Insolvent Trading Claims
Roser Lawyers is regularly engaged by Australia’s leading liquidators to act on complex insolvent trading claims against directors. Conversely, Roser Lawyers is also engaged by directors to defend insolvent trading claims.
What is an insolvent trading claim?
Pursuant to section 588H of the Corporations Act a director may be personally liable for debts incurred after a company becomes insolvent.
A company is solvent if and only if it is able to pay its debts as and when they become due and payable if a company is not solvent it is insolvent.
I have received insolvent trading claim letter or statement of claim from a liquidator what should I do?
If you have received a letter of demand or statement of claim or other court documents in relation to an alleged insolvent trading claim against you, or someone you know, it is imperative you obtain legal advice as a matter of urgency.
There are statutory defences available to directors pursuant to section 588H of the Corporations Act. Insolvent trading claims are extremely technical claims with limited judicial direction over the past 20 years.
We have experience acting for directors who are being sued for insolvent trading on some of the largest insolvent trading claims throughout Australia.
We also have acted for and recovered significant amounts of money for liquidators. It is vital to obtain expert advice in relation to matters of this nature as the consequences of an insolvent trading claim can be wide ranging and extremely costly.
Statutory Defences Available
s588H Defences:
(1) This section has effect for the purposes of proceedings for a contravention of in relation to the incurring of a debt (including proceedings under in relation to the incurring of the debt).
(2) It is a defence if it is proved that, at the time when the debt was incurred, the person had reasonable grounds to expect, and did expect, that the company was solvent at that time and would remain solvent even if it incurred that debt and any other debts that it incurred at that time.
(3) Without limiting the generality of subsection (2), it is a defence if it is proved that, at the time when the debt was incurred, the person:
(a) had reasonable grounds to believe, and did believe:
(i) that a competent and reliable person (the other person) was responsible for providing to the first-mentioned person adequate information about whether the company was solvent; and
(ii) that the other person was fulfilling that responsibility; and
(b) expected, on the basis of information provided to the first-mentioned person by the other person, that the company was solvent at that time and would remain solvent even if it incurred that debt and any other debts that it incurred at that time.
(4) If the person was a of the company at the time when the debt was incurred, it is a defence if it is proved that, because of illness or for some other good reason, he or she did not take part at that time in the management of the company.
(5) It is a defence if it is proved that the person took all reasonable steps to prevent the company from incurring the debt.
(6) In determining whether a defence under subsection (5) has been proved, the matters to which regard is to be had include, but are not to:
(a) any action the person took with a view to appointing an administrator of the company; and
(b) when that action was taken; and
(c) the results of that action.
Should you have a matter concerning Insolvent Trading, do not hesitate to contact our office for a confidential discussion.