A creditor defeating disposition occurs when a company, who is being wound up, transfers property or other assets were less than market value.

The new s588FDB of Corporation Act 2001, intends to prevent companies from disposing of assets prior to liquidation and passing those assets for less than market value.

The liquidator can seek to recover a voidable creditor-defeating disposition by applying to Court for orders to void the transaction or requesting ASIC to make an order to undo the disposition.

Take-Away Points

Ensure any assets are sold for appropriate market value. Getting this wrong may result in the transaction being voidable.