What will liquidators, trustees and lawyers, and the courts, immediately confront in the first weeks or so of the new law, under the changes introduced to the Bankruptcy Act and the Corporations Act commencing on 1 March 2017.
See if this assists.
1. As to practitioner registration, notices to the regulators, insurance and discipline, the new law is explained below by reference to the different circumstances of practitioners, as:
- applicants for registration,
- existing practitioners
- practitioners subject to discipline proceedings;
- as practitioners sitting on committees; and
- lawyers, in so far as they are involved.
2. As to matters of practice, the new law introduces some helpful but fairly minor reforms that impact all practitioners, mainly in corporate, also commencing 1 March.
The Law
We now have this legal and regulatory structure.
Corporations Act 2001
- · Corporations Schedule 2016
- · Explanatory Memorandum 2015
- · Corporations Rules 2016
- · Explanatory Statement
- · Corporations Regulations
Bankruptcy Act 1966
- · Bankruptcy Schedule
- · Explanatory Memorandum 2015
- · Bankruptcy Rules 2016
- · Explanatory Statement
- · Bankruptcy Regulations
In the two Acts, the style remains section 49(2)(b). In both the Schedules and the Rules, the style is section 10-5(3).
I prefer to say s 100-5 Corporations Schedule; s 45-5 Bankruptcy Rules.
Other options are s 100-5 IPSC [Insolvency Practice Schedule (Corporations)]; or s 45-5 IPRB [Insolvency Practice Rules (Bankruptcy)].
Regulator guidance and forms
There will be new regulator guidance and forms, yet to be issued by both AFSA and ASIC. These may be joint, according to their 2014 MOU, or at least consistent.
Interpretation
There are new definitions in the Schedules and the Rules, along with existing definitions in the principal Acts.
The removal of the official liquidator title occurs on 1 March 2017. The courts will appoint liquidators, including in cross-border proceedings.
1. Registers of practitioners
New registers of trustees and liquidators will be set up and practitioners will need to ensure their details are up to date and correct: s 15-1. Your registrations are automatically transferred.
Annual liquidator and trustee returns
You will need to lodge annual liquidator and trustee returns, transitioned so that if you are due to lodge in November 2017, you use the existing old form, but thereafter the new.
Your period of registration now lasts for 3 years, and then must be renewed: s 20-30(2).
ASIC and AFSA will be in contact about these and your fees.
ASIC’s fees have increased – Corporations (Fees) Amendment Regulation 2016.
III. Applicants for registration as a trustee or liquidator
Those applying to be registered should have regard to what the law says, the rules, and the soon to be issued guidance issued by both ASIC and AFSA: see s 20-5 and following. ASIC has issued a draft RGuide, with comments on it closing on 9 February.
The application for registration is not public, nor is anyone entitled to object to ASIC. You may wish to ask ASIC not to apply its current practice, if continued, of putting up applicants’ names on its website and inviting objections.
ASIC’s draft RG says that commercial law includes the law of contract, torts, business, corporations, and tax. Questions on those areas of law may be asked at interview, along with current issues in accounting standards, changes to the code of ethics, trusts accounting, historical analysis for insolvency assessments, giving expert evidence, and carry forward tax losses.
The insolvency study requirements are at the bachelor honours level. The UTS and ARITA course is said to meet the requirements. There is another course at the University of Adelaide and more may be offered.
You can apply to work as a receiver only, being a registered liquidator subject to conditions.
There will be an interview of applicants (s 20-20), by a three person committee – AFSA/ASIC, a trustee/liquidator, and a ministerial nominee. One thing to check is whether the ARITA nominee has any connection with you, adverse or not. You should be given the names of the members of the committee in advance.
You will need to carefully go through the requirements, including a police check and references, and details of qualifications, including postgraduate. Being an employee is not an impediment as long as independence is not compromised.
At the interview, you may be given a number of fact scenarios about which you will be asked, with some time given to read and understand these: see www.murrayslegal.com.au
You could be asked to sit an exam but that is unlikely; it may depend on the quality of your interview.
Conditions on your registration may be imposed, for example as to the type of administration you can take, or whether you must take initial appointments jointly.
CPD is to be a 40 hour per year requirement.
Insurance cover is important, about which the regulators are issuing guidance: s 25-1.
