Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (Cth)
Contents
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The Parliament of Australia enacts:
This Act is the
Corporations Amendment (Corporate Insolvency Reforms )Act 2020 .
(1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.
Sections 1 to 3 and anything in this Act not elsewhere covered by this table | The day this Act receives the Royal Assent. | 15 December 2020 |
Schedule 1 | 1 January 2021. | 1 January 2021 |
Schedule 2 | Immediately after the commencement of the provisions covered by table item 2. | 1 January 2021 |
Schedule 3 | 1 January 2021. | 1 January 2021 |
Schedule 4 | The day after this Act receives the Royal Assent. | 16 December 2020 |
Note: This table relates only to the provisions of this Act as originally enacted. It will not be amended to deal with any later amendments of this Act.
(2) Any information in column 3 of the table is not part of this Act. Information may be inserted in this column, or information in it may be edited, in any published version of this Act.
Legislation that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.
Insert:
The object of this Part, and Schedule 2 to the extent that it relates to this Part, is to provide for a restructuring process for eligible companies that allows the companies:
(a) to retain control of the business, property and affairs while developing a plan to restructure with the assistance of a small business restructuring practitioner; and
(b) to enter into a restructuring plan with creditors.
Note: Schedule 2 contains additional rules about the restructuring process.
In this Part, unless the contrary intention appears:
property of a company includes any PPSA retention of title property of the company.Note: See sections 9 (definition of
property ) and 51F (PPSA retention of title property). An extended definition ofproperty applies in subsection 444E(3) (see subsection 444E(4)).
The
restructuring of a company:
(a) begins when a restructuring practitioner for the company is appointed under section 453B; and
(b) ends in the circumstances prescribed by the regulations.
(1) A company may, by writing, appoint a small business restructuring practitioner for the company if:
(a) the eligibility criteria for restructuring are met in relation to the company on the day the appointment is made; and
(b) the board has resolved to the effect that:
(i) in the opinion of the directors voting for the resolution, the company is insolvent, or is likely to become insolvent at some future time; and
(ii) a restructuring practitioner for the company should be appointed.
(2) A company must not appoint a restructuring practitioner under subsection (1) if:
(a) the company is already under restructuring; or
(b) the company has made a restructuring plan that has not yet terminated; or
(c) the company is under administration; or
(d) the company has executed a deed of company arrangement that has not yet terminated; or
(e) a person holds an appointment as liquidator, provisional liquidator or administrator of the company.
(1) The
eligibility criteria for restructuring are met in relation to a company if, on the day on which a restructuring practitioner for the company is appointed:
(a) in a case where the regulations prescribe a test for eligibility based on the liabilities of the company—that test is satisfied; and
(b) no person who:
(i) is a director of the company; or
(ii) has been a director of the company within the 12 months immediately preceding that day;
has been a director of another company that has been under restructuring or been the subject of a simplified liquidation process within a period prescribed by the regulations, unless exempt under regulations made for the purposes of subsection (2); and
(c) the company has not been under restructuring or been the subject of a simplified liquidation process within a period prescribed by the regulations, unless exempt under regulations made for the purposes of subsection (2).
(2) The regulations may prescribe:
(a) tests for eligibility based on the liabilities of companies for the purposes of paragraph (1)(a); and
(b) circumstances in which the directors of companies are exempt from the requirement in paragraph (1)(b); and
(c) circumstances in which companies are exempt from the requirement in paragraph (1)(c).
(1) As soon as practicable after being appointed, a restructuring practitioner must make a declaration of relevant relationships.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
(2) The restructuring practitioner must give a copy of the declaration under subsection (1) to as many of the company’s creditors as reasonably practicable.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
(3) As soon as practicable after making a declaration under subsection (1), the restructuring practitioner must lodge a copy of the declaration with ASIC.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
(4) If:
(a) at a particular time, the restructuring practitioner makes a declaration of relevant relationships under subsection (1) or this subsection; and
(b) at a later time:
(i) the declaration has become out‑of‑date; or
(ii) the restructuring practitioner becomes aware of an error in the declaration;
the restructuring practitioner must, as soon as practicable, make a replacement declaration of relevant relationships.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
(5) The restructuring practitioner must give a copy of the replacement declaration under subsection (4) to as many of the company’s creditors as reasonably practicable.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
(6) As soon as practicable after making a replacement declaration under subsection (4), the restructuring practitioner must lodge a copy of the replacement declaration with ASIC.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
(7) In a prosecution for an offence constituted by a failure to include a particular matter in a declaration under this section, it is a defence if the defendant proves that:
(a) the defendant made reasonable enquiries; and
(b) after making these enquiries, the defendant had no reasonable grounds for believing that the matter should have been included in the declaration.
(1) The functions of the restructuring practitioner for a company under restructuring are:
(a) to provide advice to the company on matters relating to restructuring; and
(b) to assist the company to prepare a restructuring plan; and
(c) to make a declaration to creditors in accordance with the regulations in relation to a restructuring plan proposed to the creditors; and
(d) any other functions given to the restructuring practitioner under this Act.
(2) The regulations may make provision for and in relation to the following:
(a) the functions of the restructuring practitioner for a company under restructuring;
(b) the duties of the restructuring practitioner for a company under restructuring;
(c) the powers of the restructuring practitioner for a company under restructuring;
(d) the rights and liabilities of a person who is or has been the restructuring practitioner for a company arising out of the performance of the functions and duties, and the exercise of the powers, of the person as restructuring practitioner.
(1) A director of a company under restructuring must:
(a) attend on the restructuring practitioner; and
(b) give the restructuring practitioner information about the company’s business, property, affairs and financial circumstances; and
(c) allow the restructuring practitioner to inspect and take copies of the company’s books;
at the times and in the manner reasonably required by the restructuring practitioner
.
