Insolvent trading

Directors and officers of a company have a positive duty to prevent their company trading or incurring liabilities if it is insolvent.

A company is insolvent if it is unable to pay its liabilities (debts) when they are due.

Before a director or officer allows a company to incur new debt, the director should consider whether there are reasonable grounds to suspect that the company is insolvent or will become insolvent as a result of incurring the debt.

An understanding of the financial position of the company only when a director signs the yearly financial statements is insufficient. Directors and officers of companies need to be constantly aware of a company’s financial position.

There are various penalties and consequences of insolvent trading, including civil penalties, compensation proceedings and criminal charges.

There are various defences available to a director for insolvent trading.

This information is not a substitute for advice concerning your circumstances. Liability limited by a Scheme approved under the Professional Standards Legislation. 

ATO Debt l ATO Director Penalty Notice l Director Penalty Notice l Bankruptcy l Business Bankruptcy
Business Failure l Company Administration l Company Bankrupt l Company Debt l Company Liquidation
Deed of Company Arrangement l Insolvency l Insolvency Advice l Insolvency Specialist l Insolvent
Insolvent Trading l Liquidation l Liquidators l Small business bankruptcy l Statutory demand l Tax audit
Tax debt l Tax debt help l Unpaid tax l Voluntary Administration