Federal Court confirms release of security can constitute a ‘compromise’ under section 477(2A)

The team at Gilbert + Tobin reports that Justice Beach of the Federal Court has confirmed that releasing or altering security for a debt in exchange for consideration can amount to a “compromise” under section 477(2A) of the Corporations Act 2001 (Cth)—meaning liquidators must obtain court or creditor approval when doing so—clarifying that changes to security affecting recoverability are as significant as altering loan terms and that legal advice on a compromise may be unnecessary where the decision is purely commercial.

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