(2) A person must not fail to comply with subsection (1).
Penalty: 120 penalty units.
(3) An offence based on subsection (1) is an offence of strict liability.
(4) Subsection (3) does not apply to the extent that the person has a reasonable excuse.
Note: A defendant bears an evidential burden in relation to the matter in subsection (4), see subsection 13.3(3) of the
Criminal Code .
If the books of a company under restructuring are held by a person other than the company, that person must permit the restructuring practitioner for the company to inspect and make copies of the company’s books at any reasonable time.
When performing a function or duty, or exercising a power, as restructuring practitioner for a company under restructuring, the restructuring practitioner is taken to be acting as the company’s agent.
(1) The restructuring practitioner for a company under restructuring may, at any time, terminate the restructuring of the company:
(a) if the restructuring practitioner believes on reasonable grounds that:
(i) the company does not meet the eligibility criteria for restructuring; or
(ii) it would not be in the interests of the creditors to make a restructuring plan; or
(iii) it would be in the interests of the creditors for the restructuring to end; or
(iv) it would be in the interests of the creditors for the company to be wound up; or
(b) on any other grounds prescribed by the regulations.
(2) The restructuring practitioner for a company under restructuring terminates the restructuring of the company by giving notice in accordance with this section.
(3) The notice must:
(a) be in writing; and
(b) include all information prescribed by the regulations; and
(c) be given to:
(i) the company; and
(ii) as many of the company’s creditors as reasonably practicable.
(4) The termination takes effect on the day on which notice under this section is given to the company.
(1) Subject to this Part, while a company is under restructuring the company has control of the company’s business, property and affairs.
(2) While a company is under restructuring, a receiver or controller appointed for the purposes of Part 5.2 (whether under an instrument relating to a security interest or a court order) may only perform the functions and exercise the powers of a receiver or controller in relation to a security interest if:
(a) section 454C, 454D or 454E applies to the enforcement of the security interest; or
(b) section 454K or 454L applies to the enforcement of a right, or the performance or exercise of a function or power, over property to which the security interest relates.
Transactions and dealings affecting property
(1) A person contravenes this section if:
(a) a company is under restructuring; and
(b) the person is a director of the company; and
(c) either:
(i) the company purports to enter into a transaction or dealing affecting the property of the company and the person approves of that action; or
(ii) the person purports to enter into a transaction or dealing affecting the property of the company on behalf of the company.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
Circumstances in which transactions and dealings may occur
(2) Subsection (1) does not apply if:
(a) entering into the transaction or dealing was in the ordinary course of the company’s business; or
(b) the restructuring practitioner has consented to the transaction or dealing and, if any conditions are imposed on that consent, those conditions are met; or
(c) the transaction or dealing was entered into under an order of the Court.
(3) Subsection (1) does not apply to a payment made:
(a) by an Australian ADI out of an account kept by the company with the ADI; and
(b) in good faith and in the ordinary course of the ADI’s banking business; and
(c) after the restructuring began and on or before the day on which:
(i) the restructuring practitioner gives to the ADI written notice of the appointment that began the restructuring; or
(ii) publishes a notice of the appointment that began the restructuring in accordance with the regulations;
whichever happens first.
(4) The regulations may prescribe circumstances in which entering into a transaction or dealing is, or is not, to be treated as in the ordinary course of a company’s business.
Transactions and dealings in contravention of subsection (1) void
(5) A transaction or dealing entered into in contravention of subsection (1) is void, unless the Court orders otherwise.
Restructuring practitioner’s consent
(6) The restructuring practitioner for a company under restructuring may only give consent under paragraph (2)(b) if the restructuring practitioner believes on reasonable grounds that it would be in the interests of the creditors for the company to enter into the transaction or dealing.
(7) The restructuring practitioner may give consent subject to conditions.
Interpretive provisions
(8) For the purposes of this section, a director who votes in favour of a resolution approving, or who otherwise approves, the company entering into a transaction or dealing affecting the property of the company is taken to have approved the company purporting to take that action.
(1) Where:
(a) a court finds a person guilty of an offence constituted by a contravention of subsection 453L(1); and
(b) the court is satisfied that the company or another person has suffered loss or damage because of the act or omission constituting the offence;
the court may (whether or not it imposes a penalty) order the first‑mentioned person to pay compensation to the company or other person, as the case may be, of such amount as the order specifies.
Note: Section 73A defines when a court is taken to find a person guilty of an offence.
(2) An order under subsection (1) may be enforced as if it were a judgment of the court.
(3) The power of a court under section 1318 to relieve a person from liability as mentioned in that section extends to relieving a person from liability to be ordered under this section to pay compensation.
A payment made, transaction entered into, or any other act or thing done, in good faith by:
(a) the restructuring practitioner for a company under restructuring; or
(b) a company under restructuring with the consent of the restructuring practitioner for the company; or
(c) a company under restructuring in compliance with an order of the Court;
is valid and effectual for the purposes of this Act, and is not liable to be set aside in a winding up of the company.
Transfer of shares
(1) A transfer of shares in a company that is made while the company is under restructuring is void except if:
(a) both:
(i) the restructuring practitioner gives written consent to the transfer; and
(ii) that consent is unconditional; or
(b) all of the following subparagraphs apply:
(i) the restructuring practitioner gives written consent to the transfer;
(ii) that consent is subject to one or more specified conditions;
(iii) those conditions have been satisfied; or
(c) the Court makes an order under subsection (4) authorising the transfer.
(2) The restructuring practitioner may only give consent under paragraph (1)(a) or (b) if the restructuring practitioner believes on reasonable grounds that the transfer is in the best interests of the company’s creditors as a whole.
