THE CORPORATIONS LAW

CHAPTER 5 - EXTERNAL ADMINISTRATION

PART 5.7B - RECOVERING PROPERTY OR COMPENSATION FOR THE BENEFIT OF CREDITORS OF INSOLVENT COMPANY

Division 2 - Voidable transactions

SECTION 588FJ   FLOATING CHARGE CREATED WITHIN 6 MONTHS BEFORE RELATION-BACK DAY  

588FJ(1)  [Floating charge]  

This section applies if:

(a)  a company is being wound up in insolvency; and

(b)  the company created a floating charge on property of the company at a particular time that is at or after the commencement of this Part and:

(i) during the 6 months ending on the relation-back day; or

(ii) after that day but on or before the day when the winding up began.

588FJ(2)  [Charge is void]  

The charge is void, as against the company's liquidator, except so far as it secures:

(a)  an advance paid to the company, or at its direction, at or after that time and as consideration for the charge; or

(b)  interest on such an advance; or

(c)  the amount of a liability under a guarantee or other obligation undertaken at or after that time on behalf of, or for the benefit of, the company; or

(d)  an amount payable for property or services supplied to the company at or after that time; or

(e)  interest on an amount so payable.

588FJ(3)  [Company solvent after creation of charge]  

Subsection (2) does not apply if it is proved that the company was solvent immediately after that time.

588FJ(4)  [Charge discharging unsecured debt]  

Paragraphs (2)(a) and (b) do not apply in relation to an advance so far as it was applied to discharge, directly or indirectly, an unsecured debt, whether contingent or otherwise, that the company owed to:

(a)  the chargee; or

(b)  if the chargee was a body corporate - a related entity of the body.

588FJ(5)  [Sec 588FJ(2)(d) and (e) limited]  

Paragraphs (2)(d) and (e) do not apply in relation to an amount payable as mentioned in paragraph (2)(d) in so far as the amount exceeds the market value of the property or services when supplied to the company.

588FJ(6)  [Where charge discharged]  

If, during the 6 months ending on the relation-back day, or after that day but on or before the day when the winding up began, a debt secured by the charge was discharged, out of the company's money or property, to the extent of a particular amount (in this subsection called the ``realised amount'' ), the liquidator may, by proceedings in a court of competent jurisdiction, recover from the chargee, as a debt due to the company, the amount worked out in accordance with the formula:

                Unsecured amount - Realisation costs

      

Where:

``Unsecured amount'' means so much of the realised amount as does not exceed so much of the debt as would, if the debt had not been so discharged, have been unsecured, as against the liquidator, because of subsection (2);

``Realisation costs'' means so much (if any) of the costs and expenses of enforcing the charge as is attributable to realising the realised amount.