What directors must understand about the temporary relief.
Directors must be conscious of how their company incurs debts in
the COVID-19 environment. While the government has given a reprieve
on insolvent trading until 25 September 2020, it's unclear on
which debts are protected under the insolvent trading provisions
and directors' personal liability for any claim made
post-COVID-19.
Before this crisis, the insolvent trading law
was clear-cut under section 588G of the Corporations Act
2001 (director's duty to prevent insolvent trading by a
company). It states that a company director can be personally
liable for debts the company incurs if at that time,
"reasonable grounds" could make directors suspect the
company was already insolvent or would be insolvent due to this
debt being incurred.
