Should Directors be Pursued for Insolvent Trading where a Company has Entered into a Deed of Company Arrangement?

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

Anderson, Colin J. and Morrison, David S., Should Directors be Pursued for Insolvent Trading where a Company has Entered into a Deed of Company Arrangement? (September 16, 2005). Insolvency Law Journal, Vol. 13, 2005, University of Queensland TC Beirne School of Law Research Paper No. 10-34, Available at SSRN: https://ssrn.com/abstract=1678078 or http://dx.doi.org/10.2139/ssrn.1678078