How the Supreme Court made this assessment
Tax, accounting, and legal advisors are often the first asked
for advice by directors on potential insolvent trading claims.
As many are aware, section 588G of the Corporations Act
2001 effectively pierces the corporate veil and makes
directors personally liable for company debts incurred where:
- The company was insolvent or became insolvent at the time the
debt was incurred.
- Where the director (or a reasonable person in the
director's position) had reasonable grounds for suspecting the
company's insolvency or would become insolvent by incurring
that debt.
Defences that directors have to an insolvent trading claim
include if they had reasonable grounds to expect the company was
solvent and would remain solvent (at the time of incurring the
debt).
