Directors are faced with a number of issues in cases of insolvency. Fundamentally they should comply with the general duties and statutory duties prescribed in the Corporation act (Latimer, 2012). These duties are clearly stated in Corporation Act 179 (1). Directors have certain fiduciary duties that has been established in the case of Mill v Mills. The common law duties of the company also apply to the sourness management of the company.
This has been established in the case of Green v Bestobell. The duties of the Directors are mentioned in the common law s179. S180 to s184 explains in details about the common law duties of the director (Latimer, 2012). These are the common laws and fiduciary duties of the directors. Negligence of any of the common duty of care can result in the directors facing criminal charges. In this cases of insolvent trading three factors are considered to establish if the directors of the company are at fault.
Directors of the company are established under the s9 section of the corporate law. First condition is explaining when the duty was created in accordance with the S588G (1). Step two of this process is to showcase contravention of the duty –as mentioned in the S588G (2), S588H explains if the laws apply. In this the director should prove the validity of making a particular choice (Latimer, 2012). They should have embarked on preventive measures to ensure that the people are not affected in the process. The directors can also be faced with criminal liabilities in accordance to the S588G (3). The IRAC (Issue, Rule, Application and Conclusion) model would be applied to determine the liability of the directors. It has been said that the issue faced by the company is due to the large expansive policies. The directors will be questioned as to why they had indulged in these actions that lead to insolvency. Failure to explain would lead to criminal charged according to the directors.
According to the Australian Corporation Act 2001, the Directors have to ensure that the company does not become insolvent. IN cases they do they will be vetted completely to understand if the directors of the company indulged in any foul play or negligence. Based on the actions of the directors they would be made to face the consequences.