DIRECTORS’ LIABILITY

I am a director of a small company. The two other directors borrowed money for the company when I was overseas – I did not know they borrowed money. They are now being investigated for possible fraud on the application for the loan. I was also listed as a possible defendant. Do I need to worry about this matter when I had no idea the money was being borrowed for the company?

First, Corporations Law (Australia) states that when directors are about to borrow money on behalf of a company, if they suspect that the company would not be in a position to repay the loan, they must NOT borrow that money. Now if these directors did in fact borrow the money and you can prove that you had no idea that money was being borrowed you will have a defence under Corporations Law. You will have to prove that you were overseas and that no one ever told you or implied that money was being borrowed for the company.  Including you as a potential defendant is procedural because all names of directors of the company would be on a future summons.   

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