Legal Insights

New phoenixing laws put to the test

By Sam Kingston, Cara Thompson, & Michael Wells

• 15 December 2022 • 1 min read
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The liquidators of Intellicomms applied to the Court for relief in relation to a sale agreement entered into between Intellicomms and a related company for the sale of business assets, claiming it was a creditor-defeating disposition and a voidable transaction.

The key issue was whether the $20,727.17 payable to Intellicomms under the sale agreement was less than the market value of the property or less than the best price that was reasonably obtainable for the property. The Court’s focus was on what a prospective buyer of Intellicomms would have paid for the purchase of Intellicomms’ business. The liquidators provided evidence that a secured creditor expressed its willingness to purchase the Intellicomms business, and provided an indicative purchase price between $500,000 and $1 million – far greater than the $20,727.17 value of the sale agreement.

The Court was satisfied that the criteria for a creditor-defeating disposition had been met and that the disposition was a voidable transaction. The Court made orders to undo the sale agreement, including for the return of Intellicomms’ assets to the liquidators.

Company directors and pre-insolvency advisors may face both civil and criminal claims against them personally if they facilitate a creditor-defeating disposition. Further, directors should be mindful that ASIC has powers to order the return of property or for the payment of compensation without Court involvement. This is a powerful tool available to ASIC in addition to its existing powers.

Read the original article: New phoenixing laws put to the test

Read more articles from the December 2022 edition of The Annual Return.

By Sam Kingston, Cara Thompson, & Michael Wells

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