Overview of the Law insolvent trading

//Overview of the Law insolvent trading
  1. Definition of Insolvency

Section 588G of the Corporations Act 2001 (“Act“) relies on the definition of “insolvency” in section 95A of the Act.[1] Section 95A defines “solvency” and “insolvency”. Subsection (1) provides that a “person is solvent if and only if, the person is able to pay all the persons debts as and when they become due and payable”.  The provision then explains in subsection (2) that “a person who is not solvent is insolvent“. Insolvency is expressed as the inability of a company to pay its debts as and when they become due and payable. The explanatory paper states that “the proposed section 95A establishes a clear statement when a person is or is not insolvent“.


[1]               The Financial Services Reform (Consequential Provisions) Act 2002 (“Consequential Act”) Item 1 of Sch 2 reinstates s95A to take account of a drafting error in the Financial Services Reform Act 2001 (“FSR Act”) that deleted the definition. You will note that Item 3 in the table in s2, Commencement, the definition is retrospectively reinstated immediately after the commencement of the FSR Act. In addition, Corporations Regulation 10.2.122 was prepared to cover the period between 11 March 2002 (the commencement of the FSR Act) and 5 April 2002 (the date of assent of the Consequential Act).

2016-12-20T10:46:27+00:00By |