Unreasonable director-related transactions

What it covers

Payments, transfers of property or issues of securities to a director, a director's relative or a relative of their spouse, or to someone on their behalf, that a reasonable person in the company's circumstances would not have made. They don't need to be insolvent transactions.

"…it may be expected that a reasonable person in the company's circumstances would not have entered into the transaction…"s588FDA(1)(c)

1. 1A payment, disposition of property or issue of securities

   Or the company taking on an obligation to make one, including a contingent obligation such as granting options.

   s588FDA(1)(a)
2. 2Made to a director or someone close to them

   A director, a relative of a director, a relative of a director's spouse, or a person acting on behalf of or for the benefit of any of them.

   s588FDA(1)(b)
3. 3A reasonable person would not have entered into it

   Judged by the benefits and detriment to the company and the benefits to the other parties, as things stood when the transaction was entered into.

   s588FDA(1)(c), (2)
4. 4It falls inside the window

   The 4 years ending on the relation-back day, or after that day up to the day the winding up began.

   s588FE(6A)

What can be recovered

Only the difference between what the company gave and what a reasonable person in its circumstances would have given (s588FF(4)).

No good faith defence

The s588FG(2) defence doesn't apply to these transactions.