Corporations Act 2001 (Cth) · s588FDB
Creditor-defeating dispositions
What it covers
Disposing of company property for less than its market value (or the best price reasonably obtainable, whichever is lower) in a way that stops or delays it reaching creditors in the winding up. Aimed at illegal phoenix activity.
"…preventing the property from becoming available for the benefit of the company's creditors in the winding-up of the company…"s588FDB(1)(b)(i)
Elements
1Consideration was below value
Less than the lower of the property's market value and the best price reasonably obtainable, when the agreement was made (or when the disposition happened).
s588FDB(1)(a)2It kept the property from creditors
It prevented the property becoming available to creditors in the winding up, or hindered or significantly delayed that.
s588FDB(1)(b)3One of the insolvency conditions applies
Made while insolvent, or it caused insolvency, in the 12 months ending on the relation-back day or after it up to the winding up. Or an external administration began less than 12 months after it, as a direct or indirect result of it.
s588FE(6B)(b)4It wasn't done by an insolvency practitioner or under a court-approved arrangement
Excludes dispositions under a s411 scheme, a deed of company arrangement or a restructuring plan, or by an administrator, restructuring practitioner or liquidator.
s588FE(6B)(c)
Who else is caught
Where the buyer pays some of the price to a third party, the company is treated as having disposed of that part to the third party (s588FDB(3)).