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Insolvent Trading and Director Liability

   

Added on  2020-05-04

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Insolvent Trading and Director Liability_1

COMPANY LAW2Introduction A recent news article, which appeared in the ABC News, covered the Nathan Tinkler beingbanned by the ASIC for managing the company, where he failed in his duties as a director (Letts,2017). The following parts elucidate upon the breaches which took place in this case, particularlyin context of the director duties.Analysis of Case The key issue in this case was related to the breach of provisions covered under Part 2D.1 andPART 5.7B of the Corporations Act, 2001 (Cth). It is the duty of the directors in Australia, to prevent the company from trading where theincurring of a particular can result in the company being insolvent; or undertaking a debt whenthe company was already insolvent; particularly when there were reasonable grounds ofbelieving that the company is insolvent, or would become insolvent as a result of indulging in thetransaction as per section 588G of this act (Cassidy, 2006). In short, the directors have a duty toprevent insolvent trading by the company. The breach of this section not only attracts civilliabilities, but criminal liabilities as well. The civil penalties are covered under section 1317E,where upon the court making a declaration of contravention, the ASIC can apply for pecuniarypenalties as per section 206C or can apply for the disqualification of the director from holdingsuch post in any company for a certain period, as per section 1317G of this act (AustralianGovernment, 2013).
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