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ARTICLE · 16 AUGUST 2004

Insolvent Trading: Odds Stacked Against Directors

Clayton Utz
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In this article, we discuss some of the key findings of an empirical study into insolvent trading. While there have not been many insolvent trading actions that have gone all the way in Australia, directors lose in three out of four cases that do.

AustraliaCorporate/Commercial Law
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Article by Paul James, Professor Ian Ramsay and Polat Siva

Key Point

  • In this article, we discuss some of the key findings of an empirical study into insolvent trading. While there have not been many insolvent trading actions that have gone all the way in Australia, directors lose in three out of four cases that do.

    • An empirical published jointly by Clayton Utz and the Centre for Corporate Law and Securities Regulation (The University of Melbourne) has made various interesting findings. Despite insolvent trading provisions having been in existence in Australia for over 40 years, there have only been 103 cases that have gone to judgment (many cases are of course settled). Perhaps most significantly, 75 per cent of insolvent trading cases against directors end up in a loss for the director. This shows why insolvent trading has become such a bogeyman for company directors.

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