What are “reasonable grounds to suspect insolvency”?
“Reasonable grounds to suspect insolvency” requires more than cause for idle wondering. Instead, it must be shown that a reasonable person in the director’s position would have had an actual positive feeling of fear or misgiving.4 This is determined both according to the director’s state of knowledge and what would reasonably be known to a capable director in the same position and requires the company’s state of affairs to be capable of being known to the director.5 As this aspect of the offence is objective, a director with no actual suspicion of insolvency can be liable if a reasonable person in their position would have had suspicion. As such, directors must ensure that they monitor the company, take a diligent and intelligent interest in the available information and form an independent judgment regarding the company’s financial position.6 Directors must also be commercial in reviewing the information provided as “unquenchable optimism” is not a reasonable ground of belief.7 What i
