Insolvency (Tax Priorities) Legislation Amendment Act 1993 (32 of 1993)

Part 4   AMENDMENTS OF THE CORPORATIONS LAW

27   After section 588FG of the Corporations Law the following sections are inserted

Directors to indemnify Commissioner of Taxation if certain payments set aside

"588FGA. (1) This section applies if the Court makes an order under section 588FF against the Commissioner of Taxation because of the payment of an amount in respect of a liability under any of the following provisions of the Income Tax Assessment Act 1936:

(a) section 221F (except subsection 221F (12)), section 221G (except subsection 221G (4A)) or section 221P;

(b) subsection 221YHDC (2);

(c) subsection 221YHZD (1) or (1A);

(d) subsection 221YN (1);

(e) section 222AHA.

"(2) Each person who was a director of the company when the payment was made is liable to indemnify the Commissioner in respect of any loss or damage resulting from the order.

"(3) An amount payable to the Commissioner under subsection (2):

(a) is a debt due to the Commonwealth and payable to the Commissioner; and

(b) may be recovered in a court of competent jurisdiction by the Commissioner, or a Deputy Commissioner of Taxation, suing in his or her official name.

"(4) The Court may, in the proceedings in which it made the order against the Commissioner, order a person to pay to the Commissioner an amount payable by the person under subsection (2).

"(5) A person who pays an amount under subsection (2) has the same rights:

(a) whether by way of indemnity, subrogation, contribution or otherwise; and

(b) against the company or anyone else;

as if the payment had been made under a guarantee:

(c) of the liability referred to in subsection (1); and

(d) under which the person and every other person who was a director of the company as mentioned in subsection (2) were jointly and severally liable as guarantors.

Defences in proceedings under section 588FGA

"588FGB. (1) This section has effect for the purposes of:

(a) proceedings to recover from a person an amount payable under subsection 588FGA (2); and

(b) proceedings under subsection 588FGA (5) against a person of the kind referred to in paragraph 588FGA (5) (d).

"(2) The time when the payment referred to in subsection 588FGA (1) was made is called the payment time.

"(3) It is a defence if it is proved that, at the payment time, the person had reasonable grounds to expect, and did expect, that the company was solvent at that time and would remain solvent even if it made the payment.

"(4) Without limiting the generality of subsection (3), it is a defence if it is proved that, at the payment 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 even if it made the payment.

"(5) It is a defence if it is proved that, because of illness or for some other good reason, the person did not take part in the management of the company at the payment time.

"(6) It is a defence if it is proved that:

(a) the person took all reasonable steps to prevent the company from making the payment; or

(b) there were no such steps the person could have taken.

"(7) In determining whether a defence under subsection (6) 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; and

(b) when that action was taken; and

(c) the results of that action.".