SS Lecture 9 - SS Lecture 9 Overview Balance of directors...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 SS Lecture 9 Overview ± Balance of directors’ duties: ± Duty to prevent insolvent trading ¶11-001 - ¶11-190 1 ± Duty to act in good faith in the best interests of the co ¶12-001 - ¶12-120 ± Duty to act for a proper purpose ¶12-200 Duty to prevent insolvent trading ± Dirs have a duty to prevent their co incurring debts when the company is insolvent or will become insolvent: s.588G 2 ± No specific general law equivalent ± Duty’s objective is to protect who? ± Duty is owed by ‘directors’ - includes de facto and shadow directors How s 588G works – 4 steps ± Step 1 – does duty apply? s 588G(1) ± Step 2 – did dir breach duty? s 588G(2) Step 3 are there defences to liability? s 3 ± Step 3 – are there defences to liability? s 588H ± Step 4 – if not, what are the consequences? Step 1 - When s 588G applies ± Person was a director when a company incurred a debt ± Company was ‘insolvent’ at that time or 4 Company was insolvent at that time or became insolvent by incurring that debt ± At the time the debt was incurred, there were reasonable grounds for suspecting insolvency ‘Incur a debt’ ± Some actions deemed to be incurring a debt: 588G(1A) 5 6
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 What is an uncommercial transaction? ± S 588FB(1) A transaction. ..is an uncomcl transaction. ..if, and only if, it may be expected that a reasonable person in the coy’s circumstances would not have entered into [it], having regard to: (a) the benefits (if any) to the co. ..: and (b) the detriment to the co . .. : and (c) the respective benefits to other parties. . (d) and any other relevant matter. 7 Other debts (ie not deemed) ± Purchase of goods or services on credit ± Borrowing money ± Debt: 8 ² must be for a specific amount ² Contingent ok: Hawkins v Bank of China 222 ² must be incurred voluntarily by company Solvency and Insolvency S 95A(1) A person is solvent if, and only if, the person is able to pay all the person’s debts, as and when they become due and payable. S 95A(2) A person who is not solvent is insolvent. 9 Co insolvent or becomes so: s 588G(1)(b) ± Section 95A : insolvency worked out using cash flow test (not just balance sheet test) ± Question is: Is company able to pay all its 10 debts, as and when they become due and payable?
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 6

SS Lecture 9 - SS Lecture 9 Overview Balance of directors...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online