(3) If the restructuring practitioner refuses to give consent under paragraph (1)(a) or (b) to a transfer of shares in the company:
(a) the prospective transferor; or
(b) the prospective transferee; or
(c) a creditor of the company;
may apply to the Court for an order authorising the transfer.
(4) If the Court is satisfied, on an application under subsection (3), that the transfer is in the best interests of the company’s creditors as a whole, the Court may, by order, authorise the transfer.
(5) If the restructuring practitioner gives consent under paragraph (1)(b) to a transfer of shares in the company:
(a) the prospective transferor; or
(b) the prospective transferee; or
(c) a creditor of the company;
may apply to the Court for an order setting aside any or all of the conditions to which the consent is subject.
(6) If the Court is satisfied, on an application under subsection (5), that any or all of the conditions covered by the application are not in the best interests of the company’s creditors as a whole, the Court may, by order, set aside any or all of the conditions.
(7) The restructuring practitioner is entitled to be heard in a proceeding before the Court in relation to an application under subsection (3) or (5).
Alteration in the status of members
(8) An alteration in the status of members of a company that is made while the company is under restructuring is void except if:
(a) both:
(i) the restructuring practitioner gives written consent to the alteration; and
(ii) that consent is unconditional; or
(b) all of the following subparagraphs apply:
(i) the restructuring practitioner gives written consent to the alteration;
(ii) that consent is subject to one or more specified conditions;
(iii) those conditions have been satisfied; or
(c) the Court makes an order under subsection (12) authorising the alteration.
Note: An alteration in the status of members of a company that is made while a company is under restructuring may not be void if it is made for the purposes of the conversion and write‑off provisions determined by APRA (see Subdivision B of Division 1A of Part II of the
Banking Act 1959 , Division 2 of Part IIIA of theInsurance Act 1973 and Division 1A of Part 10A of theLife Insurance Act 1995 ).(9) The restructuring practitioner may only give consent under paragraph (8)(a) or (b) if the restructuring practitioner believes on reasonable grounds that the alteration is in the best interests of the company’s creditors as a whole.
(10) The restructuring practitioner must refuse to give consent under paragraph (8)(a) or (b) if the alteration would contravene Part 2F.2.
(11) If the restructuring practitioner refuses to give consent under paragraph (8)(a) or (b) to an alteration in the status of members of a company:
(a) a member of the company; or
(b) a creditor of the company;
may apply to the Court for an order authorising the alteration.
(12) If the Court is satisfied, on an application under subsection (11), that:
(a) the alteration is in the best interests of the company’s creditors as a whole; and
(b) the alteration does not contravene Part 2F.2;
the Court may, by order, authorise the alteration.
(13) If the restructuring practitioner gives consent under paragraph (8)(b) to an alteration in the status of members of a company:
(a) a member of the company; or
(b) a creditor of the company;
may apply to the Court for an order setting aside any or all of the conditions to which the consent is subject.
(14) If the Court is satisfied, on an application under subsection (13), that any or all of the conditions covered by the application are not in the best interests of the company’s creditors as a whole, the Court may, by order, set aside any or all of the conditions.
(15) The restructuring practitioner is entitled to be heard in a proceeding before the Court in relation to an application under subsection (11) or (13).
(1) The Court is to adjourn the hearing of an application for an order to wind up a company if the company is under restructuring and the Court is satisfied that it is in the interests of the company’s creditors for the company to continue under restructuring rather than be wound up.
(2) The Court is not to appoint a provisional liquidator of a company if the company is under restructuring and the Court is satisfied that it is in the interests of the company’s creditors for the company to continue under restructuring rather than have a provisional liquidator appointed.
General rule
(1) During the restructuring of a company, the restrictions set out in the table at the end of this section apply in relation to the exercise of the rights of a person (the
third party ) in property of the company, or other property used or occupied by, or in the possession of, the company, as set out in the table.Note: The property of the company includes any PPSA retention of title property of the company (see section 452B).
Exception—consent of restructuring practitioner or leave of court
(2) The restrictions set out in the table at the end of this section do not apply in relation to the exercise of a third party’s rights in property if the rights are exercised:
(a) with the restructuring practitioner’s written consent; or
(b) with the leave of the Court.
Possessory security interests—continued possession
(3) If a company’s property is subject to a possessory security interest, and the property is in the lawful possession of the secured party, the secured party may continue to possess the property during the restructuring of the company.
1 | a secured party in relation to property of the company, and is not otherwise covered by this table | the third party cannot enforce the security interest. |
2 | a secured party in relation to a possessory security interest in the property of the company | the third party cannot sell the property, or otherwise enforce the security interest. |
3 | a lessor of property used or occupied by, or in the possession of, the company, including a secured party (a | the following restrictions apply:
|
4 | an owner (other than a lessor) of property used or occupied by, or in the possession of, the company, including a secured party (a | the following restrictions apply:
|
(1) During the restructuring of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except:
(a) with the restructuring practitioner’s written consent; or
(b) with the leave of the Court and in accordance with such terms (if any) as the Court imposes.
(2) Subsection (1) does not apply to:
(a) a criminal proceeding; or
(b) a prescribed proceeding.
During the restructuring of a company, no enforcement process in relation to property of the company can be begun or proceeded with, except:
(a) with the leave of the Court; and
(b) in accordance with such terms (if any) as the Court imposes.
(1) This section applies where an officer of a court (the
court officer ), being:
(a) a sheriff; or
(b) the registrar or other appropriate officer of the court;
receives written notice of the fact that a company is under restructuring.
(2) During the restructuring, the court officer cannot:
(a) take action to sell property of the company under a process of execution; or
(b) pay to a person (other than the restructuring practitioner):
(i) proceeds of selling property of the company (at any time) under a process of execution; or
(ii) money of the company seized (at any time) under a process of execution; or
(iii) money paid (at any time) to avoid seizure or sale of property of the company under a process of execution; or
(c) take action in relation to the attachment of a debt due to the company; or
(d) pay to a person (other than the restructuring practitioner) money received because of the attachment of such a debt.
