Skip to content.

Home

Allens

Client Update: ASIC reports on its National Insolvent Trading Program

18 October 2010

In brief: The Australian Securities and Investments Commission has released a report on the results of its National Insolvent Trading Program, aimed to help company directors avoid insolvent trading. Partner Richard Harris (view CV) and Senior Associate Angela Martin report.

Background

The Australian Securities and Investments Commission's (ASIC) National Insolvent Trading Program (the NITP) began in 2005, and focuses on encouraging directors to identify insolvency indicators relating to their company and to seek professional advice at an early stage.

Return to top

The report

In July 2010 we reported that, as part of ASIC's focus on encouraging directors to take early steps to address solvency issues affecting their company, it released guidance note RG 2171  to help directors understand and comply with their duty under the Corporations Act 2001 (Cth) (the Act) to prevent insolvent trading.

The report ASIC issued this month provides an overview of the NITP's objectives and outcomes. Key messages for directors include:

  • maintaining appropriate books and records, and keeping fully informed about the financial affairs of the company at all times;
  • identifying insolvency concerns and assessing available options, bearing in mind the general director duties the Act imposes;
  • where solvency issues arise, seeking professional advice from suitably qualified, competent and reliable persons about the financial position of the company and how any financial difficulties can be addressed; and
  • acting in a timely manner, particularly in relation to advice received from an insolvency professional.

ASIC notes that consideration of the above principles by directors at an early stage often leads to better outcomes for external stakeholders, including employees and creditors.

Return to top

Conclusion

The report provides helpful guidance to directors of companies, and their professional advisers, in understanding and complying with their general director duties, including the duty to prevent insolvent trading under the Act. Other interested parties, including registered liquidators and creditors, may also find it a useful summary.

Footnotes
  1. A copy of RG 217 is available from the ASIC website at www.asic.gov.au/rg

For further information, please contact:

Return to top

Share with

What are these?

 

 

Recent Insolvency & Restructuring publications