This article meets our strict editorial principles. Our lawyers, experienced writers and
legally trained editorial team put every effort into ensuring the information published on
our website is accurate. We encourage you to seek independent legal advice. Learn more.
A director of a company can be made personally liable if the company becomes ‘insolvent’ or has incurred a significant amount of debt, and if a court can prove that there has been ‘wrongful trading’ on the part of the director.
This involves finding out whether the director had reasonable knowledge of the company’s financial shortcomings and the unlikelihood of avoiding insolvent liquidation. If they did not take steps to minimise the loss to creditors they may be found of wrongful trading and be personally liable for losses.
Directors of companies are bound by the Corporations Act 2001. For a full list of director duties and potential breaches see our article.
Register for our free webinars
23
Nov
Understanding Your Franchise Compliance Obligations
Online
As a franchisor, you risk penalties and franchisee claims if you are not legally compliant. Register for our free webinar today.