(3) The court officer must deliver to the restructuring practitioner any property of the company that is in the court officer’s possession under a process of execution (whenever begun).
(4) The court officer must pay to the restructuring practitioner all proceeds or money of a kind referred to in paragraph (2)(b) or (d) that:
(a) are in the court officer’s possession; or
(b) have been paid into the court and have not since been paid out.
(5) The costs of the execution or attachment are a first charge on property delivered under subsection (3) or proceeds or money paid under subsection (4).
(6) In order to give effect to a charge under subsection (5) on proceeds or money, the court officer may retain, on behalf of the person entitled to the charge, so much of the proceeds or money as the court officer thinks necessary.
(7) The Court may, if it is satisfied that it is appropriate to do so, permit the court officer to take action, or to make a payment, that subsection (2) would otherwise prevent.
(8) A person who buys property in good faith under a sale under a process of execution gets a good title to the property as against the company and the restructuring practitioner, despite anything else in this section.
(1) This section has effect only for the purposes of a law about the effect of a lis pendens on purchasers or mortgagees.
(2) During the restructuring of the company, an application to wind up the company is taken to be pending.
(3) An application that is taken because of subsection (2) to be pending constitutes a lis pendens.
(1) During the restructuring of a company:
(a) a guarantee of a liability of the company cannot be enforced, as against:
(i) a director of the company who is a natural person; or
(ii) a spouse or relative of such a director; and
(b) without limiting paragraph (a), a proceeding in relation to such a guarantee cannot be begun against such a director, spouse or relative;
except with the leave of the Court and in accordance with such terms (if any) as the Court imposes.
(2) While subsection (1) prevents a person (the
creditor ) from:
(a) enforcing as against another person (the
guarantor ) a guarantee of a liability of a company; or(b) beginning a proceeding against another person (the
guarantor ) in relation to such a guarantee;section 1323 applies in relation to the creditor and the guarantor as if:
(c) a civil proceeding against the guarantor had begun under this Act; and
(d) the creditor were the only person of a kind referred to in that section as an aggrieved person.
Note: Under section 1323, the Court can make a range of orders to ensure that a person can meet the person’s liabilities.
(3) The effect that section 1323 has because of a particular application of subsection (2) is additional to, and does not prejudice, the effect the section otherwise has.
(4) In this section:
guarantee , in relation to a liability of a company, includes a relevant agreement (as defined in section 9) because of which a person other than the company has incurred, or may incur, whether jointly with the company or otherwise, a liability in respect of the liability of the company.
liability means a debt, liability or other obligation.
If:
(a) a company is under restructuring; and
(b) property of the company consists of:
(i) cash in the form of notes or coins; or
(ii) a negotiable instrument; or
(iii) a security (as defined by subsection 92(1)); or
(iv) a derivative (as defined in Chapter 7); and
(c) the property is subject to a possessory security interest; and
(d) the secured party is:
(i) an ADI (within the meaning of the
Banking Act 1959 ); or(ii) the operator of a clearing and settlement facility (within the meaning of section 768A);
this Subdivision does not apply to the property.
Except as expressly provided, nothing in this Subdivision limits the generality of anything else in it.
Sections 454C to 454H only apply in relation to the enforcement of a PPSA security interest if the security interest is perfected, within the meaning of the
Personal Property Securities Act 2009 , at the time the enforcement starts.
Scope
(1) This section applies if:
(a) the whole, or substantially the whole, of the property of a company under restructuring is subject to a security interest; and
(b) before or during the decision period, the secured party enforced the security interest in relation to all property (including any PPSA retention of title property) of the company subject to the security interest, whether or not the security interest was enforced in the same way in relation to all that property.
(2) This section also applies if:
(a) a company is under restructuring; and
(b) the same person is the secured party in relation to each of 2 or more security interests in property (including PPSA retention of title property) of the company; and
(c) the property of the company (the
secured property ) subject to the respective security interests together constitutes the whole, or substantially the whole, of the company’s property; and(d) before or during the decision period, the secured party enforced the security interests in relation to all the secured property:
(i) whether or not the security interests were enforced in the same way in relation to all the secured property; and
(ii) whether or not any of the security interests was enforced in the same way in relation to all the property of the company subject to that security interest; and
(iii) in so far as the security interests were enforced in relation to property of the company by a receiver or controller appointed for the purposes of Part 5.2 (whether under an instrument relating to the security interest or a court order)—whether or not the same person was appointed in respect of all of the last‑mentioned property.
Power of enforcement by secured party, receiver or controller
(3) Nothing in section 453K, 453R, 453T, 453U or 454N, or in an order under subsection 454P(1), prevents any of the following from enforcing the security interest, or any of the security interests:
(a) the secured party;
(b) a receiver or controller appointed for the purposes of Part 5.2 (whether under an instrument relating to the security interest or a court order, and even if appointed after the decision period).
(1) This section applies if, before the beginning of the restructuring of a company, a secured party, receiver or other person:
(a) entered into possession, or assumed control, of property of the company; or
(b) entered into an agreement to sell such property; or
(c) made arrangements for such property to be offered for sale by public auction; or
(d) publicly invited tenders for the purchase of such property; or
(e) exercised any other power in relation to such property;
for the purpose of enforcing a security interest in that property.
(2) Nothing in section 453K, 453R, 453T, 453U or 454N, or in an order made under subsection 454P(1), prevents the secured party, receiver or other person from enforcing the security interest in relation to that property.
Scope
(1) This section applies if perishable property of a company under restructuring is subject to a security interest.
