23Duty to prevent insolvent trading

23 Duty to prevent insolvent trading

(1)  A director must prevent the Corporation from incurring a debt if –

(a) the Corporation is insolvent at that time or will become insolvent by incurring at that time the debt or debts which include that debt; and

(b) at that time there are reasonable grounds for suspecting that the Corporation is insolvent or would become insolvent by incurring the debt or those debts; and

(c) the director is aware of those grounds or a reasonable person in the position of director would be aware of those grounds.

(2)  A director is guilty of an offence and liable, on conviction, to a penalty of a fine not exceeding 2 000 penalty units or a term of imprisonment not exceeding 5 years, or both, if he or she contravenes subsection (1) knowingly, intentionally or recklessly and –

(a) dishonestly and intending to gain, directly or indirectly, an advantage for himself or herself or another person; or

(b) intending to deceive or defraud any person.

(3)  It is a defence for an offence against subsection (2) or for a contravention of subsection (1) in proceedings under section 27 if it is proved –

(a) that, at the time the debt was incurred, the director –

(i) had reasonable grounds to believe and did believe that a competent and reliable person was responsible for providing the director with adequate information as to whether the Corporation was solvent; and

(ii) had reasonable grounds to believe and did believe that the person referred to in subparagraph (i) was fulfilling the responsibility referred to in that subparagraph; and

(iii) expected, on the basis of information provided by the person referred to in subparagraph (i) , that the Corporation was solvent at that time and would remain solvent even if it incurred the debt and any other debts that it incurred at that time; or