Can You Move Business Assets into Another Company to Protect Them from Creditors?
Written by: Melissa Cunliffe (CA)
Can You Move Business Assets into Another Company to Protect Them from Creditors?
Asset protection is a legitimate part of business structuring. Moving assets once the business is already in financial trouble is a very different conversation.
ASIC's updated guidance on creditor-defeating dispositions explains its power to make orders undoing certain transactions. Broadly, a creditor-defeating disposition involves company property being disposed of in a way that prevents, hinders or significantly delays the property becoming available for creditors in a winding up, where the statutory conditions are met.
The timing of asset protection matters
A structure established years earlier for genuine commercial reasons is not the same thing as an asset being shifted after tax debts, suppliers or employees are already going unpaid. The closer a transaction is to insolvency or liquidation, the more carefully directors need to consider the Corporations Act, duties and voidable-transaction rules.
Market value matters - but it is not the only issue
ASIC's guidance focuses on evidence including who owned the asset, who received it, its value, the consideration paid and why the transaction is alleged to be voidable. A related-party journal or internal transfer should never be treated as harmless simply because all entities sit under the same family umbrella.
You cannot protect yesterday with tomorrow's restructure
The best asset-protection work happens while the business is solvent and before a claim exists. That is when ownership of trading risk, property, equipment, intellectual property and investments can be considered deliberately alongside tax, duty, finance and succession consequences.
Financial distress changes the advice
When a company cannot pay debts as they fall due, directors should obtain insolvency and legal advice promptly. Trying to fix the structure first can make the position worse.
Keep records
If a legitimate transaction occurs between related entities, document the commercial purpose, valuation, consideration, approvals and cash movement. ASIC's guidance notes that company books and records are often key evidence for liquidators seeking an order.
The bigger lesson
Asset protection is not about hiding assets. It is about designing ownership and risk sensibly before problems arise, then respecting insolvency and creditor rules if circumstances deteriorate.
Where the 4P's Future Prosperity Framework fits
People: Protect family and stakeholder interests through planned structures, not panic transfers.
Preserve: Preserve wealth with early, commercially sound structuring.
Protect: Respect director duties, insolvency law and proper documentation.
Prosper: Build a structure that supports long-term operations, finance and succession.
FAQs / People Also Ask
Can ASIC reverse an asset transfer?
ASIC or a court may undo the effect of a qualifying creditor-defeating disposition that is a voidable transaction under the Corporations Act.
Is every related-party asset transfer illegal?
No. The facts, value, timing, purpose and statutory tests matter. Related-party transactions should nevertheless be documented and commercially supportable.
When should asset protection be considered?
Ideally while the business is solvent and before a specific creditor problem or insolvency concern arises.
Considering how to structure your business assets? Contact 4P's Future Accounting to discuss your business structure, asset ownership and long term planning needs.
Disclaimer
This article does not constitute financial advice and is for general information only. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Any similarity to an individual’s personal circumstances and the examples provided in this article is purely coincidental. Any person acting upon such information without receiving specific advice, does so entirely at their own risk.
Authorisation under an Australian Financial Services Licence (AFSL) is not required in the provision of this article and the author plus Future Accounting Group Pty Ltd is not acting in its capacity as an Australian Financial Services Licence holder
Liability limited by a scheme approved under professional standards legislation.
