Paper: Latest developments in insolvent trading
In brief: The present global meltdown has put directors in an invidious position: they may have assets on their books that they consider to be very valuable but little access to funding to borrow against them and little interest from buyers at what they consider to be appropriate values. This may be because potential buyers of assets are also having trouble accessing credit.
When faced with those issues, directors who have debts falling due may find that their company has become insolvent under Australian law. They then have to consider their willingness to expose themselves to the risk of insolvent trading.
Of course, this is not a phenomenon limited to Australia. But Australia has some of the most punitive insolvent trading laws in the world. This leaves Australian directors more exposed than their foreign counterparts.
In Australia, the Federal Government's response to the credit crunch has, so far, been to increase government guarantees for approved deposit taking institutions and to seek to provide some fiscal impetus to the economy. However, relief for directors does not seem to have made it onto the table.
For more, download the paper (as an adobe acrobat pdf – 109KB).
For further information, please contact:
- Michael QuinlanPartner,
Sydney
Ph: +61 2 9230 4411
Michael.Quinlan@aar.com.au
