Is trading while insolvent an offence?
Is trading while insolvent an offence for a director or an offence for the company?
Hi, insolvent trading is an offence for a director (including "shadow" directors) under s 588G of the Corporations Act.
A breach of s 588G is both a breach of directors' duties which can lead tocompensation to be recovered from that director (s 588M). A claim is possible where the creditors suffered loss or damage because of the company’s insolvency and the debt was wholly or partly unsecured.
Also, a breach of the insolvent trading provisions can lead to ASIC prosecution.
Suggested way forward
You should consult a lawyer to determine if the acts undertaken or proposed to be undertaken by the director(s) are acts that fall foul of the insolvent trading provision, given the issue of personal liability.
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