Journal article
Insolvent Trading: Director Accountability for Minimal Returns to Creditors in Liquidations
Insolvency law journal, Vol.31(2), pp.85-96
01/09/2023
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Abstract
Recent ASIC statistics relating to company liquidations suggest that insolvent trading is commonplace. Instead of accepting this as an unavoidable cost or inevitable outcome of corporate failure, amendments could be considered to improve accountability and incentives for directors of insolvent companies and better balance the competing imperatives of reasonable risk-taking (with its attendant economic benefits) and creditor protection (preventing abuse of use of the corporate form). The "safe harbour" from insolvent trading introduced in 2017 appears to support diligent directors of financially distressed companies in exploring legitimate turnaround options. However, the "safe harbour" reform did not address longstanding deficiencies in the statutory duty to prevent insolvent trading that undermine its effectiveness as a deterrent. Legislative measures introduced in 2019, to prevent directors abusing the Fair Entitlements Guarantee (FEG) scheme, may exemplify amendments that could be extended to automatically and temporarily disqualify directors of liquidated companies that deliver a "minimal return" to general unsecured creditors.
Details
- Title
- Insolvent Trading: Director Accountability for Minimal Returns to Creditors in Liquidations
- Creators
- Mark Wellard (Author) - Southern Cross University
- Publication Details
- Insolvency law journal, Vol.31(2), pp.85-96
- Publisher
- Lawbook Co Ltd
- Identifiers
- 991013227010402368
- Academic Unit
- Faculty of Business, Law and Arts
- Language
- English
- Resource Type
- Journal article