The Corporations Act imposes a clear duty of care on directors not to trade if your company is insolvent.
If your company is insolvent or at risk of becoming insolvent and you continue to trade-on, the consequences can be disastrous if the company later fails. You could become personally liable for the debts you incurred whilst the company was insolvent and you could also be criminally prosecuted.
If you are faced with these risks or possible risks, you should seek independent advice from a suitably qualified insolvency accountant as soon as possible. Here at Insolvency Services Australia we have fully qualified insolvency accountants who you can complete an assessment as to whether your company is solvent or insolvent. Having an insolvency assessment undertaken is critical if your company has been struggling to pay its debts for some time.
Call us today for a quote on 1800 003 883.
What are my duties as a Director?
How do I prevent my company from trading whilst insolvent?
If you suspect your company is insolvent or could become insolvent in the near future, you should not incur any fresh debts. Future supplies should be paid for up-front or paid for on delivery. In addition to this, you should undertake a thorough assessment of your company’s financial position every month so as to ensure that you are “paying back old debt” and getting “back into the black”. If you are not able to “pay back old debt” you should make an assessment as to whether you should continue to trade.
What are the consequences of trading whilst insolvent?
The Corporations Act sets out the penalties for insolvent trading. Usually claims for insolvent trading are taken by liquidators, however, claims can also be taken by ASIC or by creditors (with the liquidator’s consent).
What to do if you Suspect Insolvency
If you suspect your company may be insolvent you should have an independent assessment completed on the solvency of your company immediately. You could seek to rely in this assessment if insolvent trading proceedings were ever commenced against you by a liquidator.
If you are considering a company liquidation, then you should call the liquidation specialists on 1800 003 883.
We handle all types of liquidations and business insolvencies. Our Registered Liquidator is fully licensed by the Australian Securities and Investments Commission and has over 20 years experience in the insolvency profession. Call us today and we will happily provide a quote on a no obligation basis.
All calls to us are confidential and can also be anonymous if required. We look forward to speaking to you soon. Calls to our hotline are free on 1800 003 883.