Division 2 of Part 5.7B of the Corporations Law is a regime which sets out provisions for the avoidance of certain transactions entered into prior to the commencement of a liquidation. The present study analyses this regime, the contents of which are referred to as the “avoidance provisions.” Its aim includes the following:
• ascertainment and assessment of the rationale for the regime;
• examination of its structure and scope;
• analysis of the issues relating to legal proceedings initiated under it;
• determination of the effects where the regime is applied;
• identification of the shortcomings of the regime; and finally,
• formulation of proposals, where necessary, for reform.
Chapter 1 sets out the relevant issues. Chapter 2 discusses the kinds of transactions that are likely to attract a liquidator’s attention in his or her investigation of the preliquidation dealings of a company being wound up.
Chapter 3 identifies and assesses the rationale for the existence of avoidance provisions in the Corporations Law. Whilst analysing the structure of the regime, Chapter 4 explains how it operates and the meaning of key terms, with particular emphasis on the meaning of “insolvent”.
Chapter 5 analyses the categories of voidable transactions covered by the regime, namely, unfair preferences, uncommercial transactions, unfair loans and fraudulent transactions. It also considers, in the absence of a developed body of case law, both how the provisions are likely to be applied by the courts and the scope of the provisions.
Chapter 6 examines the provision which provides protection to persons who have benefited from transactions impugned by a liquidator and against whom a liquidator is claiming money or property. Further, it seeks to ascertain the ambit of the protection so as to assess how that impacts on the effectiveness of a liquidator’s right to have a pre-liquidation transaction avoided.
Chapter 7 discusses issues encountered by a liquidator in the event of the commencement of legal proceedings against a party to a pre-liquidation transaction. The focus is on the problems confronting a liquidator in the initiation and prosecution of legal proceedings. It concludes with an examination of an alternative procedure to litigation.
Chapter 8 considers the consequences resulting from a liquidator successfully taking action in the courts to have a pre-liquidation transaction declared voidable under S.588FF. The chapter concentrates on the orders which can be made by a court and the effects that a decision that a transaction is voidable can have on parties directly or indirectly involved in the voidable transaction.
Chapter 9 identifies the major shortcomings with the avoidance provisions and suggests appropriate reform measures.
Finally, Chapter 10 provides a number of conclusions relating to the avoidance provisions. It suggests that the avoidance provisions will continue to be an important element in the administration of liquidations.
The law is stated as at 9 August 1996.