Can it actually happen? Here's how close SGH are!, page-7

Insolvent trading is the law under the Corporations Act section 588G that says that if a company is insolvent and a director allows the company to incur a new debt, then the director can be personally liable for the new debts incurred. The law makes directors responsible for ensuring that their company does not trade while insolvent. This is in addition to their general duties to act with care and diligence, in good faith, in the best interests of the company and not to improperly use their position or information received for personal gain.