In the attached document of notes, I've highlighted a

Hi, in the attached document of notes, I've highlighted a few paragraphs that apply to the Corporations Act and ASIC - that concern me regarding the possibility of future personal liability both financially or legally, as a sole director of my friend's
Pty Ltd company. Could the courts come after me personally, as Sole Director, using any of the below (as taken from attachment): CORPORATIONS ACT 2001 Duty to prevent insolvent trading 588G(1) and 588G(2) contain the provisions that encapsulate a Director’s
duty to prevent insolvent trading by a company: • a person is a director of a company at the time when the company incurs a debt; and • the company is insolvent at that time, or becomes insolvent by incurring that debt; and • at that time, there were reasonable
grounds for suspecting that the company is insolvent, or would become insolvent; • the person is aware at that time that there were such grounds for so suspecting, or • a reasonable person in a like position in a company in the company’s circumstances would
be so aware. This duty is to protect the welfare of stakeholders in the company.[14] Defences are available. Penalties For civil liability, the Courts can order: • a pecuniary penalty of up to $200,000 under section 1317G; • disqualification from management
under section 206C; and/or • require payment of compensation under section 1317H. For criminal liability, if a director or an officer is found guilty of failing to exercise their powers and discharge their duties in good faith and in the best interests of
the corporation, or for a proper purpose, may be fined up to $200,000 and imprisonment for up to five (5) years under Schedule 3. 3.6 Section 588G – Duty not to trade while insolvent The directors’ duty to avoid insolvent trading, related defences and consequences
of breach are explained in Part 5.7B Division 3.A of the Corporations Act. A person breaches this duty under sections 588G(1) and 588G(2) where: 1 he or she was a director of the company at the time when it incurs a debt 2 the company is insolvent at that
time or becomes insolvent by incurring that debt 3 at that time there were reasonable grounds for suspecting that the company was insolvent or would become insolvent and either: a he or she was aware at that time that there were such grounds b a reasonable
person in a like position in a company in the company’s circumstances would be so aware 4 he or she failed to prevent the company incurring the debt. 49 The director commits a criminal offence if the failure to prevent the company incurring the debt was dishonest.
50 The duty intends to increase a director’s responsibility and protect the welfare of stakeholders in the company. ALSO: CORPORATIONS ACT 2001 - SECT 79 Involvement in contraventions A person is involved in a contravention if, and only if, the person: (a)
has aided, abetted, counselled or procured the contravention; or (b) has induced, whether by threats or promises or otherwise, the contravention; or (c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the
contravention; or (d) has conspired with others to effect the contravention. AND ASIC information as follows: Law reform on Phoenix companies In 2011 and 2012, Treasury released an Exposure Draft for proposed new laws for “Phoenix and Other Measures”. Assuming
the new laws find their way through Parliament they are likely to become law in 2012. The new laws won’t catch all Phoenix activity but it is a further move towards personal liability for company directors in this situation. Here are the main points from the
proposed legislation: • It tries to identify phoenix companies and make a director and the Newco liable for the debts of the Newco; • The legislation focuses on the name of the OldCo and NewCo if the name is ***** ***** or similar then the NewCo is caught by
the legislation; • If the NewCo has the same name as the OldCo then a director of the NewCo is personally liable for the debts of the NewCo for five years. So, the legislation does not seek to help recover funds for the benefit of the OldCo, but instead squarely
puts the director of the NewCo in the firing line for personal liability for all debts of the NewCo.