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11.2.3.1 Effects of Successful Avoiding Transactions
11.2.3.1.1 Recovery from the Preferred Creditors/ Anyone who
Received Benefits
Australia has six types of voidable transactions which are governed under Part 5.7B
of the Corporations Act 2001. Generally, in order to be a voidable transaction, it
must occur where the company is being wound up and it must be entered into when
the company is insolvent or becomes insolvent as a result of the transaction. 46 These
are insolvent transactions, 47 for example, an unfair preference insolvent, 48 and an
uncommercial transaction, 49 an insolvent transaction with a related entity, 50 an
46 See section 588FC of the Australian Corporations Act 2001- ―A transaction of a company is an
insolvent transaction of the company if, and only if, it is an unfair preference given by the company,
or an uncommercial transaction of the company, and:
(a) any of the following happens at a time when the company is insolvent:
(i) the transaction is entered into; or
(ii) an act is done, or an omission is made, for the purpose of giving effect to the transaction;
or
(b) the company becomes insolvent because of, or because of matters including:
(i) entering into the transaction; or
(ii) a person doing an act, or making an omission, for the purpose of giving effect to the
transaction.‖
47 See section 588FE(2) of the Australian Corporations Act 2001- ―The transaction is voidable if:
(a) it is an insolvent transaction of the company; and
(b) it was entered into, or an act was done for the purpose of giving effect to it:
(i) during the 6 months ending on the relation-back day; or
(ii) after that day but on or before the day when the winding-up began.‖
48 See section 588FA(1) of the Australian Corporations Act 2001- ―A transaction is an unfair
preference given by a company to a creditor of the company if, and only if:
(a) the company and the creditor are parties to the transaction (even if someone else is also a party);
and
(b) the transaction results in the creditor receiving from the company, in respect of an unsecured
debt that the company owes to the creditor, more than the creditor would receive
from the company in respect of the debt if the transaction were set aside and the creditor were
to prove for the debt in a winding-up of the company.‖
49 See section 588FE(3) of the Australian Corporations Act 2001- ―The transaction is voidable if:
(a) it is an insolvent transaction, and also an uncommercial transaction, of the company; and
(b) it was entered into, or an act was done for the purpose of giving effect to it, during the 2 years
ending on the relation-back day.‖
An uncommercial transaction is defined in section 588FB(1) of the Australian Corporations Act
2001 as one that a reasonable person in the company‘s circumstances would not have entered into.
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