Paper: Directors and officers' insurance – how often will it be a 'recoverable asset' available to a liquidator? – 15 March 2002
In brief: If there is no or little money in the bank when a company goes into liquidation and few easily realisable assets practitioners and creditors may seek to look elsewhere in order to recover funds. One source may be claims against directors for insolvent trading or other breaches of the Corporations Act (Cth) (the Act) or common law duties, writes Partner Michael Quinlan (view CV).
Like many professionals who may be faced with personal liability in the future many directors take steps to ensure that they have few, if any, assets in their own name. For that reason there may be little benefit to a practitioner or creditors in successfully pursuing a director unless the director is covered by directors and officers (D&O) insurance giving the practitioner and creditors access to the funds of an insurance company (and hopefully not an insolvent one).
This paper:
- provides an overview of insolvent trading;
- provides an overview of D&O insurance;
- deals with the key exclusions – the Act and other limitations;
- considers whether D&O insurance can enhance the prospects of recovery in a successful insolvent trading action;
- considers how a negligence or fraud claim could enhance or interfere with a D&O recovery; and
- concludes with some consideration of the usefulness of D&O insurance in the context of insolvent trading.
For more, download the paper (as an adobe acrobat pdf – 380KB)
For further information, please contact:
- Michael QuinlanPartner,
Sydney
Ph: +61 2 9230 4411
Michael.Quinlan@aar.com.au - Geoff RankinPartner,
Brisbane
Ph: +61 7 3334 3235
Geoff.Rankin@aar.com.au
