As the global slowdown bites, the courts are clamping down on directors and other corporate officers who violate or neglect their statutory duties. They are taking a particularly hard line with directors who fail to take steps to protect a company and its creditors in cases where its solvency is threatened. Meanwhile, executives who act dishonestly are finding that they will be held personally liable for their misdeeds.
In Australia, company directors are held liable for any debts incurred at a time when a reasonable person would have suspected that the company was insolvent. However, if a director can prove he had good reason to believe that the company was, in fact, solvent at the time – for instance, if he received information to this effect from a competent and reliable person with the authority to provide it – he will avoid liability.