Experienced trustees and liquidators
For trustees and liquidators with over 5 years experience, you could be contacted by ARITA to sit on a registration interview committee: s 20-10.
Committees
The Chair of a Part 2 committee is the ASIC/AFSA delegate. A committee member may resign. If the Chair considers that the ARITA or Ministerial nominee has a ‘material personal interest’ in a matter before the committee, the chair must give notice that they are removed. Under s 50‑35 of the Rules, the committee may be reconstituted and ARITA and the Minister must choose a replacement. Notice of the replacement must be given to the person before the committee. A committee member must disclose any material personal interest to the Chair. However, that interest should properly have been conveyed to ARITA when ARITA first chose the person, unless it was not known at that time. A member’s material personal interest can be one with their related entity (a relative etc): see s 5 Bankruptcy Act.
Under s 50‑55, a committee must observe natural justice; and it is not bound by any rules of evidence and may inform itself on any matter as it sees fit. That latter statement is not quite correct – see below.
If you accept, you should be aware of the rules of natural justice (s 50-55), and objective decision making, and the elements of each of knowledge, experience, qualifications and ability, and the concept of fit and proper: Growden [2008] AATA 604. The test is not whether the applicant is as good as you but whether they would be suitable: see www.murrayslegal.com.au
1. The new discipline regime
Practitioners subject to misconduct action
For those trustees and liquidators who may be subject to this, there are processes in the Schedules, including notices served by the regulators, show cause notices and a committee hearing. It is suggested you obtain legal advice if this occurs, in particular for the hearing.
There are significant obligations imposed on the regulators and the committee to conduct the process fairly. This includes as to the composition of the panel. Again, the ARITA nominee should be independent, and the ASIC and AFSA representatives should not have been involved in the investigation process. See www.murrayslegal.com.au
However, unlike the old law, which required a bankruptcy discipline committee or CALDB to find that a certain breach or breaches had occurred (see s 155H(4) BA, and s 1292 CA respectively), the new law appears to forego that fundamental requirement, the convened committee having the authority merely to decide penalty, based on information of the regulators and a response from the liquidator or trustee.
Nevertheless, natural justice entitles a person accused of misconduct “to know in advance the rule which is said to have been broken and the circumstances constituting the ‘offence'”: … The mere recitation of a rule broken is meaningless without particulars. It seems that, in so far as a committee can determine its own procedures, a committee can have the regulators particularise the claims against the trustee or liquidator.
The reasons of the committee’s decision will be provided to you. You and your lawyer should assess whether the reasons are adequate, including as to penalty.
The committee’s reasons may be published. You may choose to release them yourself if they are not, and are in your favour, or if you disagree with them and wish to say why.
ASIC and AFSA
Both ASIC and AFSA must co-operate with each other in relation to practitioners who are both trustees and liquidators: s 10-5. You may be able to use your good record with AFSA as a response to any application by ASIC, and vice versa.
Both regulators have ethical and model litigant obligations in the way they pursue the discipline process: see www.murrayslegal.com.au.
Further details on the discipline regime, including administrative law principles, are here.
Practitioners who are asked to sit on a discipline committee
For those 5 year or more experienced liquidators and trustees, you may be asked by ARITA to sit on a discipline committee, the criteria being that you have the “knowledge and experience necessary to carry out your functions as a member of the committee”: s 50-5. This is a broader expectation than for a registration committee member.
It is a serious task and you can decline. If you accept you should be particularly aware of natural justice obligations, not to take a hindsight view, and be able to apply some aspects of the rules of evidence and have some flexibility in your assessment approach. You should be aware of recent disciplinary decisions and commentaries about them.
You do not represent ARITA, and you need not be an ARITA member. You are there only as person who has expert knowledge of the practice of bankruptcy or liquidation.
You should closely check any issues real or perceived about your independence from the applicant and their firm. It would be unsatisfactory if an issue were raised by the applicant, and you had to resign, putting all to cost and time.
You should obtain a time estimate to ensure you are available. You are entitled to be paid, usually a daily rate: s 50-30.
Other tasks and issues
There are other issues for those on discipline committees.
Use of confidential information
You as a member of a committee are bound by confidentiality obligations: s 50-35(1) with a $9,000 penalty for breach. But you can refer confidential misconduct information to a professional body, yours or another: s 50-35(2). Those bodies may be issuing guidance about this. You should obtain legal advice about this in any event.