Power of enforcement by secured party, receiver or controller
(2) Nothing in section 453K, 453R or 454N, or in an order made under subsection 454P(1), prevents any of the following from enforcing the security interest, so far as it is a security interest in perishable property:
(a) the secured party;
(b) a receiver or controller appointed for the purposes of Part 5.2 (whether under an instrument relating to the security interest or a court order, and even if appointed after the decision period).
(1) This section applies if:
(a) for the purpose of enforcing a security interest in property of a company, the secured party, or a receiver or other person, does or proposes to do an act of a kind referred to in a paragraph of subsection 454D(1); and
(b) the company is under restructuring when the secured party, receiver or other person does or proposes to do the act, or the company later begins to be under restructuring;
but does not apply in a case where section 454C applies.
(2) On application by the restructuring practitioner, the Court may order the secured party, receiver or other person not to perform specified functions, or exercise specified powers, except as permitted by the order.
(3) The Court may only make an order if satisfied that the secured party’s interests will be adequately protected during the restructuring of the company.
(4) An order may only be made, and only has effect, during the restructuring.
(5) An order has effect despite sections 454D and 454E.
Nothing in section 453K, 453R or 454N, or in an order made under subsection 454P(1), prevents a person from giving a notice under the provisions of an agreement or instrument under which a security interest is created or arises.
Scope
(1) This section applies if:
(a) a company is under restructuring; and
(b) property of the company is subject to a possessory security interest; and
(c) the property is in the possession of the secured party; and
(d) either:
(i) there is no other security interest in the property; or
(ii) there are one or more other security interests in the property, but none of the debts secured by those other security interests has a priority that is equal to or higher than the priority of the debt secured by the possessory security interest; and
(e) the secured party sells the property.
Distribution of proceeds of sale
(2) The secured party is entitled to retain proceeds of the sale as follows:
(a) if the net proceeds of sale equals the debt secured by the possessory security interest—the secured party is entitled to retain the net proceeds;
(b) if the net proceeds of sale exceeds the debt secured by the possessory security interest—the secured party is entitled to retain so much of the net proceeds as equals the amount of the debt secured by the security interest, but must pay the excess to the restructuring practitioner on behalf of the company;
(c) if the net proceeds of sale fall short of the debt secured by the possessory security interest—the secured party is entitled to retain the net proceeds.
Sections 454K to 454M do not apply in relation to the enforcement of a right, or the performance or exercise of a function or power, if the enforcement, performance or exercise is authorised by (or because of) a transaction or dealing that gives rise to a security interest in the property concerned.
Example: An example of a transaction or dealing in relation to which sections 454K to 454M do not apply because of this section is a commercial consignment of personal property. Such a transaction gives rise to a PPSA security interest because of section 12 of the
Personal Property Securities Act 2009 . The consigned property is PPSA retention of title property of the company (see sections 51F and 452B).Note: Sections 454C to 454H (property subject to security interests) may apply in relation to transactions or dealings to which this Subdivision does not apply because of this section. For example, sections 454C to 454H would apply in relation to a commercial consignment of personal property, because such a transaction gives rise to a PPSA security interest.
(1) This section applies if, before the beginning of the restructuring of a company, a receiver or other person:
(a) entered into possession, or assumed control, of property used or occupied by, or in the possession of, the company; or
(b) exercised any other power in relation to such property;
for the purpose of enforcing a right of the owner or lessor of the property to take possession of the property or otherwise recover it.
(2) Nothing in section 453K or 453R prevents the receiver or other person from performing a function, or exercising a power, in relation to the property.
Nothing in section 453K or 453R prevents a person from taking possession of, or otherwise recovering, perishable property.
(1) This section applies if:
(a) for the purpose of enforcing a right of the owner or lessor of property used or occupied by, or in the possession of, a company to take possession of the property or otherwise recover it, a person:
(i) enters into possession, or assumes control, of the property; or
(ii) exercises any other power in relation to the property; and
(b) the company is under restructuring when the person does so, or the company later begins to be under restructuring.
(2) On application by the restructuring practitioner, the Court may order the person not to perform specified functions, or exercise specified powers, in relation to the property, except as permitted by the order.
(3) The Court may only make an order if satisfied that the interests of the owner or lessor will be adequately protected during the restructuring of the company.
(4) An order may only be made, and only has effect, during the restructuring.
(5) An order has effect despite sections 454K and 454L.
Stay on enforcing rights
(1) A right cannot be enforced against a company for:
(a) the reason that the company has come or is under restructuring; or
(b) the company’s financial position, if the company is under restructuring; or
(c) a reason, prescribed by the regulations for the purposes of this paragraph, that relates to:
(i) the company coming, or possibly coming, under restructuring; or
(ii) the company’s financial position;
if the company later comes under restructuring; or
(d) a reason that, in substance, is contrary to this subsection;
if the right arises for that reason by express provision (however described) of a contract, agreement or arrangement.
Note: This result is subject to subsections (5) and (7), and to any order under section 454P.
Example: A right to terminate a contract will not be enforceable to the extent that those rights are triggered by the company coming under restructuring.
Period of the stay
(2) The right cannot be enforced as described in subsection (1) during the period (the
stay period ) starting when the restructuring of the company begins and ending at the later of the following:
(a) when the restructuring ends;
(b) if one or more orders are made under subsection (3) for the company as the result of an application made before the restructuring ends—when the last made of those orders ceases to be in force;
(c) if the company ceases to be under restructuring because of a resolution or order for the company to be wound up—when the company’s affairs have been fully wound up.
(3) The Court:
(a) may order an extension of the stay period for the company if the Court is satisfied that the extension is appropriate having regard to the interests of justice; and
(b) before deciding an application for an order under paragraph (a), may grant an interim order, but must not require the applicant to give an undertaking as to damages as a condition for doing so.
