**Corporations Act 2001 (Cth) – directors’ duties and insolvent trading liability**

**(a) Controlling Act**  
Corporations Act 2001 (Cth).

**(b) Directors’ duties provisions engaged**  
- **s 180(1)** – care and diligence: a director must exercise the degree of care and diligence that a reasonable person would exercise if they were a director of a company in the company’s circumstances and occupied the office held by, and had the same responsibilities as, the director. Continuing to trade and incur debts after clear insolvency indicators (non-payment of debts as they fall due, bookkeeper warning, no realistic funding prospect) fails this standard.  
- **s 181(1)** – good faith and proper purpose: a director must exercise powers and discharge duties in good faith in the best interests of the corporation and for a proper purpose. Diverting a profitable customer contract to a director-owned company is not in the company’s best interests and is an improper purpose.  
- **s 182(1)** – use of position: a director must not improperly use their position to gain an advantage for themselves or someone else, or to cause detriment to the corporation. The diversion of the contract for personal benefit (or benefit of the related company) and the associated detriment to the company engage this duty.

**(c) Insolvent trading provision engaged**  
**s 588G** – duty to prevent insolvent trading: a director contravenes the section if, when the company incurs a debt, it is insolvent (or becomes insolvent by incurring the debt), there are reasonable grounds for suspecting insolvency, and the director is aware of those grounds (or a reasonable person in a like position would be so aware). Ordering stock on credit while the company has ceased paying debts as they fall due, has no realistic funding prospect, and after an express insolvency warning, engages civil (and potentially criminal) liability under this provision (subject to any available defences/safe harbour, none of which are indicated on the facts).