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ARTICLE · 19 SEPTEMBER 2014

Unreasonable director-related transactions

Cooper Grace Ward
Cooper Grace Ward
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Cooper Grace Ward

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This Victorian decision will be welcomed by liquidators, but it has worrying implications for financiers or creditors.

AustraliaCorporate/Commercial Law
Graham Roberts
Graham Roberts
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A recent Victorian case has worrying implications for financiers and creditors.

A decision of the Victorian Court of Appeal in Vasudevan v Becon Constructions (Australia) Pty Ltd [2014] VSCA 14 has the potential to significantly broaden the power of a liquidator to attack a company transaction under section 588FDA of the Corporations Act 2001 (Act) where there are 'indirect benefits' to a director or close associate of a director of the company.

Although the decision will be welcomed by liquidators, it has worrying implications for financiers or creditors. Even a third party arm's-length creditor could be caught.

For creditors, the type of transaction most at risk will be where a company has provided a guarantee or security for a debt of a third party.

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