Enforcing rights after the stay for reasons relating to earlier circumstances
(4) The right is unenforceable against the company indefinitely after the end of the stay period to the extent that a reason for seeking to enforce the right:
(a) is the company’s financial position before the end of the stay period; or
(b) is the company having come or been under restructuring before the end of the stay period; or
(c) is a reason, prescribed by the regulations for the purposes of this paragraph, relating to circumstances in existence during the stay period; or
(d) is a reason referred to in paragraph (1)(c) or (d).
Rights not subject to the stay
(5) Subsection (1) does not apply to the right if it is:
(a) a right under a contract, agreement or arrangement entered into after the company comes under restructuring; or
(b) a right under a contract, agreement or arrangement entered into before 1 July 2018; or
(c) a right contained in a kind of contract, agreement or arrangement:
(i) prescribed by the regulations for the purposes of this subparagraph; or
(ii) declared under paragraph (6)(a); or
(d) a right of a kind:
(i) prescribed by the regulations for the purposes of this subparagraph; or
(ii) declared under paragraph (6)(b); or
(e) a right of a kind declared under paragraph (6)(c), and the circumstances specified in that declaration exist.
(6) For the purposes of subsection (5), the Minister may, by legislative instrument:
(a) declare kinds of contracts, agreements or arrangements referred to in a specified law of the Commonwealth; or
(b) declare kinds of rights to which subsection (1) does not apply; or
(c) declare kinds of rights to which subsection (1) does not apply in specified circumstances.
(7) Subsection (1) does not apply to the right to the extent that:
(a) the restructuring practitioner for the company; or
(b) if an administrator of the company, or an administrator of a deed of company arrangement executed by the company, is appointed after the restructuring ends—the administrator; or
(c) if a liquidator of the company is appointed after the restructuring ends—the liquidator;
has consented in writing to the enforcement of the right.
Stay on company’s right to new advance of money or credit
(8) If:
(a) one or more rights of an entity cannot be enforced against a company for a period because of subsection (1); and
(b) the company has a right under a contract, agreement or arrangement against the entity for a new advance of money or credit;
that right of the company cannot be enforced during the same period.
(1) The Court may order that subsection 454N(1) does not apply for one or more rights against a company if the Court is satisfied that this is appropriate in the interests of justice.
(2) An application for the order may be made by the holder of those rights.
Orders
(1) The Court may order that one or more rights under a contract, agreement or arrangement are enforceable against a company only:
(a) with the leave of the Court; and
(b) in accordance with such terms (if any) as the Court imposes.
Example: The order could be sought for a right to terminate for convenience.
(2) The Court may make the order if:
(a) the company is under restructuring; and
(b) the Court is satisfied that:
(i) the rights are being exercised; or
(ii) the rights are likely to be exercised; or
(iii) there is a threat to exercise the rights;
because of one or more reasons referred to in paragraphs 454N(1)(a) to (d); and
(c) an application for the order is made by the restructuring practitioner for the company.
(3) An order under subsection (1) must specify the period for which it applies. In working out the period, the Court must have regard to:
(a) subsections 454N(2), (3) and (4); and
(b) the interests of justice.
(4) Subsection (1) does not apply to a right referred to in subsection 454N(5) or (7).
Note: An order under subsection (1) also does not restrict certain secured creditors (see sections 454C to 454H).
Interim orders
(5) Before deciding an application for an order under subsection (1), the Court may grant an interim order for one or more rights under a contract, agreement or arrangement not to be enforced against a company.
(6) The Court must not require an applicant for an order under subsection (1) to give an undertaking as to damages as a condition of granting an interim order.
(1) The object of subsection (2) is to ensure that a self‑executing provision:
(a) cannot start to apply against a company for certain reasons; and
(b) can be the subject of a Court order providing that the provision can only start to apply against a company with the leave of the Court, and in accordance with such terms (if any) as the Court imposes.
(2) Sections 454N to 454Q also apply in relation to a self‑executing provision in a corresponding way to the way they apply in relation to a right. For this purpose, assume those sections apply with such modifications as are necessary, including any prescribed by the regulations for the purposes of this subsection.
Note 1: This subsection achieves the object in subsection (1) by extending the application of all of the outcomes, exceptions and powers in sections 454N to 454Q.
Note 2: These modifications include, for example, treating:
(a) a reference that a right cannot be enforced (however described) as including a reference that a self‑executing provision cannot start to apply; and
(b) the words “if the right arises for that reason by express provision (however described) of a contract, agreement or arrangement” as being omitted from subsection 454N(1); and
(c) a reference that one or more rights are enforceable as including a reference that one or more self‑executing provisions can start to apply; and
(d) paragraph 454Q(2)(b) as alternatively providing that the Court is satisfied that one or more reasons referred to in paragraphs 454N(1)(a) to (d) can cause the self‑executing provisions to start to apply.
(3) In this section:
self‑executing provision means a provision of a contract, agreement or arrangement that can start to apply automatically:
(a) for one or more reasons; and
(b) without any party to the contract, agreement or arrangement making a decision that the provision should start to apply.
If there is any inconsistency between sections 454N to 454R and one of the following Acts, that Act prevails to the extent of the inconsistency:
(a) the
Payment Systems and Netting Act 1998 ;(b) the
International Interests in Mobile Equipment (Cape Town Convention) Act 2013 .
(1) A company may propose a restructuring plan to its creditors.
(2) The company is taken to be
insolvent if the company does so.(3) The regulations may prescribe the time at which the company is taken to have done so, for the purpose of determining when the company became insolvent under subsection (2).
