Corporations Act 2001

A person must not engage in conduct of procuring, inciting, inducing or encouraging the making by a company of a disposition of property that results in the company making the disposition of the property, if:

one or more of the following applies:

the company is insolvent;

the company becomes insolvent because of the disposition or a number of dispositions made at the time of the disposition;

less than 12 months after the disposition, the start of an external administration (as defined in Schedule 2) of the company occurs as a direct or indirect result of the disposition;

less than 12 months after the disposition, the company ceases to carry on business altogether as a direct or indirect result of the disposition; and

the disposition is a creditor‑defeating disposition.

Failure to comply with this subsection is an offence: see subsection 1311(1).

Recklessness is the fault element for the result of the company making the disposition and for subparagraphs (1)(a)(i), (ii), (iii) and (iv) and paragraph (1)(b): see section 5.6 of the Criminal Code.

A person must not engage in conduct of procuring, inciting, inducing or encouraging the making by a company of a disposition of property that results in the company making the disposition of the property, if:

one or more of the following applies:

the company is insolvent;

the company becomes insolvent because of the disposition or a number of dispositions made at the time of the disposition;

less than 12 months after the disposition, the start of an external administration (as defined in Schedule 2) of the company occurs as a direct or indirect result of the disposition;

less than 12 months after the disposition, the company ceases to carry on business altogether as a direct or indirect result of the disposition; and

the person knows, or a reasonable person in the position of the person would know, that the disposition is a creditor‑defeating disposition.

This subsection is a civil penalty provision (see section 1317E).

Section 588E provides for presumptions about when a company is insolvent and about matters relevant to whether a disposition is a creditor‑defeating disposition.

Subsections (1) and (2) do not apply if the disposition was made:

under a compromise or arrangement approved by a Court under section 411; or

under a deed of company arrangement executed by the company; or

under a restructuring plan made by the company; or

by the company’s liquidator; or

by a provisional liquidator of the company.

Section 588GA also provides for subsections (1) and (2) of this section not to apply if the disposition was connected with a course of action likely to lead to a better outcome for the company.