Most directors should be aware that they may be made personally liable for any unpaid debt their company incurs while it is insolvent.
In February’s newsletter, we gave an introduction to insolvency as well as some tips on how to avoid it.
To remain viable, any company needs to ensure that it is able to meet its debts when they are due, and to allow enough working capital for future financial obligations.
Once a company can not pay its debts as and when they fall due, it is said to be insolvent.
In a sign of the challenging economic circumstances that face certain industries and geographic areas throughout Australia the number of personal insolvencies in Australia has risen by 4.4% in 2015 / 16 as compared to 2014 / 15.
This is the first increase in formal personal insolvencies since the Global Financial Crisis.