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CORPORATIONS ACT 2001 - SECT 588GAB

Officer's duty to prevent creditor-defeating disposition

             (1)  An officer of a company must not engage in conduct that results in the company making a creditor-defeating disposition of property of the company, if:

                     (a)  the company is insolvent; or

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

                     (c)  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; or

                     (d)  less than 12 months after the disposition, the company ceases to carry on business altogether as a direct or indirect result of the 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 creditor-defeating disposition and for paragraphs (1)(a), (b), (c) and (d): see section 5.6 of the Criminal Code .

             (2)  An officer of a company must not engage in conduct that results in the company making a disposition of property of the company, 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 officer knows, or a reasonable person in the position of the officer 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

             (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.



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