Corporations Act 2001

CHAPTER 5 - EXTERNAL ADMINISTRATION  

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

Note: This Part applies to a sub-fund of a CCIV in a modified form: see Division 3 of Part 8B.6 (for provisions relating to Division 2B ), Division 5 of Part 8B.6 (for provisions relating to Divisions 2 and 2A ) and Division 6 of Part 8B.6 (for provisions relating to Divisions 3 , 4 , 5 and 6 ).

Division 2B - Security interests in favour of company officers etc.  

SECTION 588FP   SECURITY INTERESTS IN FAVOUR OF AN OFFICER OF A COMPANY ETC. VOID  

General rule

588FP(1)    
A security interest, and any powers purporting to be conferred by the instrument under which the security interest is created, are void, and are taken always to have been void, if:

(a) a company grants the security interest; and

(b) a person covered by subsection (2) is a secured party; and

(c) the secured party purports to take a step to enforce the security interest, within 6 months after the time (the relevant time ) the instrument is made, without the leave of the Court under subsection (4).

588FP(2)    
This subsection covers the following persons:

(a) a person who is an officer (including a local agent of a foreign company) of the company at the relevant time;

(b) a person who has been such an officer of the company at any time within the period of 6 months ending at the relevant time;

(c) a person associated, in relation to the creation of the security interest, with a person of a kind mentioned in paragraph (a) or (b).

588FP(3)    
Without limiting paragraph (1)(c), a secured party takes a step to enforce a security interest if:

(a) the secured party appoints a receiver, or a receiver and manager, under powers conferred by an instrument creating or evidencing the security interest; or

(b) whether directly or by an agent, the secured party enters into possession or assumes control of property of a company for the purposes of enforcing the security interest; or

(c) the secured party seizes the property under section 123 of the Personal Property Securities Act 2009 for the purposes of enforcing the security interest.

Extension of time on application to the Court

588FP(4)    
On application by a secured party, the Court may give leave for a security interest granted by a company to be enforced by the secured party within 6 months after the relevant time, if it is satisfied that:

(a) the company was solvent immediately before the relevant time; and

(b) in all the circumstances of the case, it is just and equitable for the Court to do so.

Exception for security interests in PPSA retention of title property

588FP(5)    
This section does not apply in relation to a PPSA security interest in PPSA retention of title property.

Effect on debts, liabilities, obligations and title

588FP(6)    
A debt, liability or obligation is not affected by the fact that the security interest securing the debt, liability or obligation is void under subsection (1).

588FP(7)    
Subsection (1) does not affect the title of a person to property if:

(a) the person acquires the property for new value (within the meaning of the Personal Property Securities Act 2009 ) from any of the following persons (the seller ):

(i) a person covered by subsection (2);

(ii) another person on behalf of a person covered by subsection (2);

(iii) a receiver, or receiver and manager, appointed under powers conferred by an instrument creating or evidencing the security interest; and

(b) at the time the person acquires the property, the person has no actual or constructive knowledge that the seller is a secured party or acting on behalf of a secured party.

588FP(8)    
Sections 297 to 300 of the Personal Property Securities Act 2009 apply in relation to the determination of whether or not a person has actual or constructive knowledge as mentioned in paragraph (7)(b) of this section.

Onus of proof

588FP(9)    
In a proceeding in Australia under this Act, the onus of proving the fact that a person acquires property without actual or constructive knowledge as mentioned in paragraph (7)(b) lies with the person asserting that fact.