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 5 - Liability of holding company for insolvent trading by subsidiary  

SECTION 588X   DEFENCES ABOUT REASONABLE GROUNDS, ILLNESS OR REASONABLE STEPS  

588X(1)    
This section has effect for the purposes of proceedings under section 588W.

588X(2)    
It is a defence if it is proved that, at the time when the debt was incurred, the corporation, and each relevant director (if any), had reasonable grounds to expect, and did expect, that the company was solvent at that time and would remain solvent even if it incurred that debt and any other debts that it incurred at that time.

588X(3)    
Without limiting the generality of subsection (2), it is a defence if it is proved that, at the time when the debt was incurred, the corporation, and each relevant director (if any):

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

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

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

(b) expected, on the basis of the information provided to the corporation by the person, that the company was solvent at that time and would remain solvent even if it incurred that debt and any other debts that it incurred at that time.

588X(4)    
If it is proved that, because of illness or for some other good reason, a particular relevant director did not take part in the management of the corporation at the time when the company incurred the debt, the fact that the director was aware as mentioned in subparagraph 588V(1)(d)(i) is to be disregarded.

588X(5)    
It is a defence if it is proved that the corporation took all reasonable steps to prevent the company from incurring the debt.

588X(6)    
In subsections (2), (3) and (4):

relevant director
means a director of the corporation who was aware as mentioned in subparagraph 588V(1)(d)(i).