Insolvent Trading

Directors should stop a company from incurring a debt that it is not able to pay. If directors recklessly incur debts they may have to compensate those creditors for the losses they have incurred due to the breach of duty of the directors.

Traditionally the only way to avoid this outcome, was for the directors to appoint a Voluntary Administrator, or a Liquidator.

However recent changes to the Corporations Act, called “Safe Harbour” provisions, provide a mechanism for directors to maintain control of their company, in circumstances that may previously have been trading while insolvent. However formalities are required, so please call us so we can help you make use of the very beneficial provisions.

If the liquidator decides not to take action against the directors, individual or groups of creditors may commence their own actions. Creditors may apply to the liquidator for consent six months after the liquidation.

Please call Peter Lee or Graham Knight on +61 7 3186 6666 or email peter@plee.com.au if you have any enquiries.

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