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 3 - Duties to prevent insolvent trading and creditor-defeating dispositions  

Subdivision C - Safe harbour from breach of duties  

SECTION 588H   DEFENCES ABOUT REASONABLE GROUNDS, ILLNESS OR REASONABLE STEPS  
Application

588H(1)    

This section has effect for the purposes of:

(a) proceedings for a contravention of subsection 588G(2) relating to the incurring of a debt at a time (the key time ); and

(b) proceedings for a contravention of subsection 588GAB(2) or 588GAC(2) relating to the disposition of a company ' s property at a time (the key time ); and

(c) proceedings under section 588M relating to the incurring of the debt or the disposition of the property.

Expectations and belief about company ' s solvency

588H(2)    

It is a defence if it is proved that, at the key time, the person had reasonable grounds to expect, and did expect, that the company was solvent at that time and would remain solvent despite all its debts incurred, and dispositions of its property made, at that time.

588H(3)    

Without limiting the generality of subsection (2), it is a defence if it is proved that, at the key time, the person:

(a) had reasonable grounds to believe, and did believe:

(i) that a competent and reliable person (the other person ) was responsible for providing to the first-mentioned person adequate information about whether the company was solvent; and

(ii) that the other person was fulfilling that responsibility; and

(b) expected, on the basis of information provided to the first-mentioned person by the other person, that the company was solvent at that time and would remain solvent despite all its debts incurred, and dispositions of its property made, at that time.

588H(3A)    

Subsections (2) and (3) do not apply for the purposes of proceedings relating to the disposition of the company ' s property if the key time was less than 12 months before:

(a) the start of an external administration (as defined in Schedule 2) of the company that occurred as a direct or indirect result of the disposition; or

(b) the company ceased to carry on business altogether as a direct or indirect result of the disposition.

Director who did not take part in management

588H(4)    

If the person was a director of the company at the key time, it is a defence if it is proved that, because of illness or for some other good reason, he or she did not take part at that time in the management of the company.

Reasonable steps taken to prevent debt or disposition

588H(5)    

It is a defence if it is proved that the person took all reasonable steps to prevent the company from incurring the debt or making the disposition of its property.

588H(6)    

In determining whether a defence under subsection (5) has been proved, the matters to which regard is to be had include, but are not limited to:

(a) any action the person took with a view to appointing an administrator of the company or a restructuring practitioner for the company; and

(b) when that action was taken; and

(c) the results of that action.

This subsection does not apply to a defence in proceedings relating to a disposition of the company ' s property.