Penalty
As a separate task you may have to decide what outcome is imposed. There is a range of penalties. You should have some appreciation of parity in penalties for professional misconduct. If you were to recommend suspension, you would have to consider the disruption to estates and administrations, and the need for replacement appointees. Cancellation is quite a severe outcome, in particular because livelihood and income are at stake.
Publication of reasons
The committee must come to a decision and give written reasons. The committee may have to decide whether its reasons should be published. You should think independently and must yourself be satisfied with the reasons. You can dissent if you feel that is the right decision.
Application to the AAT
If there is an application to review the committee’s decision, you then become a named party to AAT proceedings, but that should be nominal only. There may be some work in assisting in that hearing process.
Creditors and others
Creditors or others have no role in this process. The hearings are in private. But a creditor may be a complainant against you and therefore may be someone whose statement you need to respond to.
1. Matters of Practice – for corporate practitioners
This is a list of things that may occur in your practices that will be different from 1 March 2017.
These are contained in Schedule 3 – Other Amendments to the Corporations Schedule [pp 369-389]. They are a miscellany of changes that were considered to be able to start now, which the profession could manage in the time available. They arise under various new or amended sections of the Corporations Act.
· Some changes will have immediate impact – lodging DIRRIs with ASIC, although ASIC has not yet released the DIRRI form.
· Some apply only to new post 1 March 2017 administrations, others to on-going administrations.
· Most are routine.
Notice of the non-exercise of rights in relation to property issued by a voluntary administrator – s 443B(3)
The change: New subsection 443B(3) simply requires a voluntary administrator to specify the location of property referred to in a notice given to an owner/lessor, if the administrator knows (or could reasonably find out) the location of the property.
Transitional: This requirement only arises for new administrations commencing 1 March or after: Part 7, Schedule 3.
Contravention of a deed – s 445HA
The change: There is a new Division 11AA containing new section 445HA – Notification of contravention of deed of company arrangement – which requires directors to notify the deed administrator – and deed administrators to notify creditors – of any material contravention of a deed, or likelihood of it, of which the director or the deed administrator becomes aware.
Transitional: This change applies to existing and new deeds but only in relation to contraventions that occur on or after 1 March 2017.
Why? The Explanatory Memorandum says this is included because “there is no statutory requirement for a deed administrator or for the directors to inform creditors that a breach of the deed has occurred”.
Consequential: There is a consequential change to s 482, s 482(2A)(da) being an additional factor the court can take into account in deciding whether to stay a liquidation when a company enters a deed.
Company’s former name – s 161A
The change: Section 161A of the Corporations Act is amended to remedy a gap in its coverage. It extends the range of circumstances whereby an external administrator can obtain court leave to dispense with the requirement to set out a company’s former name on public documents and negotiable instruments.
Previously only deed administrators could apply to the court for such dispensation, but now the court may grant leave on the application of either a liquidator, administrator, or deed administrator.
Why? The EM explains this change as being to remedy “a number of incorrect cross-references in section 161A which relates to the use of a company’s former name are corrected”.
It may remain deficient in circumstances where there have bene two or more changes in name before insolvency.
Transitional: This applies on and from 1 March 2017.
Termination of deed and then liquidation – s 446AA and amended section 499
Why? New section 446AA and amended section 499 are said to remedy a problem where the court makes an order for, or a deed provides for, the termination of a deed. The new sections are said to remedy this by allowing a liquidator to be appointed to a subsequent liquidation where the deed terminates.
Transitional: This change applies in relation to deeds that are terminated on or after 1 March 2017.
New definition of ‘relation-back day’
There is a new section 91 (10 pages) which defines ‘relation-back day’. It replaces the short definition in s 9.
Why? It is not as bad as it looks; it does fix a gap under the old law: see Chief Commissioner of State Revenue v Rafferty’s Resort Management Pty Ltd (In Liq) [2008] NSWSC 452 where the Judge found a gap in cases where administrators were appointed after the winding up application had been filed. The relation-back day was determined by the date of appointment of administrators rather than the date of filing of the winding up proceedings.
Under the new s 91 definition, the ‘relation-back day’ is earlier, being the day the winding-up application was filed.
This prevents the potential abuse of appointing an administrator well after a winding-up application is filed but before the winding-up order or members’ resolution is made.
