---
title: "Letter of advice to directors on duties and insolvent trading exposure"
url: "https://ailawframework.com/precedents/commercial-and-corporate-advisory/letter-of-advice-directors-duties"
type: "precedent"
site: "AI Law Framework"
id: "a1-letter-of-advice-directors-duties"
area_id: "A1"
kind: "letter"
ai_level: "red"
version: 1
law_stated_as_at: "2026-10-17"
---

# Letter of advice to directors on duties and insolvent trading exposure

> Answer-first letter advising directors of a company under financial pressure on their statutory duties, insolvent trading liability, the safe harbour and the immediate steps to protect themselves and creditors.

Canonical page: https://ailawframework.com/precedents/commercial-and-corporate-advisory/letter-of-advice-directors-duties  
Law stated as at: 2026-10-17

Site index for agents: https://ailawframework.com/llms.txt

## Key facts

- Kind: Letter. A letter or email you adapt and send.
- Practice area: [Commercial & Corporate Advisory](https://ailawframework.com/precedents/commercial-and-corporate-advisory.md)
- Jurisdictions: Australia, New Zealand, United Kingdom (England and Wales), United States
- AI level: Red. Keep AI out of the decisive steps. A lawyer does the work.
- Law stated as at: 2026-10-17
- Status: Maintained. Checked on 2026-10-17 against the 8 authorities it cites, for 4 jurisdictions.

## When to use it

Use when directors ask what their duties are while the company is under financial stress, or before a significant decision such as new borrowing. Do not send without the lawyer applying the company’s actual financial position. Solvency itself needs accounting input.

## How AI may be used

Lawyer-led advice on personal liability. AI may help organise the file and check citations, but the lawyer settles every conclusion and applies it to the company’s position.

**AI may:**

- Build a dated chronology of the company’s financial position from board papers, management accounts and creditor correspondence, with file references
- Check each statutory reference in the draft against the current compilation on the Federal Register of Legislation
- Produce a list of facts the letter relies on that the file does not yet support

**AI must not:**

- Must not form or state a view on whether the company is solvent
- Must not draft the conclusions or recommendations section without the lawyer’s settled advice
- Must not process the company’s financial records in a tool not approved for confidential client information

**The lawyer checks:**

- Facts and assumptions match the documents and instructions, and the letter says which ones it relies on
- Safe harbour preconditions (employee entitlements and tax lodgements) checked against evidence, not assumed
- Advice is addressed to the right clients and conflicts between the company and individual directors are considered

## Authorities

- [Corporations Act 2001 (Cth) ss 180, 181, 182, 183 (general duties)](https://www.legislation.gov.au/C2004A00818/latest/text)
- [Corporations Act 2001 (Cth) s 189 (reliance on information or advice)](https://www.legislation.gov.au/C2004A00818/latest/text)
- [Corporations Act 2001 (Cth) s 95A (meaning of solvent and insolvent)](https://www.legislation.gov.au/C2004A00818/latest/text)
- [Corporations Act 2001 (Cth) ss 588G, 588GA, 588H, 588M (insolvent trading, safe harbour, defences, compensation)](https://www.legislation.gov.au/C2004A00818/latest/text)
- [Australian Securities and Investments Commission v Healey 2011 FCA 717](https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2011/2011fca0717)
- [Companies Act 1993 (NZ) ss 131, 135, 136, 137](https://www.legislation.govt.nz/act/public/1993/0105/latest/DLM319570.html)
- [Companies Act 2006 (UK) ss 171–177; Insolvency Act 1986 (UK) s 214](https://www.legislation.gov.uk/ukpga/2006/46/part/10/chapter/2)
- In re Caremark International Inc Derivative Litigation, 698 A 2d 959 (Del Ch 1996)

## Full text and drafting notes

The full text and the drafting notes are not part of this public page. Signed-in firm accounts can read them at https://ailawframework.com/precedents/commercial-and-corporate-advisory/letter-of-advice-directors-duties and through the signed-in MCP connector https://ailawframework.com/mcp/firm.

*Practice guidance for planning and review. Confirm current primary sources and the requirements of the actual matter. This is general information, not legal advice.*