Australian Securities and Investments Commission, in the matter of Sino Australia Oil and Gas Limited (in liq) v Sino Australia Oil and Gas Limited (in liq)

The Australian Securities and Investments Commission (ASIC) brought proceedings against Sino Australia Oil and Gas Limited (in liquidation) and its managing director, Mr Shao, for various breaches of the Corporations Act 2001 (Cth). ASIC alleged that the company made misleading and deceptive statements in its disclosure documents, failed to make continuous disclosure of material information, engaged in misleading or deceptive conduct in relation to a financial product, and that Mr Shao was involved in some of these breaches. The claims included allegations of misleading statements about the company's patents and business scope, failure to disclose the deteriorating financial position of its subsidiary, and providing false information to auditors. Both the company and Mr Shao made declarations of contravention under the Act.

The legal issues before the court included whether the company's statements were misleading or deceptive, whether there was a failure to disclose information affecting the likely future net profit, and whether Mr Shao was involved in the contraventions. The court considered the admissibility of transcripts of examinations conducted under the Australian Securities and Investments Commission Act 2001 (Cth) and whether the director's duty of care and diligence had been breached. The court found that the company had engaged in misleading or deceptive conduct by providing false information to its auditors about the financial position of its subsidiary, which was likely to affect the value of its shares.

The court found that the company had contravened various sections of the Corporations Act 2001 (Cth), including sections 728(1)(a), 728(1)(b), 728(1)(c), 674(2), 1041H, and 180. The court accepted ASIC's evidence, including the transcripts of Mr Shao's examination, and found that Mr Shao was involved in the contraventions as he knew the company's profit had deteriorated and this was information which was not generally available and would have had a material effect on the company’s share price.

The court ordered that declarations of contravention be made against both the company and Mr Shao for their respective breaches of the Corporations Act 2001 (Cth). The declarations were made under sections 728(1)(a), 728(1)(b), 728(1)(c), 674(2), 1041H, 674(2A), and 180 of the Act. The court found that the company had misled or deceived investors by providing false information about the financial performance of its subsidiary and that Mr Shao was involved in these contraventions as he knew the information was not generally available and would have had a material effect on the company’s share price.