Corporations Act 2001

CHAPTER 5 - EXTERNAL ADMINISTRATION  

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

Division 2 - Voidable transactions  

Subdivision E - Various rules about voidable transactions  

SECTION 588FJ   CIRCULATING SECURITY INTEREST CREATED WITHIN 6 MONTHS BEFORE RELATION-BACK DAY  

588FJ(1)  
This section applies if:


(a) a company is being wound up in insolvency; and


(b) the company created a circulating security interest in property of the company at a particular time that is at or after 23 June 1993 and:


(i) during the 6 months ending on the relation-back day; or

(ii) after that day but on or before the day when the winding up began.

588FJ(2)  


The circulating security interest is void, as against the company ' s liquidator, except so far as it secures:


(a) an advance paid to the company, or at its direction, at or after that time and as consideration for the circulating security interest; or


(b) interest on such an advance; or


(c) the amount of a liability under a guarantee or other obligation undertaken at or after that time on behalf of, or for the benefit of, the company; or


(d) an amount payable for property or services supplied to the company at or after that time; or


(e) interest on an amount so payable.

588FJ(3)  
Subsection (2) does not apply if it is proved that the company was solvent immediately after that time.

588FJ(4)  
Paragraphs (2)(a) and (b) do not apply in relation to an advance so far as it was applied to discharge, directly or indirectly, an unsecured debt, whether contingent or otherwise, that the company owed to:


(a) the secured party; or


(b) if the secured party was a body corporate - a related entity of the body.

588FJ(5)  
Paragraphs (2)(d) and (e) do not apply in relation to an amount payable as mentioned in paragraph (2)(d) in so far as the amount exceeds the market value of the property or services when supplied to the company.

588FJ(6)  


If, during the 6 months ending on the relation-back day, or after that day but on or before the day when the winding up began, a debt secured by the circulating security interest was discharged, out of the company ' s money or property, to the extent of a particular amount (in this subsection called the realised amount ), the liquidator may, by proceedings in a court of competent jurisdiction, recover from the secured party, as a debt due to the company, the amount worked out in accordance with the formula:

Unsecured amount - Realisation costs

where:

realisation costs
means so much (if any) of the costs and expenses of enforcing the security interest as is attributable to realising the realised amount.

unsecured amount
means so much of the realised amount as does not exceed so much of the debt as would, if the debt had not been so discharged, have been unsecured, as against the liquidator, because of subsection (2).


 

Disclaimer and notice of copyright applicable to materials provided by CCH Australia Limited

CCH Australia Limited ("CCH") believes that all information which it has provided in this site is accurate and reliable, but gives no warranty of accuracy or reliability of such information to the reader or any third party. The information provided by CCH is not legal or professional advice. To the extent permitted by law, no responsibility for damages or loss arising in any way out of or in connection with or incidental to any errors or omissions in any information provided is accepted by CCH or by persons involved in the preparation and provision of the information, whether arising from negligence or otherwise, from the use of or results obtained from information supplied by CCH.

The information provided by CCH includes history notes and other value-added features which are subject to CCH copyright. No CCH material may be copied, reproduced, republished, uploaded, posted, transmitted, or distributed in any way, except that you may download one copy for your personal use only, provided you keep intact all copyright and other proprietary notices. In particular, the reproduction of any part of the information for sale or incorporation in any product intended for sale is prohibited without CCH's prior consent.