Document ID: chunk:federal_register_of_legislation:C2004A04501:schedule:3:p99
Version: federal_register_of_legislation:C2004A04501
Segment Type: schedule
Provision Reference: sch 3 (pt 99/110)
Character Range: 402562–405234

incurring of a debt by a company; and

      (b)     the person to whom the debt is owed has suffered loss or damage in relation to the debt because of the company's insolvency; and

      (c)     the debt was wholly or partly unsecured when the loss or damage was suffered; and

   (d)     the company is being wound up;

the company's liquidator may, by proceedings in a court of competent jurisdiction, recover from the corporation, as a debt due to the company, an amount equal to the amount of the loss or damage.

"(2) Proceedings under this section may only be begun within 6 years after the beginning of the winding up.

Defences

"588X.(1) This section has effect for the purposes of proceedings under section 588W.

"(2) It is a defence if it is proved that, at the time when the debt was incurred, the corporation, and each relevant director (if any), had reasonable grounds to expect, and did expect, that the company was solvent at that time and would remain solvent even if it incurred that debt and any other debts that it incurred at that time.

"(3) Without limiting the generality of subsection (2), it is a defence if it is proved that, at the time when the debt was incurred, the corporation, and each relevant director (if any):

  (a) had reasonable grounds to believe, and did believe:

         (i) that a competent and reliable person was responsible for providing to the corporation adequate information about whether the company was solvent; and

      (ii) that the person was fulfilling that responsibility; and

    (b) expected, on the basis of the information provided to the corporation by the person, that the company was solvent at that time and would remain solvent even if it incurred that debt and any other debts that it incurred at that time.

"(4) If it is proved that, because of illness or for some other good reason, a particular relevant director did not take part in the management of the corporation at the time when the company incurred the debt, the fact that the director was aware as mentioned in subparagraph 588V(1)(d)(i) is to be disregarded.

"(5) It is a defence if it is proved that the corporation took all reasonable steps to prevent the company from incurring the debt.

  "(6) In subsections (2), (3) and (4):

'relevant director' means a director of the corporation who was aware as mentioned in subparagraph 588V(1)(d)(i).

"Division 6—Application of compensation under Division 4 or 5

Application of amount paid as compensation

"588Y.(1) An amount paid to a company under section 588J, 588K, 588M or 588W is not available to pay a secured debt of the company unless all the company's unsecured debts have