Under Part 4 of the Corporate Law Reform Act 1992, sections 592 and 593 of the Corporations Law are replaced by sections 588G, 588U and 588Y. Both section 592 and its replacement section 588G, impose liability on a director whose company has traded whilst insolvent. The new provisions, like so many which have been introduced, are both complex and lengthy. Where previously there were two sections there are now fourteen replacements. The new section 588G is found in Divisions 3 and 4 of Part 5.7 B and interlocks with other amendments, including those establishing civil penalty provisions contained in Part 9.4 B. This part entitled ’Recovering Property or Compensation for the Benefit of Creditors and Insolvent Companies’, includes matters such as ’voidable transactions’ and ’the liability of a holding company for insolvent trading by a subsidiary’.
In this article the new insolvent trading provisions are analysed with particular emphasis being placed on the differences between the old section 592 and the new sections. The cases dealing with section 592 will also be considered in order to determine how the new sections will be interpreted and what the legal position will be.