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Understanding Voidable Transactions in Liquidation
Understanding Voidable Transactions in a Liquidation
The Corporations Act 2001 plays a crucial role in regulating business activity in Australia. One of its key functions is to prevent fraudulent or unfair business practices, especially during times of financial distress. Among its most important provisions are the rules concerning voidable transactions.
These are transactions that a company has made but may be undone (or “avoided”) by a liquidator if the company goes into liquidation. In simple terms, voidable transactions are like "bad deals" that can be reversed when a company is in trouble, but only under specific conditions.
These voidable transactions laws matter as they protect the rights of creditors, ensuring that companies do not make rash or unfair decisions right before they collapse. If left unchecked, a few creditors could take advantage of a struggling company, leaving others with nothing.
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