The ‘good faith’ defence to an unfair preference claim

This is the third article in our series on Unfair Preference payments.    The scenario that is common is that a business does the work or delivers the goods, invoices its customer and is eventually paid.   Three months later the business owner receives a letter from a liquidator demanding under threat of legal action that they be paid the money received on the basis the payment received was an unfair preference (Unfair Preference).  [Read more…]

Safe Harbour granted to proactive Directors of an insolvent company who are not merely ‘living in hope’

Amendments to the Corporations Act 2001 (Cth) (Corps Act) introducing the safe harbour insolvency provisions come into effect on 1 July 2018.   Under section 588G of the Corps Act a director of a company may be personally liable for debts incurred by the company if at the time the debt is incurred there are reasonable grounds to suspect the company is insolvent.  The section 588GA safe harbour provisions aim to encourage directors to remain in control of a business in financial difficulty and to take reasonable steps, outside of a formal insolvency process, to restructure and / or allow it to trade out of its difficulties in anticipation that such action will achieve a better outcome for the company than immediately appointing an administrator or liquidator.  The provisions encourage directors to closely monitor the financial position of the business, engage early with financial distress and then actively take steps to either restructure the business or, if that is not possible, to move quickly to formal insolvency.   [Read more…]

Holding company liability for debts of subsidiary

When advising on the suitability of corporate structures, we are commonly asked whether a holding company can be liable for the debts of a subsidiary.  The answer (of course) depends on a number of factors. [Read more…]

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