ASIC releases regulatory guide for directors on the duty to prevent insolvent trading

Every director of an Australian company is under a legal duty to prevent the company incurring a debt when the company is insolvent (or where that debt will cause the company to become insolvent).

The Australian Securities and Investments Commission's (ASIC) new Regulatory Guide sets out four key principles which directors should follow to meet their obligation to prevent insolvent trading.

The Regulatory Guide also sets out ASIC's approach to assessing whether a director has breached their duty.

Background

Filed under:
Australia, Company & Commercial, Insolvency & Restructuring, Hall & Wilcox, Security (finance), Breach of contract, Board of directors, Accounting, Debt, Balance sheet, Cashflow, Liquidator (law), European Commission, Australian Securities and Investments Commission, The Australian, Constitutional amendment, Corporations Act 2001 (Australia)
Authors:
Tony Macvean , James Morvell
Location:
Australia
Firm:
Hall & Wilcox
ASIC issues draft guidance on insolvent trading

In response to a degree of uncertainty as to a director's statutory duty to prevent insolvent trading, the Australian Securities and Investments Commission (ASIC) has released a consultation paper containing a number of proposals on this fundamental duty (Consultation Paper 124: Duty to prevent insolvent trading: Guide for directors). Importantly for directors, the consultation paper (which contains a draft Regulatory Guide) identifies the factors ASIC considers when deciding to commence an investigation in relation to possible insolvent trading.

Filed under:
Australia, Capital Markets, Company & Commercial, Insolvency & Restructuring, Hall & Wilcox, Public company, Security (finance), Board of directors, Budget, Debt, Cashflow, Non-executive director, Australian Securities and Investments Commission, Corporations Act 2001 (Australia)
Authors:
James Morvell , John Bassilios
Location:
Australia
Firm:
Hall & Wilcox