find the latest legal job
Corporate Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Highly-respected, innovative and entrepreneurial Not-for-Profit · Competency based Board
View details
Chief Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Dynamic, high growth organisation · ASX listed market leader
View details
In-house Projects Lawyer | Renewables / Solar | 2-5 Years PQE
Category: Generalists - In House | Location: All Australia
· Help design the future · NASDAQ Listed
View details
Insurance Lawyer (3-5 PAE)
Category: Insurance and Superannuation Law | Location: Brisbane CBD & Inner Suburbs Brisbane QLD
· Dynamic organisation ·
View details
Legal Counsel
Category: Corporate and Commercial Law | Location: North Sydney NSW 2060
· 18 month fixed term contract · 3-5 years PQE with TMT exposure
View details
Insolvent trading laws hinder companies in GFC

Insolvent trading laws hinder companies in GFC

Australia's insolvent trading laws could result in more company collapses than necessary, according to McCullough Robertson partner Scott Butler.Butler said the laws prevent company directors…

Australia's insolvent trading laws could result in more company collapses than necessary, according to McCullough Robertson partner Scott Butler.

Butler said the laws prevent company directors restructuring in the GFC as directors look to avoid the liability of insolvent trading, rather than trade their way out of business difficulties.

"The Corporations Act 2001 makes directors responsible for ensuring their companies do not trade while insolvent, and leaves them open to civil, and possibly criminal, penalties as well as being personally liable to compensate for losses if insolvent trading occurs," he said.

"This legislation means that directors are walking a legal tightrope if they attempt to keep their businesses afloat rather than declaring insolvency."

A director cannot allow a company to incur a debt unless he or she has a reasonably held expectation that it is solvent under current legislation.

However, with finance difficult to access and cash flow affected by creditors delaying payment, the issue is affecting a growing number of otherwise creditworthy companies, said Butler.

Australian regulators need to provide greater flexibility to directors, he said, such as that granted in Britain where directors have a greater opportunity to continue trading if there is a reasonable prospect of avoiding insolvency. Germany suspended insolvent trading laws in 2008 in response to the GFC.

- Sarah Sharples

Like this story? Read more:

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

The legal budget breakdown 2017

Insolvent trading laws hinder companies in GFC
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
LCA president Fiona McLeod SC
Aug 17 2017
Where social fault lines meet the justice gap in Aus
After just returning from a tour of the Northern Territory, LCA president Fiona McLeod SC speaks wit...
Marriage equality flag
Aug 17 2017
ALHR backs High Court challenge to marriage equality postal vote
Australian Lawyers for Human Rights (ALHR) has voiced its support for a constitutional challenge to ...
Give advice
Aug 17 2017
A-G issues advice on judiciary’s public presence
Commonwealth Attorney-General George Brandis QC has offered his advice on the public presence of jud...
APPOINTMENTS
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
opinion
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
Help
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...