Bankruptcy Amendment Act 1987

Overview

The Bankruptcy Amendment Act 1987 (No. 119 of 1987) was enacted to address various issues and gaps within the existing bankruptcy framework, primarily by clarifying definitions, enhancing procedural safeguards, and updating certain provisions of the Bankruptcy Act 1966. This Act was passed by the Queen, the Senate, and the House of Representatives of the Commonwealth of Australia and received Royal Assent on 16 December 1987. The principal objective of the Act is to refine the administration of bankruptcy proceedings, ensuring they are conducted with greater transparency and fairness. It introduces modifications to the original Act to better align it with contemporary economic practices and legal standards, while maintaining the core principles of equitable distribution among creditors and the fair treatment of debtors. The changes include updates to definitions, the introduction of new investigative powers, and the establishment of specific duties for trustees and other officials involved in bankruptcy proceedings. These amendments aim to strengthen the oversight and execution of bankruptcy laws, ensuring they effectively serve the interests of all parties involved.

Scope and Application

The Bankruptcy Amendment Act 1987No. 119 of 1987 applies to the Commonwealth jurisdiction and amends the Bankruptcy Act 1966. It applies to natural persons, companies, partnerships, and trusts, addressing their financial affairs, conduct, and the ability to present a declaration of intention to petition for bankruptcy. The Act introduces new definitions and provisions, including the concept of associated entities and the powers of trustees and the Official Receiver to investigate the affairs of debtors and bankrupts. It also modifies the procedures for the presentation and acceptance of debtor's petitions, the conduct of examinations, and the powers and duties of trustees and controlling trustees. Certain amendments apply retroactively to bankruptcies occurring after the commencement of the Act, while other provisions are limited to bankruptcies and related proceedings occurring after specific subsections come into operation. The Act extends the scope of the Bankruptcy Act 1966 to include partnerships registered under state or territory laws, and allows for the delegation of powers by the Minister or Secretary. The Act also includes provisions for the examination of trustees and other persons, and modifies the requirements for the registration of trustees and the procedures for the nomination or appointment of trustees for deeds of assignment, deeds of arrangement, or compositions. Offences related to the examination process and the conduct of debtors and bankrupts are defined, with penalties for false statements and failure to disclose property. The Act ensures that certain rights and protections, such as those of secured creditors, remain unaffected by the changes introduced.

Key Provisions

• The Bankruptcy Amendment Act 1987No. 119 of 1987 amends the Bankruptcy Act 1966 (referred to as the Principal Act) by introducing several new sections and modifying existing ones. The Act, which received Royal Assent on 16 December 1987, introduces changes to the interpretation, application, and procedural aspects of bankruptcy law in Australia. The main sections inserted or amended by the Act include definitions of associated entities (sections 5a to 5k), investigation and examination processes (sections 19aa to 19ak), the declaration of intention to present a debtor's petition (sections 54a to 54l), and the application of the Act to joint debtors (section 187a). The Act also introduces new provisions regarding the examination of trustees and controlling trustees (sections 179a to 179k and 212c to 212f) and modifies the application of the Act to deeds of assignment, deeds of arrangement, and compositions (sections 231 to 248).
• Under the new provisions, associated entities are defined in relation to companies, natural persons, partnerships, and trusts. These definitions detail the circumstances in which an entity is considered associated with a person, focusing on relationships such as control, financial interest, or professional advice. The Act mandates investigations into the conduct and affairs of a bankrupt by the trustee or Official Receiver, as well as the provision of statements of affairs and books to the trustee or Official Receiver. It also expands the duties of trustees to include attending meetings of creditors and assisting in the examination of the bankrupt. The Act further stipulates that the Registrar and other officials must refrain from certain actions during the stay period related to a debtor’s declaration of intention. Additionally, it allows the trustee to apply to the Court for orders relating to property of entities controlled by the bankrupt, with considerations for the interests of other persons involved.
• The Act imposes various obligations on parties involved in a bankruptcy. For instance, debtors are required to present accurate statements of their affairs and assist in investigations conducted by the trustee or Official Receiver. Trustees and the Official Receiver have duties to convene meetings of creditors, investigate the bankrupt's affairs, and prepare reports. The Act also details the processes for examining trustees and controlling trustees, including the rights to legal representation and the production of books and documents relevant to the examination. Furthermore, the Act sets out the procedures for declarations of intention, the application of the Act to joint debtors, and the requirements for the nomination or appointment of trustees for deeds of assignment, deeds of arrangement, or compositions.
• There are several offences and penalties outlined in the Act for breaches of its provisions. For instance, knowingly making false or misleading statements about a debt (section 263c) carries a penalty of up to $1,000, imprisonment for 6 months, or both. Failure to comply with requirements under sections 77a, 77b, or 130, or to provide information or books relating to the bankrupt’s or debtor’s examinable affairs, is also an offence (sections 265 and 265a), with similar penalties. Providing a false or misleading declaration under section 215a is punishable by a fine of up to $1,000, imprisonment for up to 6 months, or both (section 268a). The Act also criminalises the failure of a person to attend before the Court or a magistrate, to be sworn or to give evidence, and any prevarication or evasion in the course of an examination (sections 264a to 264d). The failure of a bankrupt or debtor to disclose property or books relating to their affairs to the trustee is an offence (section 265), with penalties that may include fines and imprisonment. Additionally, the Act provides for the protection of officials such as Registrars and magistrates during examinations and the protection of reports generated during these examinations.
• Lastly, the Act clarifies the application of certain amendments to ensure there is no ambiguity in their interpretation or effect. It specifies that some amendments apply only to bankruptcies occurring after the Act's commencement, while others continue to apply to existing cases. The Act also makes it clear that certain amendments are for the avoidance of doubt and do not alter the interpretation of the Principal Act as it stood before the amendments. These provisions ensure that the amendments introduced by the Act are applied correctly and consistently across different scenarios and time frames.

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Insolvency Law

Bankruptcy Law

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Act

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