Transitional: The new definition applies to the winding up of a company ‘starting’ on or after 1 March 2017: s 1635(4).
Amendment to Corporations Act – s 588FGA
The change: The text of this provision is amended to change ‘Court’ to ‘court’ (see s 58AA) so that lower courts can deal with small s 588FGA preference indemnity claims against directors by the ATO [say $200,000].
Why? The need for this reform was noted in Scott v ATO [2003] VSC 50, the judge saying that what was probably a typo “has potentially severe and unjust consequences, and should be addressed by the legislature”.
Transitional: This applies regardless of whether the preference payment was made before or after 1 March 2017.
Lodgment of declarations
You are required to lodge with ASIC any ‘DIRRI’ made on and after 1 March, including replacement DIRRIs, if you are:
· A voluntary administrator – s 436DA(4) (6);
· A replacement administrator: s 449CA(4) (6)
· A creditors voluntary liquidator: s 506A(2) (5).
The timeframe is ’as soon as practicable after making the declaration’.
The form of the declaration is yet to be advised by ASIC
“Printed copy” – s 491
Why? This term is antiquated. Under s 491(2)(a), instead of lodging a printed copy of the members’ voluntary winding up resolution the company must lodge, in the prescribed form, a notice setting out the text of the resolution.
Transitional: This applies to resolutions made on or after 1 March 2017.
Pooling
“The text of” any pooling orders made by a court under s 579A, 579B and 579C must be lodged by the person obtaining the orders with ASIC within two business days after the making of the order and in a prescribed form.
Transitional: This applies to orders made on or after 1 March 2017.
Sale of practitioner’s claims
The change: Section 100-5 allows a trustee or liquidator to sell a voidable transaction claim.
Why? to help realise funds quicker and to allow such claims to be pursued.
Transitional: none, so it seems any claims can be sold from day one.
1. Bankruptcy – commencing 1 March 2017
There is not much in bankruptcy that starts on 1 March except for the registration and discipline processes, much of which has always applied in any event, and the s 100-5 sale of claims provision.
The new term throughout bankruptcy is now “business days”, not working days, with the same meaning. There is awkward new terminology to be used – a “regulated debtor’s estate”.
VII. What to expect in the coming months
The regulators will be issuing guidance about the current changes that have commenced, and about the ones coming in on 1 September 2017.
A further bulletin will be issued about those, soon.
Michael Murray
The new insolvency laws – what to expect in the first weeks
What will liquidators, trustees and lawyers, and the courts, immediately confront in the first weeks or so of the new law, under the changes introduced to the Bankruptcy Act and the Corporations Act commencing on 1 March 2017.
See if this assists.
1. As to practitioner registration, notices to the regulators, insurance and discipline, the new law is explained below by reference to the different circumstances of practitioners, as:
2. As to matters of practice, the new law introduces some helpful but fairly minor reforms that impact all practitioners, mainly in corporate, also commencing 1 March.
The Law
We now have this legal and regulatory structure.
Corporations Act 2001
Bankruptcy Act 1966
In the two Acts, the style remains section 49(2)(b). In both the Schedules and the Rules, the style is section 10-5(3).
I prefer to say s 100-5 Corporations Schedule; s 45-5 Bankruptcy Rules.
Other options are s 100-5 IPSC [Insolvency Practice Schedule (Corporations)]; or s 45-5 IPRB [Insolvency Practice Rules (Bankruptcy)].
Regulator guidance and forms
There will be new regulator guidance and forms, yet to be issued by both AFSA and ASIC. These may be joint, according to their 2014 MOU, or at least consistent.
Interpretation
There are new definitions in the Schedules and the Rules, along with existing definitions in the principal Acts.
The removal of the official liquidator title occurs on 1 March 2017. The courts will appoint liquidators, including in cross-border proceedings.
1. Registers of practitioners
New registers of trustees and liquidators will be set up and practitioners will need to ensure their details are up to date and correct: s 15-1. Your registrations are automatically transferred.
Annual liquidator and trustee returns
You will need to lodge annual liquidator and trustee returns, transitioned so that if you are due to lodge in November 2017, you use the existing old form, but thereafter the new.
Your period of registration now lasts for 3 years, and then must be renewed: s 20-30(2).
ASIC and AFSA will be in contact about these and your fees.
