**Corporations Act 2001 (Cth)**

**(a) Controlling Act**  
Corporations Act 2001 (Cth). This is the principal Commonwealth statute regulating companies, directors’ duties and insolvent trading for the FY2025-26 period.

**(b) Directors’ duties provisions engaged**  
- **s 180** (care and diligence): requires a director to exercise the degree of care and diligence that a reasonable person in the same position would exercise. Continuing to trade, order stock on credit and ignore the bookkeeper’s insolvency warning after debts are not being paid as they fall due engages this duty.  
- **s 181** (good faith / best interests and proper purpose): requires a director to act in good faith in the best interests of the company and for a proper purpose. Once the company is insolvent (or nearly so) the duty expands to take creditors’ interests into account; diverting a profitable customer contract and continuing to incur debts without realistic funding prospects breaches this duty.  
- **s 182** (improper use of position): prohibits a director from improperly using their position to gain an advantage for themselves or someone else, or to cause detriment to the company. Diverting the profitable customer contract to a separate company owned by the director is a classic misuse of position.

**(c) Insolvent trading provision engaged**  
**s 588G** (director’s duty to prevent insolvent trading). A director contravenes this section if:  
- the company incurs a debt while insolvent (or becomes insolvent by incurring the debt);  
- there are reasonable grounds for suspecting insolvency at the time; and  
- the director fails to prevent the company from incurring the debt.  

Ordering stock on credit after the company has stopped paying debts as they fall due, has no realistic prospect of new funding, and has been warned it “looks insolvent” squarely engages s 588G (civil penalty; criminal liability under s 588G(3) if the director is dishonest).