Insolvent Trading & Leases – Miller Sockhill Lawyers – Buderim Sunsine Coast QLD

Directors of companies that are in financial trouble are always wary of Section 588G of the Corporations Act which provides that directors are personally liable if their company incurs a debt when it was insolvent and there are reasonable grounds to suspect that the company was insolvent at the time.

So with respect to a Lease where payments are normally due on a monthly basis if a company is insolvent and then must make another payment under the Lease are they trading insolvent?

Fortunately for any directors out there the answer to this is no. When leasing a property, the debt is incurred upon entering into the lease. Section 588G is applicable when a debt is incurred rather than when it is payable, meaning that even after incurring a debt a company becomes insolvent and lease. However if the Lease expires and the tenant remains on a month to month basis a new debt is incurred each month so directors must be careful in this situation.

Based on the Sunshine Coast Miller Sockhill Lawyers can assist you with any legal matters of a commercial nature, do not hesitate to contact a solicitor right here in our Sunshine Coast office.