Insolvent Trading is a serious issue. As a director of a business you have a responsibility to not let your organisation engage in insolvent trading. This occurs when debts are incurred but at the time it is know they will not be able to be paid as and when they are due.

ASIC has released a booklet to help directors better understand their responsibilities with Insolvent Trading. The Insolvent Trading report is a result of ASIC's visits to over 1,530 Australian companies displaying solvency concerns during the period from 2005–06 to 2009–10. Interestingly 15% of these companies reviewed by ASIC were subsequently placed into external administration. This was mostly by the directors.

They found a director is less likely to breach their duties if they:
1: Maintain appropriate books and records
2: Identify insolvency concerns and assess available options
3: Seek professional advice
4: Act in a timely manner

For the full 24 page report go to > ASIC National Insolvent Trading Program Report

Comment from Mark Streeter Sydney Lawyer

What is interesting in this report on Insolvent Trading is that 85% of these companies displaying insolvency concerns therefore were not placed into external administration. The majority of business worked their way through it. Asking for legal advice about insolvent trading is not saying it is all over. Acting in a timely manner rather than leaving it too late is a very good reminder for all business directors. As the report says "Directors seeking advice at an early stage may achieve a better outcome for external stakeholders, including employees and creditors."

If you are facing insolvency or trying to recover debts from an insolvent company give us a call to arrange an appointment to discuss your options.

Many people wonder what can and can't a bankrupt individual do when they are declared bankrupt?

Bankruptcy has serious effects on the individual.  Upon becoming bankrupt almost all of their property goes to (‘vests in’) the persons Trustee in Bankruptcy.

It is then an offense for an undischarged bankrupt person to engage in the following:

a)    Obtain credit or enter a commercial transaction for value in excess of $4,623.00 without disclosing that they are bankrupt.
b)    To carry on a business under an assume name without disclosing the true name and status of bankruptcy.
c)    May not leave Australia or do any act to prepare to leave Australia without the permission of the persons Trustee in Bankruptcy.

Property acquired by the person after being made Bankrupt but before being discharged from Bankruptcy is generally divisible among creditors.

If the bankrupt was in a partnership this partnership is automatically dissolved by becoming bankrupt unless specifically agreed in the partnership agreement to be otherwise.

The bankrupt cannot be:

a)    A director of a company.
b)    A member of the Local Council, a Member of House of representatives or the Senate or a member of the State or Territory Houses of Parliament.
c)    Any civil action commenced by the bankrupt (before they became bankrupt) is “stayed” until the Trustee elects to pursue or discontinue the action.

See also What is Bankruptcy?