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ARTICLE · 17 DECEMBER 2019

A bankrupt cannot be a director... or can they?

Worrells
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Article discusses interesting situation where the bankrupt is a director of a SMSF where the only asset is real property.

AustraliaInsolvency/Bankruptcy/Re-Structuring
Morgan Lane
Morgan Lane
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Or can they...

Most readers would know that once a person is subject to a bankruptcy or personal insolvency agreement (Part X), they are restricted from acting as a company director. In theory this seems straightforward; however, there is a quirk in a crossover of legislation and a practicality that requires careful consideration.

The general position under the Corporations Act 2001 is that pursuant to:

  • Section 206B(3): A person is disqualified from managing corporations if they are an undischarged bankrupt under Australian law, its external territories, or another country.
  • Section 206B(4): A person is disqualified from managing a corporation if a person has executed a personal insolvency agreement under Part X of the Bankruptcy Act 1966 ; or a similar law of an external Territory or a foreign country, and the agreement terms are not satisfied.

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