Proposing a restructuring plan
(1) The regulations may make provision for and in relation to the following:
(a) proposing a restructuring plan;
(b) the matters that must or may be included in a restructuring plan;
(c) accepting and rejecting a proposal for a restructuring plan;
(d) the circumstances in which a proposal for a restructuring plan lapses;
(e) the consequences of a proposal for a restructuring plan lapsing.
Making, varying and terminating a restructuring plan
(2) The regulations may make provision for and in relation to the following:
(a) making a restructuring plan;
(b) the consequences of making a restructuring plan;
(c) the variation of a restructuring plan;
(d) the termination of a restructuring plan;
(e) the consequences of a restructuring plan being varied or terminating.
Debts and claims
(3) The regulations may make provision for and in relation to the following:
(a) debts and claims that must or may be dealt with in a restructuring plan;
(b) the calculation of the value of those debts and claims under a restructuring plan;
(c) the proof and ranking of those debts and claims under a restructuring plan;
(d) the property of a company that must or may be used in payment of those debts and claims under a restructuring plan;
(e) the payment of those debts and claims under a restructuring plan;
(f) the period within which those debts and claims must be paid under a restructuring plan;
(g) the treatment of those debts and claims under a restructuring plan if the property of the company is not sufficient to satisfy those debts and claims in full;
(h) the nature and duration of any moratorium on the enforcement of debts of and claims against a company that makes a restructuring plan;
(i) the effect of a restructuring plan on rights, obligations and liabilities in relation to debts of and claims against a company.
Contributories
(4) The regulations may make provision for and in relation to the following:
(a) the identification of contributories of the company;
(b) the rights, obligations and liabilities of contributories of the company in relation to a restructuring plan.
Circumstances in which restructuring plan void
(5) The regulations may make provision for and in relation to the following:
(a) the circumstances in which all or part of a restructuring plan is void;
(b) the consequences if all or part of a restructuring plan is void.
Contravention of a restructuring plan
(6) The regulations may make provision for and in relation to the following:
(a) the circumstances in which a restructuring plan is contravened;
(b) the consequences if a restructuring plan is contravened.
The restructuring practitioner
(7) The regulations may make provision for and in relation to the following:
(a) the appointment of a restructuring practitioner for a restructuring plan;
(b) the functions of the restructuring practitioner for a restructuring plan;
(c) the duties of the restructuring practitioner for a restructuring plan;
(d) the powers of the restructuring practitioner for a restructuring plan;
(e) the rights, obligations and liabilities of the restructuring practitioner for a restructuring plan arising out of the performance of the functions and duties, and the exercise of the powers, of the restructuring practitioner for the plan.
General
(8) Without limiting anything in this section, the regulations may make provision for and in relation to any information (including personal information within the meaning of the
Privacy Act 1988 ), report or other document that must or may be created or given in relation to a proposal for a restructuring plan, or a restructuring plan.
A person cannot be appointed as restructuring practitioner for a company or for a restructuring plan unless:
(a) the person has consented in writing to the appointment; and
(b) as at the time of the appointment, the person has not withdrawn the consent.
(1) A person must not consent to be appointed, and must not act as restructuring practitioner for a company or for a restructuring plan.
(2) Subsection (1) does not apply if the person is a registered liquidator.
Note: A defendant bears an evidential burden in relation to the matter in subsection (2), see subsection 13.3(3) of the
Criminal Code .(3) An offence based on subsection (1) is an offence of strict liability.
(1) Subject to this section, a person must not, except with the leave of the Court, seek or consent to be appointed as, or act as, restructuring practitioner for a company or for a restructuring plan if:
(a) the person, or a body corporate in which the person has a substantial holding, is indebted in an amount exceeding $5,000 to the company or to a body corporate related to the company; or
(b) the person is, otherwise than in a capacity as:
(i) administrator or liquidator of the company or a related body corporate; or
(ii) administrator of a deed of company arrangement executed by the company or a related body corporate; or
(iii) restructuring practitioner for the company or a related body corporate; or
(iv) restructuring practitioner for a restructuring plan made by the company or a related body corporate;
a creditor of the company or of a related body corporate in an amount exceeding $5,000; or
(c) the person is a director, secretary, senior manager or employee of the company; or
(d) the person is a director, secretary, senior manager or employee of a body corporate that is a secured party in relation to property of the company; or
(e) the person is an auditor of the company; or
(f) the person is a partner or employee of an auditor of the company; or
(g) the person is a partner, employer or employee of an officer of the company; or
(h) the person is a partner or employee of an employee of an officer of the company.
(2) An offence based on subsection (1) is an offence of strict liability.
(3) For the purposes of paragraph (1)(a), disregard a debt owed by a natural person to a body corporate if:
(a) the body corporate is:
(i) an Australian ADI; or
(ii) a body corporate registered under section 21 of the
Life Insurance Act 1995 ; and(b) the debt arose because of a loan that the body corporate or entity made to the person in the ordinary course of its ordinary business; and
(c) the person used the amount of the loan to pay the whole or part of the purchase price of premises that the person uses as their principal place of residence.
(4) For the purposes of this section, a person is taken to be a director, secretary, senior manager, employee or auditor of a company if:
(a) the person is or has, within the last 2 years, been a director, secretary, senior manager, employee, auditor or promoter of the company or a related body corporate; and
(b) ASIC has not directed that the person not be taken to be a director, secretary, senior manager, employee or auditor for the purposes of this section.
ASIC may give a direction under paragraph (b) only if it thinks fit in the circumstances of the case.
(5) For the purposes of paragraphs (1)(g) and (h),
officer does not include liquidator.
The appointment of a person as restructuring practitioner for a company or for a restructuring plan cannot be revoked.
(1) Where the restructuring practitioner for a company:
(a) dies; or
(b) becomes prohibited from acting as restructuring practitioner for the company; or
(c) resigns by notice in writing given to the company;
the appointer may appoint someone else as restructuring practitioner for the company.
