THE CORPORATIONS LAW

CHAPTER 5 - EXTERNAL ADMINISTRATION

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

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Division 3 - Director's duty to prevent insolvent trading

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SECTION 588H   DEFENCES  

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588H(1)  [Defences to civil proceedings]  
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This section has effect for the purposes of proceedings for a contravention of subsection 588G(2) in relation to the incurring of a debt (including proceedings under section 588M in relation to the incurring of the debt).

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588H(2)  [Reasonable grounds to expect company solvent]  

It is a defence if it is proved that, at the time when the debt was incurred, the person had reasonable grounds to expect, and did expect, that the company was solvent at that time and would remain solvent even if it incurred that debt and any other debts that it incurred at that time.

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588H(3)  [Reliance on other person]  

Without limiting the generality of subsection (2), it is a defence if it is proved that, at the time when the debt was incurred, the person:

(a)  had reasonable grounds to believe, and did believe:

(i) that a competent and reliable person ( ``the other person'' ) was responsible for providing to the first-mentioned person adequate information about whether the company was solvent; and
(ii) that the other person was fulfilling that responsibility; and

(b)  expected, on the basis of information provided to the first-mentioned person by the other person, that the company was solvent at that time and would remain solvent even if it incurred that debt and any other debts that it incurred at that time.

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588H(4)  [Director ill, etc]  

If the person was a director of the company at the time when the debt was incurred, it is a defence if it is proved that, because of illness or for some other good reason, he or she did not take part at that time in the management of the company.

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588H(5)  [Reasonable steps to prevent incurring of debt]  

It is a defence if it is proved that the person took all reasonable steps to prevent the company from incurring the debt.

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588H(6)  [Elements proving reasonableness]  

In determining whether a defence under subsection (5) has been proved, the matters to which regard is to be had include, but are not limited to:

(a)  any action the person took with a view to appointing an administrator of the company; and

(b)  when that action was taken; and

(c)  the results of that action.

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