Our legal system is a total joke!

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tdgeek

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#2952994 10-Aug-2022 12:46

MikeAqua:

The function of a limited company is that it limits the liabilities of the shareholders and directors. The objective is to encourage people to invest in businesses. Take thta incentive away and yiu'll gte less genuine p[eople prepared to take that risk. Debtors can seek director guarantees as an additional step.

In cases where criminal conduct is involved then yes, I think directors and officers of companies should be personally liable. One problem with that is when a criminal gets a custodial sentence, they seem to be absolved of financial responsibility for their offending.

Negligence also, for example, trading when they know they are insolvent. Those new creditors can go after negligence, and thereby seek personal liability on the directors

MikeB4

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#2953000 10-Aug-2022 12:55

tdgeek:

Negligence also, for example, trading when they know they are insolvent. Those new creditors can go after negligence, and thereby seek personal liability on the directors

Trading while insolvent is not in itself a bad thing and many companies trade out of insolvency

tdgeek

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#2953007 10-Aug-2022 13:14

MikeB4:

Trading while insolvent is not in itself a bad thing and many companies trade out of insolvency

Agree. They "should" seek help to allow them to trade out of it. But if the business is insolvent, and the creditors don't know, its negligent to obtain goods and services. Thats based on hope. But otherwise, an insolvent business that can show to the bank that they can trade out, can and should continue, and the creditors made aware so that they can choose to trade (or not) and that they can use Romalpa Clauses if they dont already. Need to be upfront, and get the help that way.

MikeB4

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#2953009 10-Aug-2022 13:19

tdgeek:

Agree. They "should" seek help to allow them to trade out of it. But if the business is insolvent, and the creditors don't know, its negligent to obtain goods and services. Thats based on hope. But otherwise, an insolvent business that can show to the bank that they can trade out, can and should continue, and the creditors made aware so that they can choose to trade (or not) and that they can use Romalpa Clauses if they dont already. Need to be upfront, and get the help that way.

There is also a responsibility for suppliers etc to do due diligence and maintain viable debtor control. The same responsibility is on investors and customers.

tdgeek

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#2953012 10-Aug-2022 13:26

MikeB4:

There is also a responsibility for suppliers etc to do due diligence and maintain viable debtor control. The same responsibility is on investors and customers.

Very true. I imagine it can be tough out there these days. Debtor days start to blow out. some fail, that is another negative effect on cashflow. Covid is easing so lets hang on a bit longer etc

MikeB4

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#2953015 10-Aug-2022 13:32

tdgeek:

Very true. I imagine it can be tough out there these days. Debtor days start to blow out. some fail, that is another negative effect on cashflow. Covid is easing so lets hang on a bit longer etc

I run a very tight reign on debtor accounts. If payment is not received by the time the next months invoice is due to go out then the account is examined. I will allow carry over in some circumstances with prior arrangement. Non payment impacts our sales staff as commission is not paid until the customer has paid, a sale is not a sale until the money is in the bank and I don't like impacting staff remuneration so it take it very seriously.

gzt

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#2953018 10-Aug-2022 13:53

MikeAqua: The function of a limited company is that it limits the liabilities of the shareholders and directors. The objective is to encourage people to invest in businesses. Take thta incentive away and yiu'll gte less genuine p[eople prepared to take that risk

That is incorrect. The purpose of limited liability is protection for shareholders from liability for decisions made by directors and officers of the company and so on.

In contrast, director liability is more complex. Directors and officers have always had a greater responsibility and therefore liability. In practice that was subject to all kinds of in's and outs leading to incremental change to clarify the law in New Zealand and other places around the world lately.

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neb

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#2953144 10-Aug-2022 18:05

Wheelbarrow01:
It seems this modus operandi is also easy to get away with in Australia too.

Much easier. While in Queensland some years ago (but a long time after Joh) I remember reading a news story that referenced "the notorious X company" who had yet again illegally demolished a historic building in the middle of the night in order to build on the land that it occupied. It seemed to be business as usual that they could do this and get away with it and similar lawbreaking.

neb

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#2953146 10-Aug-2022 18:07

Geektastic: in Ancient Rome and Greece,

and in the modern USA,

debtors could place themselves in slavery (or courts could put them there) until debts were paid.

gzt

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#2953189 10-Aug-2022 20:03

neb:
Wheelbarrow01: It seems this modus operandi is also easy to get away with in Australia too.
Much easier. While in Queensland some years ago (but a long time after Joh) I remember reading a news story that referenced "the notorious X company" who had yet again illegally demolished a historic building in the middle of the night in order to build on the land that it occupied. It seemed to be business as usual that they could do this and get away with it and similar lawbreaking.

Getting off topic here. This is a well known case in London. Developer smashed a pub to the ground one day before it was granted listed status. A judge made them restore and rebuild it brick by brick:

https://www.bbc.com/news/uk-england-london-57155143
It took five years

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