The liability protection provided to directors as a result of incorporation is referred to as the "corporate veil". However, there are exceptions to this general rule at Common law and under Statute law, which allow lifting the veil and making the directors liable for breach of their duties. For instance, there is a duty placed on directors by the Corporations Act 2001 to make sure their company does not trade while it is insolvent. A director has a duty to prevent the company from incurring a debt if the company is insolvent at the time the debt is incurred or becomes insolvent by incurring the debt, section 588 G of Corporations Act 2001. Section 588 G does not apply to officers other than directors. However, s. 9 of the CA defines a director as a person who is appointed to the position of a director or is appointed to the position of an alternate director and is acting in that capacity, regardless of the name that is given to his or her position. The definition is broad but it is clear that s. 588 G will be applicable to both shadow and de facto directors. It is also clear that s. 588 G of the CA is designed primarily to protect the interests of creditors because when company becomes insolvent, unsecured creditors might be unable to get their funds back.

Determining whether a company is insolvent predominantly involves using a cash flow test, but must be determined by reference to the facts of each case. A number of factors that a reasonable person would take into account in determining whether a company is insolvent are 14 indicators in insolvency situation: ASIC v Plymin (2003) VSC 123. Dart Limited meets several factors of insolvency:
• Continuing losses. Company’s expenses exceeded income by 2.5 million every month since early 2008
• Inability to borrow further funds from the present bank. In November 2008 Dart Ltd tried to borrow money from existing bank