Corporations Act 2001

CHAPTER 5 - EXTERNAL ADMINISTRATION  

PART 5.8 - OFFENCES  

Note: This Part applies to a sub-fund of a CCIV in a modified form: see Division 7 of Part 8B.6 .

SECTION 589   INTERPRETATION AND APPLICATION  

589(1)    
Sections 590 to 593 (inclusive) apply to a company:

(a)    that has been wound up or is in the course of being wound up; or

(b)    that has been in the course of being wound up, where the winding up has been stayed or terminated by an order under section 482 ; or

(ba)    of which a provisional liquidator has been appointed; or

(c)    that is or has been under administration; or

(ca)    that has executed a deed of company arrangement, even if the deed has since terminated; or

(cb)    

that is or has been under restructuring; or

(cc)    

that has made a restructuring plan, even if the plan has since terminated; or

(d)    affairs of which are or have been under investigation; or

(e)    in respect of property of which a receiver, or a receiver and manager, has at any time been appointed, whether by the Court or under a power contained in an instrument, whether or not the appointment has been terminated; or

(f)    that has ceased to carry on business or is unable to pay its debts; or

(g)    that has entered into a compromise or arrangement with its creditors.

589(2)    
For the purposes of this Part, affairs of a company are or have been under investigation if, and only if:

(a)    ASIC is investigating, or has at any time investigated, under Division 1 of Part 3 of the ASIC Act:

(i) matters being, or connected with, affairs of the company; or

(ii) matters including such matters; or

(b)    affairs of the company have at any time been under investigation under:

(i) Part VII of the Companies Act 1981 ; or

(ii) the provisions of a previous law of a State or Territory that correspond to that Part.

589(3)    
For the purposes of this Part, a company is taken to have ceased to carry on business only if:

(a)    

ASIC has published in the prescribed manner a notice of the proposed deregistration of the company under subsection 601AA(4) or 601AB(3) ; and

(b)    if the notice was published under subsection 601AA(4) or under subsection 601AB(3) because of a decision under subsection 601AB(1) - 2 months have passed since the notice was published and ASIC has not been informed that the company is carrying on business.

589(4)    
For the purposes of this Part, a company is taken to be unable to pay its debts if, and only if, execution or other process issued on a judgment, decree or order of a court (whether or not an Australian court) in favour of a creditor of the company is returned unsatisfied in whole or in part.

Meaning of appropriate officer and property

589(5)    

In this Part:

appropriate officer
means:

(a) in relation to a company that has been, has been being or is being wound up - the liquidator; and

(aa) in relation to a company of which a provisional liquidator has been appointed - the provisional liquidator; and

(b) in relation to a company that is or has been under administration - the administrator; and

(ba) in relation to a company that has executed a deed of company arrangement - the deed ' s administrator; and

(bb) in relation to a company that is or has been under restructuring - the restructuring practitioner; and

(bc) in relation to a company that has made a restructuring plan - the plan ' s restructuring practitioner; and

(c) in relation to a company affairs of which are or have been under investigation - ASIC or the NCSC, as the case requires; and

(d) in relation to a company in respect of property of which a receiver, or a receiver and manager, has been appointed - the receiver or the receiver and manager; and

(e) in relation to a company that has ceased to carry on business or is unable to pay its debts - ASIC or the NCSC, as the case requires; and

(f) in relation to a company that has entered into a compromise or arrangement with its creditors - the person appointed by the Court to administer the compromise or arrangement.

property
of a company includes any PPSA retention of title property of the company.

Note: See sections 9 (definition of property ) and 51F (PPSA retention of title property).

relevant day
(Repealed by No 76 of 2023, s 3, Sch 2[135] (effective 20 October 2023).)

589(6)    
This Part applies in relation to a company that was first incorporated other than under this Act:

(a)    as if, in this Part (other than section 595 ) as so applying:

(i) a reference to the company included a reference to the company as it existed at a time before its registration day (including a time before the commencement of this Act); and

[ CCH Note: There is no subparagraph 589(6)(a)(ii).]

(iii) a reference, in relation to a provision of this Act, to ASIC included a reference to the NCSC (if relevant); and

(b)    with such other modifications as the circumstances require.

SECTION 590   OFFENCES BY OFFICERS OF CERTAIN COMPANIES  

590(1)    

A person who, being a past or present officer or employee of a company to which this section applies:

(a)    

does not disclose to the appropriate officer all the property of the company, and how and to whom and for what consideration and when any part of the property of the company was disposed of within 10 years next before the relevant day, except such part as has been disposed of in the ordinary course of the business of the company; or

(b) (Repealed)

(c)    

has, within 10 years next before the relevant day or at a time on or after that day:

(i) engaged in conduct that resulted in the fraudulent concealment or removal of any part of the property of the company to the value of $100 or more; or

(ii) engaged in conduct that resulted in the concealment of any debt due to or by the company; or