ASIC’s fees have increased – Corporations (Fees) Amendment Regulation 2016.
III. Applicants for registration as a trustee or liquidator
Those applying to be registered should have regard to what the law says, the rules, and the soon to be issued guidance issued by both ASIC and AFSA: see s 20-5 and following. ASIC has issued a draft RGuide, with comments on it closing on 9 February.
The application for registration is not public, nor is anyone entitled to object to ASIC. You may wish to ask ASIC not to apply its current practice, if continued, of putting up applicants’ names on its website and inviting objections.
ASIC’s draft RG says that commercial law includes the law of contract, torts, business, corporations, and tax. Questions on those areas of law may be asked at interview, along with current issues in accounting standards, changes to the code of ethics, trusts accounting, historical analysis for insolvency assessments, giving expert evidence, and carry forward tax losses.
The insolvency study requirements are at the bachelor honours level. The UTS and ARITA course is said to meet the requirements. There is another course at the University of Adelaide and more may be offered.
You can apply to work as a receiver only, being a registered liquidator subject to conditions.
There will be an interview of applicants (s 20-20), by a three person committee – AFSA/ASIC, a trustee/liquidator, and a ministerial nominee. One thing to check is whether the ARITA nominee has any connection with you, adverse or not. You should be given the names of the members of the committee in advance.
You will need to carefully go through the requirements, including a police check and references, and details of qualifications, including postgraduate. Being an employee is not an impediment as long as independence is not compromised.
At the interview, you may be given a number of fact scenarios about which you will be asked, with some time given to read and understand these: see www.murrayslegal.com.au
You could be asked to sit an exam but that is unlikely; it may depend on the quality of your interview.
Conditions on your registration may be imposed, for example as to the type of administration you can take, or whether you must take initial appointments jointly.
CPD is to be a 40 hour per year requirement.
Insurance cover is important, about which the regulators are issuing guidance: s 25-1.
Experienced trustees and liquidators
For trustees and liquidators with over 5 years experience, you could be contacted by ARITA to sit on a registration interview committee: s 20-10.
Committees
The Chair of a Part 2 committee is the ASIC/AFSA delegate. A committee member may resign. If the Chair considers that the ARITA or Ministerial nominee has a ‘material personal interest’ in a matter before the committee, the chair must give notice that they are removed. Under s 50‑35 of the Rules, the committee may be reconstituted and ARITA and the Minister must choose a replacement. Notice of the replacement must be given to the person before the committee. A committee member must disclose any material personal interest to the Chair. However, that interest should properly have been conveyed to ARITA when ARITA first chose the person, unless it was not known at that time. A member’s material personal interest can be one with their related entity (a relative etc): see s 5 Bankruptcy Act.
Under s 50‑55, a committee must observe natural justice; and it is not bound by any rules of evidence and may inform itself on any matter as it sees fit. That latter statement is not quite correct – see below.
If you accept, you should be aware of the rules of natural justice (s 50-55), and objective decision making, and the elements of each of knowledge, experience, qualifications and ability, and the concept of fit and proper: Growden [2008] AATA 604. The test is not whether the applicant is as good as you but whether they would be suitable: see www.murrayslegal.com.au
1. The new discipline regime
Practitioners subject to misconduct action
For those trustees and liquidators who may be subject to this, there are processes in the Schedules, including notices served by the regulators, show cause notices and a committee hearing. It is suggested you obtain legal advice if this occurs, in particular for the hearing.
There are significant obligations imposed on the regulators and the committee to conduct the process fairly. This includes as to the composition of the panel. Again, the ARITA nominee should be independent, and the ASIC and AFSA representatives should not have been involved in the investigation process. See www.murrayslegal.com.au
However, unlike the old law, which required a bankruptcy discipline committee or CALDB to find that a certain breach or breaches had occurred (see s 155H(4) BA, and s 1292 CA respectively), the new law appears to forego that fundamental requirement, the convened committee having the authority merely to decide penalty, based on information of the regulators and a response from the liquidator or trustee.
Nevertheless, natural justice entitles a person accused of misconduct “to know in advance the rule which is said to have been broken and the circumstances constituting the ‘offence'”: … The mere recitation of a rule broken is meaningless without particulars. It seems that, in so far as a committee can determine its own procedures, a committee can have the regulators particularise the claims against the trustee or liquidator.
