A Liquidator can recover from a related entity of the company, the benefit of any transaction entered into by the company which is an unfair preference or an uncommercial transaction (or certain types of other voidable transactions) in circumstances where the transaction is with a third party, but the transaction resulted in a liability of the related entity of the company being reduced or discharged.

A common example of a claim available to a Liquidator under Section 588FH of the Corporations Act 2001 (Cth) is where a company makes an unfair preference payment to a creditor whose debt has been personally guaranteed by a director of the company. In these circumstances the company’s director has received an indirect benefit as a result of the transaction due to the company having reduced the director’s liability under the personal guarantee and the amount of the payment to the creditor is recoverable from the director personally.

No Statutory Defences Available to Section 588FH Claim

There are no statutory defences available to a claim by a Liquidator under Section 588FH of the Corporations Act 2001 (Cth). This often results in circumstances were a statutory defence may be available to the actual recipient of a transaction (such as a creditor having a defence to an unfair preference claim), however, there being no defence available to the related entity of the company which has received an indirect benefit as a result of the transaction.

Advice Regarding Section 588FH Recoveries from Related Entities

If you wish to discuss this article, or your circumstances, please don’t hesitate to contact Pearce & Heers Brisbane or Gold Coast office and our experienced staff will be able to assist you.