Commonwealth Consolidated Acts

CORPORATIONS ACT 2001 - SECT 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 .

  (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

  (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

  (ba)   under a restructuring plan made 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.