Action by Liquidator against Directors for Breach of Duties under Section 588G of Corporations Act

Running head: COMPANY LAW
COMPANY LAW
Name of the Student
Name of the University
Author Note

COMPANY LAW1
Issue
Whether there can be any kind of action taken by the liquidator against Alice and Libby
and what defences are applicable for Alice and Libby.
Law
The duties of the directors which would help in preventing or prohibiting insolvent
trading has been laid down in the Corporations Act, 2001 (Cth) under the section 588G. This
specific section has been made and is applicable only to those individuals who are the directors
of a particular company during the time when there is a loss suffered by a company through
incurring debts or in another case if the company has become insolvent. It is applicable also
when there has been any kind of suspicions related to the insolvency of the company during the
commencement of it. If the individual who has become the director of a company has no idea
about the insolvent nature of the company then he or she has violated the duties of the directors
which can be held in the case of ASIC v Plymin, Elliott & Harrison [2003] VSC 123. This is
considered to be one of the leading cases which is related to insolvency and breach of directors’
duties under the above-mentioned section of the Act (Buscombe, 2019).
There are certain defences that can be taken into consideration if there has been any
violation or any contravention under section 588G of the Act. These defences have been
mentioned under section 588H of the Corporations Act, 2001 where it states that if there has
been any reasonable grounds or there has been any kind of illness which has rendered the
director weak and thus cannot perform the duties of that of the director in a company then they
can claim for defences under this specific section which would help them to carry out
proceedings in the court if they have been found contravening or violating the Section 588G of