Corporate Law: Insolvent Trading and Director's Liability

Running head: CORPORATE LAW
Company Law
Name of the Student
Name of the University
Author Note

1COMPANY LAW
Issue:
Whether or not Mr. Poolman and Mr.Irving is responsible insolvent trading and thereby
the loss and damage suffered. The issue also involves if it is the fault of the liquidator or if
the directors of the company are at fault. The issue also involves regarding the loss incurred
by the liquidators.
Rule:
Section 588M of the Corporations Act of the year 2001 states that if the Director of a
Company has violated section : 588G(2) or (3) of the Corporations Act in the year 2001 and
is found guilty with respect of incurring debt and the creditor on whom he owes a debt has
thereby suffered some loss or some damage with regards to the debt because of the
insolvency of the company and the debt thereby incurred was either wholly or a part was not
secured when the said loss or the damage occurred and which led to the winding up of the
Company.
Section 588G of the Corporations Act of the year 2001 deals with the “Director's
duty to prevent insolvent trading by company”. It is stated that if the director of a company
trades during the time of insolvency period then he won’t be able to do so by this section. It
also states that if the company is insolvent during that time or if the company becomes
insolvent on the basis of incurring debt, then also the director won’t be able to do so. The
director also won’t be able to trade according to this section when there is a chance of
insolvency.
According to section 536 of the Corporations Act of the year 2001 it is stated that if
the court wants it can investigate the actions of the liquidator. The court can at any time make
inquiry regarding the works of the liquidator. The court in this regard can also ask questions

2COMPANY LAW
to the liquidator at it thinks necessary. Then on the basis of this inquiry the court can take
decisions as it thinks necessary.
Section: 37 A of the Conveyancing Act, of the year 1919 states for each and every
alienation with regards to property which is made before or there after the enforcement of
the Conveyancing (Amendment) Act 1930 , with an intention for defrauding the creditors,
will thus, be voidable.
Section 1317 of Corporations Act of the year 2001 deals with “relief from liability for
contravention of civil penalty provision”.
According to section 1318 of the Corporations Act in the year 2001 it is stated that in
case of a civil proceeding against the director of a company on account of default,
negligence, breach of trust, breach of duty. If it appears to the honourable court that the
director is liable regarding the negligence or default or breach caused but was honest in his
actions regarding the circumstances of the particular case, then the director can be fairly
excused for the negligence or default or breach caused. The Court in this regard can relieve
the director either fully or in a part from the liability if the court thinks it necessary.
Application:
In the Hall and Ors v Poolman and Ors [2007] NSWSC 1330 case “Reynolds Group of
companies” had a vineyard as well as winery in New South Wales. On August in the year
2003, “Reynolds Wine Group” entered into voluntary administration and then it again went to
voluntary administration in November in the year 2003. During that time Reynolds went into
liquidation process. Secured Creditors collectively had a debt of $30 million approximately.