Action taken by liquidator against directors for insolvent trading

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

CORPORATIONS LAW1
Issue
Whether there can be any action taken by the liquidator against the directors who were
Alice and Libby and what remedies are available.
Law
Under the section of 588 G the directors of a company needs to prevent their company
from running into losses or from incurring any kind of debts. The directors of a company has to
protect its company from being insolvent under this section of the CA Act, 2001. It applies to a
person who at the time of the commencement of this had incurred any debts or would be
incurring any debts which would make the company insolvent. The person under reasonable
belief needs to be aware or have the knowledge that the company have been solvent without any
kind of suscpicion. Therefore, it is a breach of the directors’ duties. The director should prevent
the company from being insolvent and should not do it in a dishonest way. It can be seen in the
case of TourPrint International Pty Ltd & ANOR v BOTT, Supreme Court of New South Wales,
15 June 1999.
Under the section 588H the defences can be claimed by the directors if they are
considered to be on reasonable grounds or through any kind of illness which would mean that the
person was incapable of performing in the company and thus designated someone else to be
apart of that company and try to carry out the functions appropriately by giving adequate
information to the person or the director. If the director is reasonably ill then that is considered to
be a ground for defence under this section. The directors need to be able to prevent the company
from being insolvent and to prevent the company from incurring any kind of debts. It can be seen