In this practice area
Advice and representation for directors facing personal liability when a company fails, including director penalty notices, insolvent trading, guarantees, breach of duty claims and liquidator examinations.
When directors face personal liability
A company is a separate legal entity, and directors are not usually liable for its debts. That protection has important exceptions, and they tend to arise together when a company fails. A director may receive a director penalty notice from the ATO, a demand under a personal guarantee, a summons for examination, and a claim from the liquidator, all within a few months.
We act for directors, former directors and people alleged to be shadow or de facto directors in these circumstances.
The legal framework
Under Division 269 of Schedule 1 to the Taxation Administration Act 1953 (Cth), directors can become personally liable for a company's unpaid PAYG withholding, superannuation guarantee charge and GST through a director penalty notice. If the liability was reported within three months of its due date, the penalty can generally be remitted by paying the debt, appointing an administrator or placing the company into liquidation within 21 days of the notice. If it was not reported in time, a lockdown penalty applies and those options no longer remove the liability. Limited defences exist, including illness and taking all reasonable steps.
Liquidators can also bring claims for insolvent trading under section 588G of the Corporations Act 2001 (Cth), for breach of the duties of care and diligence, good faith and proper use of position in sections 180 to 182, for unreasonable director-related transactions, and for creditor-defeating dispositions. Creditors can enforce personal guarantees directly. ASIC may seek civil penalties or disqualification in serious cases.
How these matters typically run
Timing is critical. A director penalty notice has a 21-day window, and the choice made in that window can decide whether the liability survives. Liquidators usually investigate for some months, often including an examination, before issuing demands. Guarantee claims can move faster, as the creditor only needs to prove the guarantee and the principal debt. A director's own assets, family trust arrangements and insurance often shape how these matters resolve.
How GopherWood Lawyers acts
We give directors a clear view of their overall exposure, not just the claim in front of them, because steps taken on one front affect the others. That includes advice before appointment of an administrator or liquidator, responses to director penalty notices within time, preparation for examinations, defence of insolvent trading and breach of duty claims, and challenges to guarantees. Where directors and officers insurance may respond, we notify the insurer and deal with coverage early.