And here I thought CD’s were going the way of the dodo, insolvency law now has a CDD, or ‘creditor defeating disposition’, as a weapon to combat illegal phoenixing.
The law came into effect on 18 February 2020, but ONLY applies to dispositions entered on or after that date.
What is a CDD? See s 588FDA Corporations Act.
It is a disposition of property (or similar) not at market value or not at the best price reasonably available in the circumstances that either prevents, hinders or significantly delays the property becoming available to creditors.
A CDD must either occur whilst the company is insolvent or causes insolvency within 12 months of an external administration appointment.
A disposition can be presumed to be a CDD merely by you failing to retain sufficient books and records about the Company or the transaction for 7 years.
Only Liquidators and ASIC (a new power has been given to them) can recover CDD’s. However, a creditor may purchase the right to the legal claim against the perpetrator (message me if you’d like more details on this).
… I will be writing about this new law all week. Tomorrow I will take a look at what defences are available (including the big 553C set-off hole missed by Commonwealth Treasury).
Read more here:
- No express exclusion of set-off in the newly announced phoenixing offences: a missed opportunity!?
- Panel chat about untrustworthy advisors
- A glaring hole in the proposed new illegal phoenix recovery law
- Some Illegal Phoenixing Numbers