The reasons of the committee’s decision will be provided to you. You and your lawyer should assess whether the reasons are adequate, including as to penalty.
The committee’s reasons may be published. You may choose to release them yourself if they are not, and are in your favour, or if you disagree with them and wish to say why.
ASIC and AFSA
Both ASIC and AFSA must co-operate with each other in relation to practitioners who are both trustees and liquidators: s 10-5. You may be able to use your good record with AFSA as a response to any application by ASIC, and vice versa.
Both regulators have ethical and model litigant obligations in the way they pursue the discipline process: see www.murrayslegal.com.au.
Further details on the discipline regime, including administrative law principles, are here.
Practitioners who are asked to sit on a discipline committee
For those 5 year or more experienced liquidators and trustees, you may be asked by ARITA to sit on a discipline committee, the criteria being that you have the “knowledge and experience necessary to carry out your functions as a member of the committee”: s 50-5. This is a broader expectation than for a registration committee member.
It is a serious task and you can decline. If you accept you should be particularly aware of natural justice obligations, not to take a hindsight view, and be able to apply some aspects of the rules of evidence and have some flexibility in your assessment approach. You should be aware of recent disciplinary decisions and commentaries about them.
You do not represent ARITA, and you need not be an ARITA member. You are there only as person who has expert knowledge of the practice of bankruptcy or liquidation.
You should closely check any issues real or perceived about your independence from the applicant and their firm. It would be unsatisfactory if an issue were raised by the applicant, and you had to resign, putting all to cost and time.
You should obtain a time estimate to ensure you are available. You are entitled to be paid, usually a daily rate: s 50-30.
Other tasks and issues
There are other issues for those on discipline committees.
Use of confidential information
You as a member of a committee are bound by confidentiality obligations: s 50-35(1) with a $9,000 penalty for breach. But you can refer confidential misconduct information to a professional body, yours or another: s 50-35(2). Those bodies may be issuing guidance about this. You should obtain legal advice about this in any event.
Penalty
As a separate task you may have to decide what outcome is imposed. There is a range of penalties. You should have some appreciation of parity in penalties for professional misconduct. If you were to recommend suspension, you would have to consider the disruption to estates and administrations, and the need for replacement appointees. Cancellation is quite a severe outcome, in particular because livelihood and income are at stake.
Publication of reasons
The committee must come to a decision and give written reasons. The committee may have to decide whether its reasons should be published. You should think independently and must yourself be satisfied with the reasons. You can dissent if you feel that is the right decision.
Application to the AAT
If there is an application to review the committee’s decision, you then become a named party to AAT proceedings, but that should be nominal only. There may be some work in assisting in that hearing process.
Creditors and others
Creditors or others have no role in this process. The hearings are in private. But a creditor may be a complainant against you and therefore may be someone whose statement you need to respond to.
1. Matters of Practice – for corporate practitioners
This is a list of things that may occur in your practices that will be different from 1 March 2017.
These are contained in Schedule 3 – Other Amendments to the Corporations Schedule [pp 369-389]. They are a miscellany of changes that were considered to be able to start now, which the profession could manage in the time available. They arise under various new or amended sections of the Corporations Act.
· Some changes will have immediate impact – lodging DIRRIs with ASIC, although ASIC has not yet released the DIRRI form.
· Some apply only to new post 1 March 2017 administrations, others to on-going administrations.
· Most are routine.
Notice of the non-exercise of rights in relation to property issued by a voluntary administrator – s 443B(3)
The change: New subsection 443B(3) simply requires a voluntary administrator to specify the location of property referred to in a notice given to an owner/lessor, if the administrator knows (or could reasonably find out) the location of the property.
Transitional: This requirement only arises for new administrations commencing 1 March or after: Part 7, Schedule 3.
Contravention of a deed – s 445HA
The change: There is a new Division 11AA containing new section 445HA – Notification of contravention of deed of company arrangement – which requires directors to notify the deed administrator – and deed administrators to notify creditors – of any material contravention of a deed, or likelihood of it, of which the director or the deed administrator becomes aware.
Transitional: This change applies to existing and new deeds but only in relation to contraventions that occur on or after 1 March 2017.
Why? The Explanatory Memorandum says this is included because “there is no statutory requirement for a deed administrator or for the directors to inform creditors that a breach of the deed has occurred”.
