Insolvent trading is a serious offence which can have severe consequences in Australia for executive and non-executive directors, including personal pecuniary penalties, compensations payable, disqualification and possible imprisonment (in the case of a criminal offence).
There are a number of defences available to directors against allegations of insolvent trading. A proactive approach to risk management can also help directors to manage their liability risks.
This white paper looks at the concept of insolvent trading, as well as the management strategies companies should consider when they are financially distressed.
We also look at some insurance issues that directors in various jurisdictions (including Asia, the UK and the US) should consider as a matter of personal liability risk management.