Current Insolvency provisions under the Australian Corporations Act impose a duty on Directors not to trade while insolvent, but also not to trade in a manner that will lead it to insolvency.
Although this may not appear too onerous an obligation, it can actually be trickier than it seems. Some companies regularly flirt with insolvency, particularly if they trade in commodity prices or on the foreign exchange. The same can be said for directors who, in the pursuit of innovation, lead their company into unknown territory.
The personal liability provisions under the existing insolvency framework in Australia means directors may be unwilling to take the necessary risks i…
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