Imagine Co A sells its tyre shop business to Co B and nearly 1 year later enters liquidation.
If Co A Liquidator pursued Co B for a CDD, what defences are available:
1. Commerciality of recovering monies from Co B.
2. Was the sale for market value or the best price reasonably attainable in the circumstances? Say the tyre shop was on market for a while and advertised via brokers, but no other offers are made.
Co B’s consideration may be reasonable even if below market value. GET OUT OF JAIL FREE CARD??
Don’t forget to keep sufficient records about the sale, like a journal or agreements.
3. Due to the sale, Co A is not, or does not become, insolvent.
4. Good faith – Co B did not suspect/know or ought not to have suspected/known of Co A’s insolvency at sale time.
5. 553C set-off – if Co B has no actual notice of insolvency and is owed a debt by Co A, then it possibly may be able to set-off its debt with the CDD. I have previously asked Treasury to amend 553C to exclude all voidables, but this has fallen on deaf ears. I have written extensively about why 553C cannot and should not apply to any of the voidable transaction claims in Part 5.7B of the Corporations Act.
6. Co B exercised its general security interest rights in accordance with the security agreement entered into with Co A.
7. Safe harbour restructure defence (but only if Co A goes into Voluntary Administration first) – s588FG(8), the sale is voidable but ASIC and the courts cannot actually void it