(iii) engaged in conduct that resulted in the fraudulent parting with, alteration or making of any omission in, or being privy to fraudulent parting with, altering or making any omission in, any book affecting or relating to affairs of the company; or

(iv) by any false representation or other fraud, obtained on credit, for or on behalf of the company, any property that the company has not subsequently paid for; or

(v) engaged in conduct that resulted in the fraudulent pawning, pledging or disposal of, otherwise than in the ordinary course of the business of the company, property of the company that has been obtained on credit and has not been paid for;

(d)    fraudulently makes any material omission in any statement or report relating to affairs of the company; or

(e) (Repealed)

(f)    

engaged in conduct that prevented the production to the appropriate officer of any book affecting or relating to affairs of the company; or

(g)    has, within 10 years next before the relevant day or at a time on or after that day, attempted to account for any part of the property of the company by making entries in the books of the company showing fictitious transactions, losses or expenses; or

(h)    has, within 10 years next before the relevant day or at a time on or after that day, been guilty of any false representation or other fraud for the purpose of obtaining the consent of the creditors of the company or any of them to an agreement with reference to affairs of the company or to the winding up;

contravenes this subsection.

590(2)    

Absolute liability applies to so much of an offence based on paragraph (1)(c) , (g) or (h) as requires that an event occur within 10 years next before the relevant day or at a time on or after that day.

Note: For absolute liability , see section 6.2 of the Criminal Code .

590(3)    

Paragraph (1)(a) does not apply to the extent that the person is not capable of disclosing the information referred to in that paragraph.

Note: A defendant bears an evidential burden in relation to the matters in subsection (3) , see subsection 13.3(3) of the Criminal Code .

590(4)    

A person who, being a past or present officer or employee of a company to which this section applies, does not deliver up to, or in accordance with the directions of, the appropriate officer:

(a)    all the property of the company in the person ' s possession; or

(b)    all books in the person ' s possession belonging to the company (except books of which the person is entitled, as against the company and the appropriate officer, to retain possession);

contravenes this subsection.

590(4A)    

A person who, being a past or present officer or employee of a company and knowing or believing that a false debt has been proved by a person, fails for a period of one month to inform the appropriate officer of his or her knowledge or belief contravenes this subsection.

590(4B)    

A person must not intentionally or recklessly fail to comply with subsection (4) or (4A) .

590(5)    
Where a person pawns, pledges or disposes of any property in circumstances that amount to a contravention by virtue of subparagraph (1)(c)(v) , a person who takes in pawn or pledge or otherwise receives the property knowing it to be pawned, pledged or disposed of in those circumstances contravenes this subsection.

590(6)    
A person who takes in pawn or pledge or otherwise receives property in circumstances mentioned in subsection (5) and with the knowledge mentioned in that subsection is taken to hold the property as trustee for the company concerned and is liable to account to the company for the property.

590(7)    
Where, in proceedings under subsection (6) , it is necessary to establish that a person has taken property in pawn or pledge, or otherwise received property:

(a)    in circumstances mentioned in subsection (5) ; and

(b)    with the knowledge mentioned in that subsection;

the matter referred to in paragraph (b) of this subsection may be established on the balance of probabilities.

Meaning of relevant day

590(8)    

In this section:

relevant day
means the day on which:

(a) in relation to a company that has been wound up, has been in the course of being wound up, or is being wound up:

(i) if, because of Division 1A of Part 5.6 , the winding up is taken to have begun on the day when an order that the company be wound up was made - the application for the order was filed; or

(ii) otherwise - the winding up is taken because of Division 1A of Part 5.6 to have begun; or

(b) in relation to a company of which a provisional liquidator has been appointed - the provisional liquidator was appointed; or

(c) in relation to a company that is or has been under administration - the administration began; or

(d) in relation to a company that has executed a deed of company arrangement - the deed was executed; or

(e) in relation to a company that is or has been under restructuring - the restructuring began; or

(f) in relation to a company that has made a restructuring plan - the plan was made; or

(g) in relation to a company affairs of which are or have been under investigation:

(i) if paragraph 589(2)(a) applies - the investigation began; or

(ii) if paragraph 589(2)(b) applies - a direction was given to the NCSC to arrange for the investigation; or

(h) in relation to a company in respect of property of which a receiver, or a receiver and manager, has been appointed - the receiver, or the receiver and manager, was appointed; or

(i) in relation to a company that is unable to pay its debts - the execution or other process was returned unsatisfied in whole or in part; or

(j) in relation to a company that has ceased to carry on business - a notice was first published in relation to the company under subsection 601AA(4) or 601AB(3) ; or

(k) in relation to a company that has entered into a compromise or arrangement with its creditors - the compromise or arrangement was approved by the Court.

SECTION 592   INCURRING OF CERTAIN DEBTS; FRAUDULENT CONDUCT  

592(1)   [ Liability for debts, etc, before 23 June 1993]  

Where:

(a) a company has incurred a debt before 23 June 1993; and

(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(1A)   [ Strict liability offence]  

An offence based on subsection (1) is an offence of strict liability.

