Insolvent Trading & Director’s Role

Insolvent trading is the law under the Corporations Act section 588G that says that if a company is insolvent and a director allows the company to incur a new debt, then the director can be made personally liable for the new debts incurred. The law makes directors responsible for ensuring that their company does not trade while insolvent.

Insolvent trading is the law under the Corporations Act section 588G that says that if a company is insolvent and a director allows the company to incur a new debt, then the director can be made personally liable for the new debts incurred. The law makes directors responsible for ensuring that their company does not trade while insolvent.

This video outlines the roles and responsibilities of a Company Director while company goes insolvent.

In this video, you will discover the following key points:

  1. Avoid trading whilst insolvent.
  2. What are the powers given to liquidators under the section 588 G of Corporations Act?
  3. A Director may access protection from the consequences of insolvent trading.
  4. A Director has a defence against insolvent trading claims as per Section 588H of the Act.
  5. A Defence will apply to protect a Director from personal liability in an insolvent trading claim.
  6. Safe Harbour option for Directors and its requirements.
  7. Involving a Safe Harbour advisor.

Recent Articles

We’re pleased to welcome Chris Bergin to Cathro & Partners. Joining the team in February 2025, Chris brings with him 18 years of experience across a broad spectrum of corporate and personal insolvency matters. His background includes work in voluntary administration, receiverships, liquidations, safe harbour advisory, and complex restructuring assignments.

Section 588FP of the Corporations Act 2001 (Cth) addresses the validity of security interests granted by a company to certain related parties, particularly its officers. This provision is designed to prevent company officers from securing personal advantages over other creditors, especially in the period leading up to an external administration.

When a business faces insolvency, one of the most overlooked yet critical aspects is ensuring that administrators and receivers are legally and correctly appointed. In this episode of The Cut, expert insolvency lawyer Nick Christiansen from Sparke Helmore joins the conversation with host Simon Cathro, to break down valid vs.