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Insolvent Trading – another ASIC court action

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I know from the many calls we take at Dissolve that most directors are aware of, and worried about, insolvent trading laws.  There was an interesting case I blogged about last year here and another much bigger case has been commenced by ASIC this month.

ASIC has commenced an action against the three directors of Kleenmaid.  Kleenmaid collapsed in 2009 owing about $97 million.  This case is a big one with 1100 witness statements and 4000 exhibits.  Some interesting tidbits:

  • ASIC alleges insolvency from March 2008;
  • ASIC is going for 18 counts of criminal insolvent trading (civil insolvent trading cases are much more common) for around $4 million;
  • The directors are also charged with a $13 million fraud against Westpac;
  • They are also charged with another fraud for withdrawing $330,000 from the company’s bank accounts two days before the Administrators were appointed.

It’s pretty rare to see criminal cases for insolvent trading but we also saw one last year where a director was sentenced to 3 years jail.

I’ll provide some advice in a future blog on how directors can ensure they do not fall foul of insolvent trading laws whilst working through their company’s problems.

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