(2) In subsection (1):
appointer , in relation to the restructuring practitioner for a company, means:
(a) if the restructuring practitioner was appointed by the Court under Division 90 of Schedule 2 (review of the external administration of a company) or subsection (4) of this section—the Court; or
(b) the company.
(3) An appointment under subsection (1) by the company must be made by resolution of the board.
(4) Where a company is under restructuring, but for some reason no restructuring practitioner is acting, the Court may appoint a person as restructuring practitioner on the application of ASIC or of an officer, member or creditor of the company.
Scope
(1) This section applies to a restructuring practitioner appointed under subsection 456E(1) otherwise than by the Court.
Declaration of relationships
(2) As soon as practicable after being appointed, the restructuring practitioner must make a declaration of relevant relationships.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
Notification of creditors
(3) The restructuring practitioner must:
(a) give a copy of the declaration under subsection (2) to as many of the company’s creditors as reasonably practicable; and
(b) do so at the same time as notice of the appointment is given under section 457A.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
(4) As soon as practicable after making a declaration under subsection (2), the restructuring practitioner must lodge a copy of the declaration with ASIC.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
Updating of declaration
(5) If:
(a) at a particular time, the restructuring practitioner makes a declaration of relevant relationships under subsection (2) or this subsection; and
(b) at a later time:
(i) the declaration has become out‑of‑date; or
(ii) the restructuring practitioner becomes aware of an error in the declaration;
the restructuring practitioner must, as soon as practicable, make a replacement declaration of relevant relationships.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
(6) As soon as practicable after making a replacement declaration under subsection (5), the restructuring practitioner must lodge a copy of the replacement declaration with ASIC.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
Defence
(7) In a prosecution for an offence constituted by a failure to include a particular matter in a declaration under this section, it is a defence if the defendant proves that:
(a) the defendant made reasonable enquiries; and
(b) after making these enquiries, the defendant had no reasonable grounds for believing that the matter should have been included in the declaration.
(1) The regulations may make provision for and in relation to the following:
(a) the rights, obligations and liabilities of a company that is or has been under restructuring in relation to a person who is or has been the restructuring practitioner for the company;
(b) the rights, obligations and liabilities of a company that has at any time made a restructuring plan in relation to a person who is or has been the restructuring practitioner for the restructuring plan;
(c) the rights, obligations and liabilities of the officers and former officers of a company that is or has been under restructuring in relation to a person who is or has been the restructuring practitioner for the company;
(d) the rights, obligations and liabilities of the officers and former officers of a company that has at any time made a restructuring plan in relation to a person who is or has been a restructuring practitioner for the restructuring plan.
(2) The rights, obligations and liabilities provided for in the regulations are in addition to any other rights, obligations and liabilities provided for under this Act.
A person who is or has been the restructuring practitioner for a company under restructuring is not liable to an action or other proceeding for damages in respect of:
(f) Schedule 2; or
(g) an instrument made for the purposes of a provision of Schedule 2.
Giving a document (2) The document may be given to the recipient by means of an electronic communication.
(3) The document may be given by giving the recipient (by means of an electronic communication or otherwise) sufficient information to allow the recipient to access the document electronically.
(4) However, an electronic communication or electronic access may only be used if, at the time the electronic communication is used or information about the electronic access is given:
(a) it is reasonable to expect that the document would be readily accessible so as to be useable for subsequent reference; and
(b) there is a nominated electronic address in relation to the recipient.
Signing the document
(5) If the document is required to be signed by a person, that requirement is taken to have been met in relation to the electronic communication of the document, or access to the document electronically, if:
(a) the person receives a copy or counterpart of the document:
(i) that is in a physical form; or
(ii) by means of an electronic communication; and
(b) the copy or counterpart includes the entire contents of the document; and
(c) the person indicates, by means of an electronic communication, that the person has signed the document; and
(d) a method is used to identify the person and to indicate the person’s intention in respect of the information communicated in the document; and
(e) the method used was either:
(i) as reliable as appropriate for the purpose for which the document was generated or communicated, in light of all the circumstances, including any relevant agreement; or
(ii) proven in fact to have fulfilled the functions described in paragraph (d), by itself or together with further evidence.
(6) For the purposes of paragraph (5)(b), a copy or counterpart of a document need not include:
(a) the signature of another person signing the document; or
(b) any material included in the document to identify another person signing the document or to indicate another person’s intention in respect of the contents of the document.
Application of section to documents given to ASIC
(7) Subsections (2) to (4) do not apply to a document that is required or permitted to be given to ASIC.
(8) If:
(a) under this Act, the signature of a person is required on a document; and
(b) the person signs the document in accordance with subsection (5); and
(c) the person submits the document for lodgement;
ASIC must not refuse to receive or register the document on the basis that the document has not been signed.
Definitions
(9) In this section:
external administration of a company has the same meaning as in Schedule 2.
Insert:
In this Part:
commencement day means the day on which Part 2 of Schedule 4 to theCorporations Amendment (Corporate Insolvency Reforms) Act 2020 commences.
The modifications of this Act made by the
Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 do not apply in relation to:
(a) a meeting of a committee convened under Part 2 of Schedule 2; or
(b) a meeting concerning one or more companies under external administration;
that is held on or after the commencement day.
(1) This item applies if, before the commencement day:
(a) a thing is done in accordance with:
(i) the
Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 ; or(ii) the
Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 ; and(b) the thing done would, apart from this item, be invalid or ineffective because it did not satisfy the requirements of this Act.
(2) The thing done is as valid and effective, and is taken always to have been as valid and effective, as it would have been had the thing done satisfied the requirements of this Act.
Repeal the note.
Repeal the note.
Repeal the note.
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