Should Directors be Pursued for Insolvent Trading where a Company has Entered into a Deed of Company Arrangement?
Insolvency Law Journal, Vol. 13, 2005
11 Pages Posted: 18 Sep 2010 Last revised: 21 Sep 2010
Date Written: September 16, 2005
This article examines the tension in Australia between the insolvent trading prohibition and the voluntary administration regime provided for in the Corporations Act. The tension exists since the former seeks to prosecute directors for incurring debts that the company cannot pay whereas the latter provisions seek to allow a company in financial distress to resolve the means of dealing with financial difficulty with its creditors and move forward on an agreed basis. The case of John Elliott is the first case in Australian corporate law history concerning the relevant provisions where an agreement was made with creditors, after which the director was prosecuted pursuant to the insolvent trading prohibition.
Keywords: insolvency, bankruptcy, insolvent trading, S588G
JEL Classification: K22
Suggested Citation: Suggested Citation