At the end of 2011, the Federal Government introduced two draft Bills directed at clamping down on companies that engage in “phoenix” activity.

Shareholder claims and corporate bankruptcies are on the rise.

On 24 November 2009, ASIC released Consultation Paper 124 which provides guidance for directors on their duty to prevent insolvent trading which is imposed by section 588G of the Corporations Act 2001.

The economic climate over the past two years has seen a growing number of corporate insolvencies. There is also evidence that directors, and particularly directors of small to medium size enterprises, do not fully understand their duty to prevent insolvent trading.

Directors and officers of corporations are often subject to potential personal liabilities as a result of their positions. This potential for personal liability may be increased in the insolvency context, where a corporation’s creditors will seek to collect on certain debts from alternate sources, such as directors and officers. Directors and officers often utilize insurance and various court mechanisms in order to mitigate their personal liabilities.

The following is a broad overview of the duties and liabilities of directors when their company is in financial difficulties. It is a general guide only and there will be variations according to the specific laws in each jurisdiction.  

The lengthening of the restoration period for dormant companies may make a solvent liquidation an attractive option for some companies. James Stonebridge examines the impact of changes introduced under the Companies Act 2006.

Earlier this summer an affiliate of Rogers Communications Inc. acquired all of the issued and outstanding shares of the corporation carrying on the Mobilicity wireless business in the context of Mobilicity’s Companies’ Creditors Arrangement Act (CCAA) proceeding.