Can a bankrupt person run a company?

A relative is proposed as replacement director

A director is considering personal bankruptcy while a related trading company continues operating. The director suggests appointing a relative and continuing to make the decisions behind the scenes. That arrangement needs legal scrutiny. The issue is what the person actually does, not only who is recorded as director.

Check the restriction before acting

ASIC explains that bankruptcy affects eligibility to manage corporations. Obtain legal advice about the restriction, its duration and any lawful application available in your circumstances. Do not assume a resignation alone resolves every management issue.

List all companies and the decisions you currently make. Include bank authority, staff instructions, contracts and financial control. The adviser needs the real operating position to assess what must change.

Source: ASIC — Bankruptcy and personal insolvency agreements

Separate work from management

You may have technical skills the business needs, but using those skills and managing the company are different questions. Define proposed duties, reporting lines and authority in writing.

Ask the lawyer to assess the substance of the role. A title such as consultant does not establish that the activities are permitted. Avoid directing a replacement director informally while presenting them as independently in control.

Deal with company interests and records

Tell the trustee about shares, loans and other interests in the company. Provide relevant records and ask how those interests will be treated. Do not transfer them casually to keep the business operating.

Ensure the company obtains advice on its own compliance and continuity, including authorised signatories and record access. Personal bankruptcy does not by itself explain the company’s separate financial position.

Source: AFSA — Personal bankruptcy and company liquidation

Build a lawful income plan

Assess employment or other permitted work with the appropriate advice. Check professional licensing, contracts and required disclosures. Prepare a household budget reflecting actual income and any contribution obligations.

Keep written advice and implementation records. Revisit the arrangement if responsibilities change. The goal is a sustainable role that complies with the restrictions, not an informal workaround that creates additional risk.

Check the actual management role

List every company and actual management responsibility.

Obtain advice before resigning, appointing someone or changing roles.

Disclose company interests to the trustee.

Document a lawful work and income arrangement.

Call CRP today about bankruptcy and company-management concerns and coordinating specialist advice.