Directors' Duties and Insolvent Trading: Analysis of a Legal Case

This case study analyzes whether Gino breached his director's duty for prevention of insolvent trading under section 588G of the Corporations Act, 2001. It applies the rules of section 588G, which outlines the conditions for breach, and section 588H, which provides defenses. The analysis considers Gino's role as a director of Sell my House Pty Ltd, the company's insolvency, and Gino's awareness of the company's financial position. The conclusion explores whether Gino can utilize the relief under section 588H due to his unawareness of the complete insolvency during his hospitalization.

LAW CASE

Table of Contents
 ISSUE
 RULES
 APPLICATION
 CONCLUSION

ISSUE
 Is Gino under the breach of Directors duty for prevention of
insolvent trading under section 588G of the corporation Act, 2001?

RULE
Section 588G:
 As per this section of the Corporation act, a person is under the
breach of the duty to prevent insolvent treading if:
 The person is company’s director at the time of company incurring
debt; and
 The company becomes insolvent due to incurring debts or it
insolvent when incur debt; and

RULES CONTINUE…
 Section 588H:
 This section of the corporation act, 2001 provides defence to breach of the
director’s duty regarding insolvency trading, if the person proves that;
 The person has a reasonable ground to believe that company was solvent at the
time of incurring dent or it would remain solvent; or
 The person has reasonable grounds of believe that a reliable and competent
person of the company have a responsibility related with providing information
of company’s solvency; or

 With application of the rules of section 588G, it can be stated that Gino was
director of the company Sell my House Pty Ltd when it becomes insolvent and
also it continued trading after 2 weeks off its insolvency.
 The company Sell my House Pty Ltd had all reasons of understanding its
insolvency, yet it incurred debt in from of continuing the business for 2 months.
 Also, Gino was aware about the position of the company, being near insolvency
and he had reasonable grounds of suspecting the solvency of the company Sell
my House Pty Ltd.
 This can be stated that he had an idea of that the solvency condition of the
organisation was on the verge of getting insolvent.
APPLICTION

CONCLUSION
 With this it can be concluded that when the breach of director duty occurred Gin
was unaware of the complete insolvency of the Sell my House Pty Ltd as he was
severely ill and hospitalised.
 The relief can be utilised by Gino pertaining under section 588H of the
corporation act 2001