If My Company Has Bad Debt as a Director Am I Liable?
If a company gets to the point where they can not pay their bills they are called insolvent. An insolvent company in Australia, is a company that is not following the provisions of the Corporation Act, which states that the company must be solvent in order to be trading.
Violating the Corporation Act potentially means trouble for the director of the company. You see when you are the director of the company you are have to make sure the company follows all applicable laws. In addition if there are share holders or creditors you also have duties to them as well to make sure things in the company are going well for them. That means you have to make sure everyone’s interests are protected.
To operate within the Corporations Act you must ensure you do this otherwise you could become personally liable especially if the company goes bankrupt. What happens is the ASIC can charge you compensation proceedings that equal the amount the creditors lost. If you violate the Corporation Act you can be fined up to 0,000.
