Gay's lawyers told the court his family companies would not survive if he was not allowed to run them.
The Commonwealth Director of Public Prosecutions will pursue proceeds of crime action against former Gunns boss, John Gay.
Gay was fined $50,000 and disqualified from running a corporation after being found guilty of selling 3.4 million Gunns shares in 2009 while he had price sensitive information.
Lawyers acting for Gay say the Commonwealth DPP has sent a letter stating it intends lodging a pecuniary penalty order against the former timber boss, which compels him to pay money for the benefits derived from criminal activity.
The CDPP says it is still waiting on expert evidence about the benefit Gay gained as a result of his offending.
It has previously been estimated Gay made close to a $1 million from the sale of the shares.
The letter was mentioned during a Supreme Court hearing which will determine whether Gay should be allowed to run a family company.
The former chairman of the collapsed timber company told the court a business his family owns will not survive if he cannot run it.
He is seeking leave from the Australian Securities and Investment Commission (ASIC) to serve as a director for Specialty Veneers and the family trust which owns it, JEG Management.
The company has operations in Launceston and Somerset, in north-western Tasmania, and employees 21 people.
Under cross-examination, Gay told the hearing that he expects the company will not survive beyond the next three years if he is not providing strategic direction.
"The business is high end and there are sometimes big risks in buying timbers," he said.
He did not agree that he could perform the same functions while employed by the company or as a consultant.
Gay also said it would be difficult for him to secure finance for the companies, if he were disqualified from acting as a director.
"It's my belief that people in the finance industry have problems with people who have restrictions on them about running a business."
In submissions, Gay's lawyer Jonathon Moore told the hearing his client was of good character and his insider trading offence had been classified as inadvertent, rather than criminal.
He said Gay would be adequately punished if he remained unable to run large, publicly-listed companies like Gunns, but was only allowed to direct the two small, family-owned businesses.
ASIC opposes the application, saying it would water down the penalty handed down against Gay.
The judge hearing the case has reserved his decision.
More on this story: •John Gay's insider trading fine takes some by surprise •No proceeds of crime action against ex-Gunns boss John Gay •ASIC boss calls for tougher penalties to punish corporate crooks
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