Section 486 of the Corporations Act says that a court-appointed liquidator must not allow creditors or shareholders to inspect company books and records without a court order.

A recent Federal Court decision has held that the prohibition also applies in voluntary windings up – but the ATO is able to circumvent it by issuing a statutory notice to produce to the liquidator under section 264 of the Income Tax Assessment Act 1936 (Cth.).

The decision arose in circumstances where two jointly appointed liquidators in a voluntary winding up had received a section 264 notice from the ATO and were unsure:

• whether section 486 applied in the first place (given that it was a voluntary winding up); and
• if it did, whether it prevailed over the tax legislation so as to permit the liquidators to disregard the section 264 notice.

The ATO approached the court for guidance and, because the liquidators did not wish to contest the matter, the ATO also paid for a barrister to turn up and argue the contrary position.

After hearing from both sides, and reviewing the underlying legislative policy, the court concluded:

• that section 486 does apply in voluntary windings up (with the result that voluntary liquidators must not allow creditors or contributories to inspect books and records without a court order); but
• that, once a section 264 notice has been issued, the section 264 requirement trumps the section 486 protection, with the result that liquidators are not entitled to rely on section 486 to ignore the notice.

The full decision in Commissioner of Taxation v Warner [2015] FCA 659 can be viewed online. If you have any questions about the decision or how it affects you, please contact us.