Recovery of property for creditors

The liquidator is given power to seek a variety of orders, usually for the payment of money, to recover property disposed of by the company at differing times before and after the "relation-back day", which is usually the day of filing of the winding up application. The dispositions liable to attack are:

• • an unfair preference to a creditor where that is made within 6 months before the relation-back day (or 2 years if it is also an uncommercial transaction) and at a time when the company is insolvent;
• • an uncommercial transaction that is entered into within 2 years before the relation-back day;
• • an unfair preference or an uncommercial transaction that is entered into:
• • ◦ with a related entity within 4 years before the relation-back day; or
• • ◦ for the purpose of defeating creditors within 10 years before the relation-back day;
• • an unreasonable director-related transaction that is entered into within 4 years before the relation-back day; and
• • an unfair loan that is made at any time.

In addition, the liquidator can recover from a related entity a benefit received from such a transaction, such as the discharge or reduction of a guarantee in favour of the company.

Vesting of PPSA security interests

Under amendments to the CA consequent upon the introduction of the PPSA, certain PPSA security interests created by a company which is wound up vest in the company (and so become unenforceable by a secured party) unless registered within a prescribed time prior to the commencement of the winding up. There are exceptions and in some cases a right in the (formerly) secured party to prove for its loss in the winding up.

Avoidance of security interests to related parties

The same amendments provide for the avoidance of security interests in favour of officers, some former officers and their associates if steps are taken to enforce them within 6 months after they are created, unless the court grants leave.

See Recovery of property for creditors