By Jennifer Mee -
Snapshot
- Two decades after One.Tel’s collapse sparked reform, the ‘unreasonable director-related transaction’ provisions remain a potent but controversial string to a liquidator’s bow.
- Recent court decisions reveal the expansive scope of what counts as a transaction ‘for the benefit of’ a director, including dealings with third parties and indirect financial advantages, raising questions about fairness and legislative clarity.
- With limited defences available and no insolvency requirement, the provisions can catch unsuspecting parties in their net—prompting reflection on whether Parliament intended such broad consequences.
Amongst the various ‘clawback’ provisions in a liquidator’s toolkit, the ‘unreasonable director-related transaction’ provisions of the Corporations Act 2001 (Cth) (‘Act’) are some of the more powerful. At the time of their introduction, over 20 years ago in the wake of the collapse of One.Tel, community outrage at extravagant directors’ bonuses was high. There was an impetus to introduce strong, far-reaching provisions to send a clear message to the corporate sector.
Fast forward to the present and many of the scenarios and complexities confronting the courts in interpreting these provisions are far from those which triggered their introduction. Much of the contemporaneous extrinsic material suggests somewhat scant attention was given to the broader ramifications of the new provisions’ reach.
