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Incurring of Certain Debts

This offence applies to companies that have incurred a debt before the 23rd of June 1993. At the time the debt was incurred, it must have been obvious that the company could not pay the debt. Or as a result of the debt, could not pay other debts.

Incurring of Certain Debts
  • On 03 January 1992, directors of a company borrow $1 million from a bank, knowing they will not be able to pay the amount back.

  • The debt was incurred without your express or implied authority or consent.
  • At the time when the debt was incurred, you did not have a reason to expect the company would not be able to pay all its debts.
There are other possible defences, depending on the circumstances surrounding the alleged offending. Each matter is unique and requires an individual approach and strategy.

Questions in cases like this
  • When was the debt incurred?
  • Did you know about the debt?
  • Did you authorise the debt?
  • Did you have any reason to think the company could not pay the debt or other debts?

Court that deals with this charge

The charge of Incurring of Certain Debts (s592 of the Corporations Act 2001) would likely be heard in the Magistrates’ Court.

The section that covers this offence is section 592 of the Corporations Act 2001.

What is the legal definition of Incurring of Certain Debts?
The Prosecution must show that the company incurred the debt, that the debt was incurred before the 23rd of June 1993 and at the time of incurring the debt it was known by the directors of that company that the company could not pay existing debts.

“Was the debt incurred before 23 June 1993?”