Insolvent Trading Penalties
The main idea of Insolvent Trading laws is to make directors personally liable for debts incurred after a company was insolvent. That is because those creditors who provided credit to the company will have suffered a loss as a result of the directors allowing the company to trade while insolvent. So the Corporations Law says that the liability for debts after a company becomes insolvent lies with those who were directors at the time the debt was incurred. The Liquidator, a creditor or even ASIC may bring civil penalties against directors. ASIC can also seek orders against a director:
- disqualification them from managing a company;
- fining them up to $200,000;
- to pay compensation to the company equivalent to the loss suffered by creditors.
The Department of Public Prosecutions can even bring criminal proceedings for insolvent trading if fraud or dishonesty is involved.
It is clearly better not to be pondering these possibilities so if you are in doubt about the solvency of your company you should CALL US NOW and discuss the problem with one of our advisors.