A common question that is often asked when starting a new company is if I become the director will I be liable for the debt.
So lets explore that. 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:
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