A company is required by s.286 of the Corporations Act to maintain books and records that correctly record and explain its transactions and financial position and performance, and would enable true and fair financial statements to be prepared and audited.

If a company fails in this requirement, is may be presumed insolvent throughout the period in which records were not maintained.

If a company is presumed insolvent for lack of records, a Liquidator’s action for insolvent trading will be made easier and more readily expose a directors’ personal assets to loss.

See the matter of Swan Services Pty Ltd (in liquidation) as reported by ERA Legal, which can also be found here in greater detail.