Insolvent Trading: A Case Analysis of Adriano Zumbo

Business Law Assignment

Introduction
The following report analyzes the case of insolvent trading. Recently an article was published in
the newspaper which provided information about insolvent trading practices adopted by Adriano
Zumbo since 2017 (Han, 2018). Insolvent trading is an unlawful offence and it may result in
directors becoming personally liable for the dents of a company.
Analysis
Insolvent trading is considered to be unlawful in the Australian Law under Corporations Act
2001 section 588G.
In the recently published newspaper reports it was highlighted that three businesses run by
Zumbo in Australia, including 611 Pty Ltd, I’m So Fancy Pty Ltd and Mel611 Pty Ltd, entered
into voluntary administration at the beginning of August 2018and continued to trade. There were
no releases from the side of the company justifying the reasons for entering into voluntary
administration. Later, it was revealed that the company had an outstanding debt of approximately
$10 million and was still trading in the market. Further, it was also mentioned in the reports that
the business did not have sufficient business working capital, since the year 2016 and was not
able to meet even the short term business obligations. This is a lawful offence under the
Corporation Act 588G. According to this Act the companies and the directors of the company
were banned from further trading as they will further incur debts for the company (Powell,
2018).
It is the duty of the directors to prevent the insolvent trading by the company. If the director of
the company fails to fulfill his duties after being aware of the factor that there are grounds of
predicting insolvency, the penalties ,may range up to $200,000. If the dishonest factors are