Note: For strict liability , see section 6.1 of the Criminal Code .

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.

Note: A defendant bears a legal burden in relation to a matter mentioned in subsection (2), see section 13.4 of the Criminal Code .

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(6A)   [ Absolute liability offence]  

For the purposes of an offence based on subsection (6), absolute liability applies to paragraph (6)(b).

Note: For absolute liability , see section 6.2 of the Criminal Code .

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) is, unless the contrary is established, taken to be such a certificate and to have been duly issued.

SECTION 593   POWERS OF COURT  

593(1)    
Where a person has been convicted of an offence under subsection 592(1) in respect of the incurring of a debt, the Court, on the application of ASIC or the person to whom the debt is payable, may, if it thinks it proper to do so, declare that the first-mentioned person is personally responsible without any limitation of liability for the payment to the person to whom the debt is payable of an amount equal to the whole of the debt or such part of it as the Court thinks proper.

593(2)    
Where a person has been convicted of an offence under subsection 592(6), the Court, on the application of ASIC or of a prescribed person, may, if it thinks it proper to do so, declare that the first-mentioned person is personally responsible without any limitation of liability for the payment to the company of the amount required to satisfy so much of the debts of the company as the Court thinks proper.

593(3)    
In relation to a company in respect of which a conviction referred to in subsection (2) relates:

(a) the appropriate officer; and

(b) a creditor or contributory of the company authorised by ASIC to make an application under that subsection; and

(c) if the company was a company to which section 592 applied by reason of paragraph 589(1)(c) - a member of the company;

are prescribed persons for the purposes of that subsection.

593(4)    
Where the Court makes a declaration under subsection (1) in relation to a person, it may give such further directions as it thinks proper for the purpose of giving effect to that declaration.

593(5)    
In particular, the Court may order that the liability of the person under the declaration is a charge:

(a) on a debt or obligation due from the company to the person; or

(b) on a right or interest under a security interest in any property of the company held by or vested in the person or a person on the person ' s behalf, or a person claiming as assignee from or through the person liable or a person acting on the person ' s behalf.

593(6)    
The Court may, from time to time, make such further order as it thinks proper for the purpose of enforcing a charge imposed under subsection (5).

593(7)    

For the purpose of subsection (5), assignee includes a person to whom or in whose favour, by the directions of the person liable, the debt, obligation or security interest was created, issued or transferred or the interest created, but does not include an assignee for valuable consideration, not including consideration by way of marriage, given in good faith and without actual knowledge of any of the matters upon which the conviction or declaration was made.

593(8)    
On the hearing of an application under subsection (1) or (2), the appropriate officer or other applicant may give evidence or call witnesses.

SECTION 594  

594   CERTAIN RIGHTS NOT AFFECTED  
Except as provided by subsection 592(4) nothing in subsection 592(1) or 593(1) or (2) affects any rights of a person to indemnity, subrogation or contribution.

SECTION 595   INDUCEMENT TO BE APPOINTED LIQUIDATOR ETC. OF COMPANY  

595(1)    

A person must not give,or agree or offer to give, to another person any valuable consideration with a view to securing the first-mentioned person's own appointment or nomination, or to securing or preventing the appointment or nomination of a third person, as:

(a) a liquidator or provisional liquidator of a company; or

(b) an administrator of a company; or

(c) an administrator of a deed of company arrangement executed, or to be executed, by a company; or

(ca) a restructuring practitioner for a company; or

(cb) a restructuring practitioner for a restructuring plan made, or to be made, by a company; or

(d) a receiver, or a receiver and manager, of property of a company; or

(e) a trustee or other person to administer a compromise or arrangement made between a company and any other person or persons.

595(2)    

An offence based on subsection (1) is an offence of strict liability.

Note: For strict liability , see section 6.1 of the Criminal Code .

SECTION 596   FRAUDS BY OFFICERS  

596(1)    

A person who, while an officer or employee of a company:

(a)    by false pretences or by means of any other fraud, induces a person to give credit to the company or to a related body corporate; or

(b)    

with intent to defraud the company or a related body corporate, or members or creditors of the company or of a related body corporate, makes or purports to make, or causes to be made or to be purported to be made, any gift or transfer of, or security interest in, or causes or connives at the levying of any execution against, property of the company or of a related body corporate; or

(c)    with intent to defraud the company or a related body corporate, or members or creditors of the company or of a related body corporate, engages in conduct that results in the concealment or removal of any part of the property of the company or of a related body corporate after, or within 2 months before, the date of any unsatisfied judgment or order for payment of money obtained against the company or a related body corporate;

contravenes this section.

Note: This section applies to a CCIV in a modified form: see section 1238F .

596(2)    

Absolute liability applies to so much of an offence based on paragraph (1)(c) as requires that an event occur after, or within 2 months before, the date of any unsatisfied judgment or order for payment of money obtained against the company or a related body corporate.

Note: For absolute liability , see section 6.2 of the Criminal Code .