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Is A Director Liable For Company Debt? |
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Is A Director
Liable For The Debts Of A Company?
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.
As
the director if you don't do this you aren't in compliance with the
Corporation Act and you could become personally liable for the
company's debts, especially if you they go bankrupt. What happens is
the ASIC can charge you compensation proceedings that equal the amount
the creditors lost. Additionally there can be a charge of up to
$200,000 just for violating the Corporation Act.
If
as the director you do your part to make sure everyones' interests are
protected, you stay on top of what is happening financially with the
company and creditors and you act honestly as the director you might be
able to use this as a defense in order to not have to pay the civil and
proceedings charges.
On
top of this the director might also be held personally accountable if
taxes of the company are not paid. If the company does not pay the
taxes the government comes after the company, but if there is nothing
to get from the company they can actually make the director liable
because he did not do his job and make sure the company was paying all
their bills, including their taxes.
In
conclusion if you are a director there are a few things you can do to
protect yourself. First you must always be sure to act honestly on
behalf of the company and everyone who has interests in the company. On
top of that, make sure the company can always pay their bills and their
taxes, and if there are any problems, be sure to get financial and
legal advice. If you believe that the company is near insolvent or is
insolvent, stop trading so that you do not violate any laws. From this
point consult further with someone on your financial situation do what
is in the best interest of everyone.
One
last note, if you as the director ever become bankrupt you must appoint
someone new as the director, a director is not allowed to act if they
have received a personal bankrupt.
The
Simple
Steps To Order Your Company
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