Directors face many areas of potential exposure, some of them are very serious and may have a significant adverse effect on the director.


The following tips can assist you to protect your hard-earned wealth:

  • Know and understand how your business structure works— have a strong discipline about the manner in which the structure is administered.
  • Carefully read and understand all contractual documentation such as terms of loans, lease and supply agreements etc—and negotiate before agreeing to them.
  • Limit any personal guarantees—keep a register and put a maximum limit on any guarantee given.
  • Never own assets—transfer any assets you do own as soon as possible and before taking on any potential risk.
  • Have a good reason for the transfer other than “asset protection”.1
  • The best approach is to ensure any asset transfers are for full market value and actual real consideration (not via journal entries).
  • Ensure the at-risk person does not make any direct financial contributions to assets or servicing of debt—the non-at-riskperson holding assets needs their own income to service the debt.


Note 1 –

Arguably assets transferred for asset protection purposes may satisfy the “main purpose” test in Section 121 of the Bankruptcy Act 1966 of the transfer being to defeat creditors, and may be void in the event of bankruptcy even if transferred years prior (Wallace v Wallace [2016] FCCA 963 (31 May 2016)).

Tips kindly provided by our friends at Worrells Solvency & Forensic Accountants

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