ASIC orders CDD’s

I have been writing all week about the new creditor defeating dispositions (CDD) and today am looking at the new ASIC CDD powers (s 588FGAA of the Corporations Act 2001).

Sarah’s Garage is trading well, but has fallen behind on its BASs.

Rather than pay the ATO, Sarah’s Garage is convinced by dodgy Dan to sell its business to the related, Sarah’s Mech for $1.

A liquidator may pursue the new company for a CDD, but what if they have no funds?

In the past, this transaction may have slipped through the cracks, but the new CDD law means that ASIC on its own initiative (or the Liquidator by applying to ASIC) may order any number of things including:

– repayment of reasonable consideration
– transfer of the business back to the Liquidation … etc

These applications must be made within 3 years of appointment. There are a number of exceptions to this, so please get in touch if you have any questions.

ASIC must send the order to the offending party and Liquidator, and give written reasons (which are reviewable by a Court). The reference here to Court, and not court, is very important. It means that an application to set aside the ASIC order must be made to the Supreme or Federal Court, not any local court (despite quantum). This will be very expensive!

ASIC must exercise judgment (controversially) about what a court might decide about possible defences before issuing the order.

What is not addressed is how will ASIC fund these actions, as they haven’t even put forward any guidance notes or funding proposals to date! Hopefully the IP profession are not the ones paying, but I am a sceptic.

#SVVoidables #insolvency #directors

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