THE CORPORATIONS LAW

CHAPTER 5 - EXTERNAL ADMINISTRATION

PART 5.8 - OFFENCES

SECTION 592   INCURRING OF CERTAIN DEBTS; FRAUDULENT CONDUCT  

592(1)  [Liability for debts etc before Pt 5.7B commenced]  

Where:

(a)  a company has incurred a debt before the commencement of Part 5.7B;

(b)  immediately before the time when the debt was incurred:

(i) there were reasonable grounds to expect that the company will not be able to pay all its debts as and when they become due; or

(ii) there were reasonable grounds to expect that, if the company incurs the debt, it will not be able to pay all its debts as and when they become due; and

(c)  the company was, at the time when the debt was incurred, or becomes at a later time, a company to which this section applies;

any person who was a director of the company, or took part in the management of the company, at the time when the debt was incurred contravenes this subsection and the company and that person or, if there are 2 or more such persons, those persons are jointly and severally liable for the payment of the debt.

592(2)  [Defence]  

In any proceedings against a person under subsection (1), it is a defence if it is proved:

(a)  that the debt was incurred without the person's express or implied authority or consent; or

(b)  that at the time when the debt was incurred, the person did not have reasonable cause to expect:

(i) that the company would not be able to pay all its debts as and when they became due; or

(ii) that, if the company incurred that debt, it would not be able to pay all its debts as and when they became due.

592(3)  [Proceedings for recovery of debt]  

Proceedings may be brought under subsection (1) for the recovery of a debt whether or not the person against whom the proceedings are brought, or any other person, has been convicted of an offence under subsection (1) in respect of the incurring of that debt.

592(4)  [Onus of proof]  

In proceedings brought under subsection (1) for the recovery of a debt, the liability of a person under that subsection in respect of the debt may be established on the balance of probabilities.

592(5)  [Effect of payment of debt]  

Where subsection (1) renders a person or persons liable to pay a debt incurred by a company, the payment by that person or either or any of those persons of the whole or any part of that debt does not render the company liable to the person concerned in respect of the amount so paid.

592(6)  [Fraudulent conduct]  

Where:

(a)  a company has done an act (including the making of a contract or the entering into of a transaction) with intent to defraud creditors of the company or of any other person or for any other fraudulent purpose; and

(b)  the company was at the time when it does the act, or becomes at a later time, a company to which this section applies;

any person who was knowingly concerned in the doing of the act with that intent or for that purpose contravenes this subsection.

592(7)  [Certificate re conviction prima facie evidence]  

A certificate issued by the proper officer of an Australian court stating that a person specified in the certificate:

(a)  was convicted of an offence under subsection (1) in relation to a debt specified in the certificate incurred by a company so specified; or

(b)  was convicted of an offence under subsection (6) in relation to a company specified in the certificate;

is, in any proceedings, prima facie evidence of the matters stated in the certificate.

592(8)  [Document deemed to be certificate]  

A document purporting to be a certificate issued under subsection (7) shall, unless the contrary is established, be deemed to be such a certificate and to have been duly issued.