Questions for Directors

A director is obliged to be constantly aware of the company’s financial position.
An understanding of the financial position of the company only at the time that a director signs off on the company’s financial statements is insufficient.

Does the director:

  • Have information at their disposal to regularly form the view that the company is solvent?
  • Monitor the financial affairs of the company and make sufficient inquiries into its financial affairs on a regular basis?
  • Rely on a third party to provide information about the solvency of the company and, if so, does the director make diligent and timely inquiries of them?
  • Understand the indicators of insolvency that a reasonable person should take into account in determining whether the company is insolvent?
  • Take positive steps to confirm the company’s financial position and realistically assess the options available to deal with any of the company’s financial difficulties?

Is the company:

  • Continually making losses?
  • Unable to realise current assets and facing cash flow difficulties?
  • Not paying creditors in accordance with its terms?
  • Not paying tax and superannuation liabilities?
  • Subject to accumulating debt with excess liabilities over assets?
  • Defaulting on loan or interest payments?
  • Subject to increased monitoring and/o rinvolvement by its financier?
  • Experiencing difficulties in obtaining finance?
  • Entering into instalment arrangements to repay creditors including the ATO?
  • Subject to judgement debts?
  • Disorganised in its internal accounting procedures?
  • Deficient in financial records?
  • Losing key management personnel?