By Andrew Hack, Solicitor, and Stephen Mullette, Principal, of Matthews Folbigg Lawyers, in our Insolvency, Restructuring and Debt Recovery Group.
As discussed in previous blogs in this series, both directors and external advisers have a duty to prevent creditor-defeating dispositions. Not only are they potentially liable for compensation, additionally they are liable for fines as well as it being a criminal offence. An offence could result in a maximum prison sentence of up to 10 years. The intention element is satisfied if a person has knowledge, intention or recklessness of the disposition being a creditor-defeating disposition.
The potential fines for a breach of the section can be severe. For individuals, the pecuniary penalty applicable is the greater of either 5,000 penalty units ($1.05m) or three times any benefit derived or detriment avoided because of the contravention.
For corporate bodies, the pecuniary penalty applicable is the greater of either:
- 50,000 penalty units ($10.5m);
- Three times any benefit derived or detriment avoided because of the contravention; or