Consequential: There is a consequential change to s 482, s 482(2A)(da) being an additional factor the court can take into account in deciding whether to stay a liquidation when a company enters a deed.
Company’s former name – s 161A
The change: Section 161A of the Corporations Act is amended to remedy a gap in its coverage. It extends the range of circumstances whereby an external administrator can obtain court leave to dispense with the requirement to set out a company’s former name on public documents and negotiable instruments.
Previously only deed administrators could apply to the court for such dispensation, but now the court may grant leave on the application of either a liquidator, administrator, or deed administrator.
Why? The EM explains this change as being to remedy “a number of incorrect cross-references in section 161A which relates to the use of a company’s former name are corrected”.
It may remain deficient in circumstances where there have bene two or more changes in name before insolvency.
Transitional: This applies on and from 1 March 2017.
Termination of deed and then liquidation – s 446AA and amended section 499
Why? New section 446AA and amended section 499 are said to remedy a problem where the court makes an order for, or a deed provides for, the termination of a deed. The new sections are said to remedy this by allowing a liquidator to be appointed to a subsequent liquidation where the deed terminates.
Transitional: This change applies in relation to deeds that are terminated on or after 1 March 2017.
New definition of ‘relation-back day’
There is a new section 91 (10 pages) which defines ‘relation-back day’. It replaces the short definition in s 9.
Why? It is not as bad as it looks; it does fix a gap under the old law: see Chief Commissioner of State Revenue v Rafferty’s Resort Management Pty Ltd (In Liq) [2008] NSWSC 452 where the Judge found a gap in cases where administrators were appointed after the winding up application had been filed. The relation-back day was determined by the date of appointment of administrators rather than the date of filing of the winding up proceedings.
Under the new s 91 definition, the ‘relation-back day’ is earlier, being the day the winding-up application was filed.
This prevents the potential abuse of appointing an administrator well after a winding-up application is filed but before the winding-up order or members’ resolution is made.
Transitional: The new definition applies to the winding up of a company ‘starting’ on or after 1 March 2017: s 1635(4).
Amendment to Corporations Act – s 588FGA
The change: The text of this provision is amended to change ‘Court’ to ‘court’ (see s 58AA) so that lower courts can deal with small s 588FGA preference indemnity claims against directors by the ATO [say $200,000].
Why? The need for this reform was noted in Scott v ATO [2003] VSC 50, the judge saying that what was probably a typo “has potentially severe and unjust consequences, and should be addressed by the legislature”.
Transitional: This applies regardless of whether the preference payment was made before or after 1 March 2017.
Lodgment of declarations
You are required to lodge with ASIC any ‘DIRRI’ made on and after 1 March, including replacement DIRRIs, if you are:
· A voluntary administrator – s 436DA(4) (6);
· A replacement administrator: s 449CA(4) (6)
· A creditors voluntary liquidator: s 506A(2) (5).
The timeframe is ’as soon as practicable after making the declaration’.
The form of the declaration is yet to be advised by ASIC
“Printed copy” – s 491
Why? This term is antiquated. Under s 491(2)(a), instead of lodging a printed copy of the members’ voluntary winding up resolution the company must lodge, in the prescribed form, a notice setting out the text of the resolution.
Transitional: This applies to resolutions made on or after 1 March 2017.
Pooling
“The text of” any pooling orders made by a court under s 579A, 579B and 579C must be lodged by the person obtaining the orders with ASIC within two business days after the making of the order and in a prescribed form.
Transitional: This applies to orders made on or after 1 March 2017.
Sale of practitioner’s claims
The change: Section 100-5 allows a trustee or liquidator to sell a voidable transaction claim.
Why? to help realise funds quicker and to allow such claims to be pursued.
Transitional: none, so it seems any claims can be sold from day one.
1. Bankruptcy – commencing 1 March 2017
There is not much in bankruptcy that starts on 1 March except for the registration and discipline processes, much of which has always applied in any event, and the s 100-5 sale of claims provision.
The new term throughout bankruptcy is now “business days”, not working days, with the same meaning. There is awkward new terminology to be used – a “regulated debtor’s estate”.
VII. What to expect in the coming months
The regulators will be issuing guidance about the current changes that have commenced, and about the ones coming in on 1 September 2017.
A further bulletin will be issued about those, soon.
Michael Murray
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