Risk of Personal Liability for Directors

Breaches of the Corporation Act by directors of companies may result in personal
liability. Serious breaches may also result in criminal liability.

Insolvent trading

If some or all of the following events are present in a company and the company is subsequently placed into liquidation, then the director may be at risk of
prosecution by a liquidator.

  • Overdue Commonwealth and/or Statetaxes
  • A poor relationship with its financier,including an inability to borrow further funds
  • No access to alternatefinance
  • An inability to raise further equity capital
  • Continuing losses
  • A liquidity ratio below 1
  • Suppliers placing the company on cash on delivery (COD) or otherwise demanding special payments before resuming supply
  • Creditors remaining unpaid outside of trading terms
  • Issuing post-dated cheques
  • Dishonoured cheques or electronic payments being returned unpaid
  • Special arrangements with selected creditors
  • Receipt of solicitors’ letters, summonses, judgements or warrants issued against the company
  • Payments to creditors of round sums which are not reconcilable to specific invoices
  • An inability to produce timely and accurate financial information to display the company’s trading performance and financial position and make reliable forecasts.

Corporate Insolvency

DW Advisory offers the full range of corporate insolvency services to assist companies facing cashflow difficulties and mounting debts that cannot be adequately addressed without the protection and process of a formal insolvency appointment.

Choosing the right option, at the right time, can be imperative to the survival of the business, or, where that is not possible, maximising the return for the company’s creditors.

Seeking early advice will reduce the risk of personal liability for the company’s directors. Our significant experience and expertise will assist greatly in achieving the best available outcome.

For more information, please click on the link below to contact one of our advisors.

02 9234 0444