ASIC releases Insolvent Trading Act30-November-2010 Fraud and Insolvency By admin
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:
- Maintain appropriate books and records
- Identify insolvency concerns and assess available options
- Seek professional advice
- 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 on 8197 0105 to arrange an appointment to discuss your options.