Directors Beware

A recent decision handed down by the Federal Court ordered the Commissioner to refund payments made by a company when it was insolvent.

The Court also held that the directors of the company at the time of the payments were required to indemnify the Commissioner a percentage of the refund in respect of any loss resulting from the order.

Company directors should be aware of their obligations under the Corporations Act 2001. Where a company is insolvent and makes payments to the Commissioner, the company’s liquidator can apply to a court to have the payments refunded.

However, if the payments are prescribed tax payments contained in the Corporations Act (eg, PAYG withholding amounts), the directors of a company may be required to indemnify the Commissioner against any losses.