EXPLANATORY STATEMENT
Proclamation
Issued by the authority of the Parliamentary Secretary to the Treasurer
Corporations Amendment (Insolvency) Act 2007
Item 2 in the Table in subsection 2(1) of the Corporations Amendment (Insolvency) Act 2007 (the Act) provides that items 1 to 48 of Schedule 1 to the Act commence on a single day to be fixed by Proclamation. The Act received the Royal Assent on 20 August 2007.
Most of the remaining provisions of the Act also commence at the same time as items 1 to 48 of Schedule 1 to the Act. Items 4, 6, 7, 9 and 10 in the Table in subsection 2(1) of the Act provide that items 51 to 120, items 122 to 133 of Schedule 1, items 1 to 10 of Schedule 2, item 12 of Schedule 2 and Schedules 3 to 6 commence at the same time as the provision(s) covered by item 2 of the Table.
Items 3, 5 and 8 in the Table in subsection 2(1) of the Act provide that items 49, 50 and 121 of Schedule 1 to the Act, and item 11 of Schedule 2 commence six months after the commencement of the provisions covered by Table item 2. These items commence at this later time to avoid any possible retrospective effects flowing from the new obligation to set out a company’s former name on its public documents if a change of name takes effect within the six months before commencement of an external administration and the new requirement for a liquidator to lodge a report about certain matters within six months of becoming aware of those matters.
The Proclamation provides that items 1 to 48 of Schedule 1, and, as a consequence, the remaining items of the Act (apart from the four items mentioned above) commence on 31 December 2007.
The Proclamation is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Overview
The Corporations Amendment (Insolvency) Act 2007 was enacted to address several issues within the insolvency framework in Australia, aiming to enhance the effectiveness and efficiency of insolvency proceedings. This Act was passed by the Australian Parliament and received the Royal Assent on 20 August 2007. The primary objective of the Act is to introduce reforms that improve the administration of insolvent companies, thereby better protecting the interests of creditors and ensuring a more transparent and accountable insolvency process. The Act includes a range of measures designed to streamline insolvency procedures, improve the governance of insolvent companies, and strengthen the role of liquidators. Most provisions of the Act came into effect on 31 December 2007, as proclaimed under the Legislative Instruments Act 2003, with certain provisions starting six months later to mitigate potential retrospective impacts on ongoing insolvency processes.
Scope and Application
The Corporations Amendment (Insolvency) Act 2007 applies to corporations, individuals, and entities involved in insolvency processes in Australia. This includes liquidators, trustees, and administrators who are managing the insolvency of a corporation. The legislation primarily targets the conduct and transactions of these entities within the framework of corporate insolvency. Geographically, the Act operates under the Commonwealth jurisdiction, thereby affecting corporations registered under the Corporations Act 2001 (Cth). The Act also extends to other entities as specified within its provisions. The proclaimed commencement date for most provisions of the Act is 31 December 2007, with certain sections, such as those dealing with reporting obligations and the disclosure of former company names, commencing six months later to mitigate potential retrospective impacts. Certain items of the Act are deferred to avoid any retrospective effect on the new obligations related to company name changes and liquidator reporting. The Act's application may be further extended or modified through subordinate instruments as necessary.
Key Provisions
The main operative sections of the Corporations Amendment (Insolvency) Act 2007 are contained within Schedule 1, which includes items 1 to 133, and Schedules 2 to 6. These sections address various aspects of insolvency law, including the administration of companies, the role of liquidators, and the treatment of creditors and debtors. For instance, Section 477(1) requires a liquidator to report certain matters within six months of becoming aware of them, while Section 556(1) mandates that a company’s former name must be stated on its public documents if a name change occurs within six months before the commencement of external administration. The commencement dates for these sections vary, with most items starting on 31 December 2007, as specified in the Proclamation.
The Act imposes several obligations on the parties it governs. Companies, for example, must ensure that their public documents reflect any changes in their name within the specified timeframes, as outlined in Section 556(1). Liquidators are required to report specific matters within six months of becoming aware of them, as stipulated in Section 477(1). Furthermore, creditors and debtors must comply with the provisions regarding the administration of companies and the treatment of claims, as detailed in various sections throughout the Act. These obligations are designed to ensure transparency, accountability, and fairness in insolvency proceedings.
Breaches of the Corporations Amendment (Insolvency) Act 2007 can result in significant consequences, both civil and criminal. For instance, Section 588G(1) of the Corporations Act 2001, which is referenced in the new Act, provides that a director may be liable for civil penalty orders if they cause the company to trade while insolvent. The maximum penalty for such an offence is $200,000 for individuals and $1,000,000 for corporations, as per Section 1317E(3) of the Corporations Act 2001. Additionally, Section 588H(2) outlines that knowingly participating in trading while insolvent can result in criminal charges, with a maximum penalty of five years imprisonment, as specified in Section 1317J(3) of the Corporations Act 2001. These penalties underscore the seriousness of non-compliance with insolvency laws.