Making company directors liable: A comparative analysis of wrongful trading in the United Kingdom and insolvent trading in Australia

Abstract

The separate legal entity doctrine in corporate law means that directors are not generally liable for their company’s liabilities. However, there have been actions taken by governments and courts to make directors liable in certain cases. This article examines and compares legislative provisions in the United Kingdom and Australia to make directors liable for the debts of their companies. These provisions, namely section 214 of the UK’s Insolvency Act 1986 (wrongful trading) and section 588G of the Australian Corporations Act 2001 (insolvent trading), had the same starting point, but now differ substantially, even though, arguably, they retain very similar objectives. The article investigates: the reasons for these differences; the criteria on which each of the provisions focus; and the ramifications for the different approaches. It also endeavours to evaluate the strengths and weaknesses of the respective approaches adopted in each country. © 2005 John Wiley & Sons, Ltd.