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ARTICLE · 11 NOVEMBER 2020

Insolvent trading – Know your obligations

Madgwicks
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Temporary relief on insolvent trading for directors ends on 31 December 2020, so businesses must know their obligations.

AustraliaInsolvency/Bankruptcy/Re-Structuring
Catherine Ballantyne
Catherine Ballantyne

Due to the economic repercussions of COVID-19, insolvent trading has become an area of law that all those involved in business should understand. With the temporary relief on insolvent trading for directors scheduled to end on 31 December 2020, it is vital that businesses understand their obligations

What is insolvent trading?

A director has a duty to prevent insolvent trading. Insolvent trading occurs where:

(a) a  person is a  director of a  company at the time when the  company incurs a debt; and

(b) the  company is  insolvent at that time, or becomes  insolvent by incurring that debt (or multiple debts); and

(c) at that time, there are reasonable grounds for suspecting that the  company is  insolvent, or would become  insolvent by incurring the debt(s).

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.

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