Corporations Act 2001

CHAPTER 5 - EXTERNAL ADMINISTRATION  

PART 5.7B - RECOVERING PROPERTY OR COMPENSATION FOR THE BENEFIT OF CREDITORS OF INSOLVENT COMPANY  

Division 3 - Duties to prevent insolvent trading and creditor-defeating dispositions  

Subdivision B - Duties to prevent creditor-defeating dispositions  

SECTION 588GAC   PROCURING CREDITOR-DEFEATING DISPOSITION  

588GAC(1)  
A person must not engage in conduct of procuring, inciting, inducing or encouraging the making by a company of a disposition of property that results in the company making the disposition of the property, if:


(a) one or more of the following applies:


(i) the company is insolvent;

(ii) the company becomes insolvent because of the disposition or a number of dispositions made at the time of the disposition;

(iii) less than 12 months after the disposition, the start of an external administration (as defined in Schedule 2 ) of the company occurs as a direct or indirect result of the disposition;

(iv) less than 12 months after the disposition, the company ceases to carry on business altogether as a direct or indirect result of the disposition; and


(b) the disposition is a creditor-defeating disposition.

Note 1: Failure to comply with this subsection is an offence: see subsection 1311(1) .

Note 2: Recklessness is the fault element for the result of the company making the disposition and for subparagraphs (1)(a)(i), (ii), (iii) and (iv) and paragraph (1)(b): see section 5.6 of the Criminal Code .

588GAC(2)  
A person must not engage in conduct of procuring, inciting, inducing or encouraging the making by a company of a disposition of property that results in the company making the disposition of the property, if:


(a) one or more of the following applies:


(i) the company is insolvent;

(ii) the company becomes insolvent because of the disposition or a number of dispositions made at the time of the disposition;

(iii) less than 12 months after the disposition, the start of an external administration (as defined in Schedule 2 ) of the company occurs as a direct or indirect result of the disposition;

(iv) less than 12 months after the disposition, the company ceases to carry on business altogether as a direct or indirect result of the disposition; and


(b) the person knows, or a reasonable person in the position of the person would know, that the disposition is a creditor-defeating disposition.

Note 1: This subsection is a civil penalty provision (see section 1317E ).

Note 2: Section 588E provides for presumptions about when a company is insolvent and about matters relevant to whether a disposition is a creditor-defeating disposition.

Exceptions

588GAC(3)  
Subsections (1) and (2) do not apply if the disposition was made:


(a) under a compromise or arrangement approved by a Court under section 411 ; or


(b) under a deed of company arrangement executed by the company; or


(c) by the company ' s liquidator; or


(d) by a provisional liquidator of the company.

Note: Section 588GA also provides for subsections (1) and (2) of this section not to apply if the disposition was connected with a course of action likely to lead to a better outcome for the company.


View surrounding sectionsView surrounding sectionsBack to top


This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.