The Federation Press

Insolvent Trading



[T]his is the first book that I have reviewed that sets out to deal specifically with the problems that arise when Companies are faced with the problems of whether or not they may continue to trade due to insolvency and to the ultimate liabilities of Directors under Part 5.8 of the Corporations Law....
At the heart of this book is the fact that Company Directors are responsible both in a Civil and in a Criminal sense for permitting that Company to continue to trade when it is unable to pay its debts as and when they fall due. One of the prime difficulties is in determining when that position has been reached and much of the value of this book arises because of its discussion of the different cases in which this issue has been considered....
The differences of judicial opinion as to when such an action may be brought and as to when the requirements for success have been established are discussed and should assist in providing advice in future cases as to when and how such proceedings can be taken.
On the other hand Company Directors should be presented with a copy of this book as compulsory reading, upon assuming office so that they might better understand their obligations as directors. This is a very valuable exposition on a difficult area of the Law. - The Law Letter (Law Society of Tasmania)

Table of Contents


Application of Part 5.8 of the Corporations Law
Interpretation and Application/ The Problem Identified/ The Competing View/ The Narrow View of Section 553(2)(b)/ Critique of the Narrow View/ Conclusion

The Concept of a ’Debt’ in the Corporations Law
What is a ’Debt’?/ When is a ’Debt’ Incurred?

Part 5.8 of the Corporations Law in Operation
Standing to Sue/ The Concept of Reasonable Expectation and Inability to Pay Debts/ The Meaning of the Terms ’the Company’ and ’the Management’/ Liability under Section 593(1) of the Corporations Law

Statutory Defences to an Insolvent Trading Claim

Recovering Property or Compensation for the Benefit of Creditors of Insolvent Companies after June 1993
Corporate Law Reform Act 1992: A New Insolvent Trading Regime/ Corporations Law Part 9.4B/ Corporations Law Part 5.7B Divisions 1 and 2

Directors’ Duty to Prevent Insolvent Trading and Recovery of Compensation from Directors after June 1993
Directors’ Statutory Duty to Prevent Insolvent Trading/ Defences to a Claim for Breach of Section 588G Duty/ Liability of Directors to Compensate the Company/ Liability of a Holding Company for the Insolvent Trading of its Subsidiary

Table of Cases
Table of Statutes

Of interest...