Forum Replies Created
Byronent,
The section is not about insolvent trading etc it is specifically about making directors liable for debts and other obligations incurred by the company as a trustee. The section reads:“A person who is a director of a corporation when it incurs a liability while acting, or purporting to act, as trustee, is liable to discharge the whole or a part of the liability if the corporation:
a) has not, and cannot, discharge the liability or that part of it; and
b)is not entitled to be fully indemnified against the liability out of trust assets.
This is so even if the trust does not have enough assets to indemnify the trustee. The person is liable both individually and jointly with the corporation any anyone else who is liable under this subsection.”
I don’t work directly in this area but have read some of the cases & for the relatively small expense of locking my assets up in another entity I believe it is well worth while – very cheap insurance.
In terms of asset protection I very much agree with Terryw – one seminar I attended even went as far as advising one property per trust.
While this creates more paperwork it also provides the greatest amount of protection. Effectively if the trust is sued the most the litigant can get out of the trust is the net value of the trust ie. the value of the property less any mortgage.
If you are about this for asset protection reasons you may also want to seek advice about a trust to hold all your personal assets. Most people believe that if they use a company as trustee their personal assets are protected. However, if you are a director of the corporate trustee and the trust and trustee (the company) can’t pay out the trust’s debts then you become personally liable (s197 Corporations Act 2001).
