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What is insolvent trading and what are the consequences?

Now I’ve made a proper investigation of our company’s financial position I think we may have been trading while insolvent for the past six or more months. Does that now make me liable for any of the company’s debts?
Asked in Newcastle - Newcastle and Lake Macquarie, NSW, 07-12-2015
1 Lawyer Answered
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  1. Insolvency & Liquidation
Lawyer Answers (1): Answers from lawyers are general preliminary responses. They are not formal legal advice and cannot taken account of all your circumstances. They do not create a lawyer–client relationship.

Answer by Kelly Angus, Adelaide 5000 SA

  • As a director you must make sure your company does not incur debts when it is insolvent. 
  • If you breached that duty the liquidator can take legal action against you to recover the amount of the debts incurred.
  • If your company was trading while insolvent the claim can be made against you as a director personally. This will mean that you are personally liable to compensate the company for that amount.

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