any of the securities of the company or books affecting or relating to the company

A company’s books can include any record of information, no matter how it is stored and any document or register.

It must be shown that you caused the destruction etc. recklessly. This means that you were aware of the risk that your actions could result in the destruction but you nevertheless took that risk.

Possible defences

The Act states it is a defence to the charge if the person proves that they “acted honestly and that in all the circumstances the act or omission constituting the offence should be excused”.

If the accused can show that they were not aware of the risk that the documents would be destroyed they may be able to defend the charge. This may be the case where a person accidentally deleted or disposed of books of the company. However, the defendant bears the evidential onus of proving they did not have a dishonest intention.

For advice or representation in any legal matter, please contact Armstrong Legal.