Part 4EXTERNAL ADMINISTRATION OF COMPANIES AND PART 5.7 BODIES

PART 4—EXTERNAL ADMINISTRATION OF COMPANIES AND PART 5.7 BODIES 29\. Section 9 of the Corporations Law is amended: (a) by omitting “, 444 and 500,” from paragraph (a) of the definition of “company” and substituting “, 500 and 600F,”; (b) by omitting “Part” (first occurring) from paragraph (c) of the definition of “company” and substituting “Parts 5.7B and”; (c) by omitting “body corporate to which Part 5.7 applies” from paragraph (b) of the definition of “contributory” and substituting “Part 5.7 body”; (d) by omitting paragraph (c) of the definition of “externally-administered body corporate” and substituting the following paragraphs: “(c) that is under administration; (ca) that has executed a deed of company arrangement that has not yet terminated; or”; (e) by omitting “in sections 475, 531, 532 and 535 to 540, inclusive, and” from the definition of “liquidator”; (f) by inserting “(for example, but without limitation, through the operation of a presumption for which this Law or any other law of this jurisdiction provides)” after “way” in the definition of “prove”; (g) by omitting the definitions of “entity”, “party”, “relevant date” and “resolution” and substituting the following definitions: “ ‘entity’: (a) in Part 3.2A—has the meaning given by section 243C; and (b) in Parts 3.6 and 3.7—has the meaning given by section 294A; and (c) otherwise—has the meaning given by section 64A; ‘party’: (a) in relation to a transaction—includes, if the transaction has been completed or given effect to, or has been terminated, a person who was a party to the transaction; and (b) in relation to a Chapter 8 agreement—means, in the case of a proposed or discharged relevant agreement, a person who would be a party to the relevant agreement if it were in effect; ‘relevant date’, in relation to a winding up, means the day on which the winding up is taken because of Division 1A of Part 5.6 to have begun; ‘resolution’ means: (a) in relation to a body corporate—a resolution other than a special resolution; or (b) in relation to creditors or contributories—a resolution passed at a meeting of the creditors or contributories;”; (h) by inserting the following definitions: “ ‘administration’, in relation to a body corporate or relevant body, or an entity within the meaning of Parts 3.6 and 3.7, has, in the case of a company or recognised company, the meaning given by: (a) section 435C or a corresponding law; and (b) section 1381 or a corresponding law; ‘administrator’: (a) in relation to a body corporate or relevant body, or an entity within the meaning of Parts 3.6 and 3.7, but not in relation to a deed of company arrangement: (i) means an administrator of the body or entity appointed under Part 5.3A; and (ii) has a meaning affected by section 1381; and (iii) if 2 or more persons are appointed under that Part as administrators of the body or entity—has a meaning affected by paragraph 451A(2)(b); or (b) in relation to a deed of company arrangement: (i) means an administrator of the deed appointed under Part 5.3A; and (ii) if 2 or more persons are appointed under that Part as administrators of the deed—has a meaning affected by paragraph 451B(2)(b); ‘affairs’, in relation to a body corporate, has, in the provisions referred to in section 53, a meaning affected by that section; ‘begin’, in relation to a winding up, has the meaning given by Division 1A of Part 5.6; ‘business affairs’, in relation to an entity, has a meaning affected by sections 53AA, 53AB, 53AC and 53AD; ‘commence’, in relation to a winding up, has the meaning given by Division 1A of Part 5.6; ‘committee of creditors’, in relation to a company under administration, means a committee of creditors of the company appointed at a meeting convened under section 436E; ‘connected entity’, in relation to a corporation, means: (a) a body corporate that is, or has been, related to the corporation; or (b) an entity that is, or has been, connected (as defined by section 64B) with the corporation; ‘control day’, in relation to a controller of property of a corporation, means: (a) unless paragraph (b) applies: (i) in the case of a receiver, or receiver and manager, of that property—the day when the receiver, or receiver and manager, was appointed; or (ii) in the case of any other person who is in possession, or has control, of that property for the purpose of enforcing a charge—the day when the person entered into possession, or took control, of property of the corporation for the purpose of enforcing that charge; or (b) if the controller became a controller of property of the corporation: (i) to act with an existing controller of such property; or (ii) in place of a controller of such property who has died or ceased to be a controller of such property; the day that is, because of any other application or applications of this definition, the control day in relation to the controller referred to in subparagraph (i) or (ii); ‘controller’, in relation to property of a corporation, means: (a) a receiver, or receiver and manager of that property; or (b) anyone else who (whether or not as agent for the corporation) is in possession, or has control, of that property for the purpose of enforcing a charge; ‘decision period’, in relation to a chargee in relation to a charge on property of a company under administration, means the period beginning on the day when: (a) if notice of the appointment of the administrator must be given to the chargee under subsection 450A(3)—such notice is so given; or (b) otherwise—the administration begins; and ending at the end of the tenth business day after that day; ‘deed of company arrangement’ means a deed of company arrangement executed under Part 5.3A or such a deed as varied and in force from time to time; ‘de facto spouse’, in relation to a person, means an individual of the opposite sex to that person who is living with that person as his or her spouse on a genuine domestic basis although not legally married to that person; ‘defect’, in relation to a statutory demand, includes: (a) an irregularity; and (b) a misstatement of an amount or total; and (c) a misdescription of a debt or other matter; and (d) a misdescription of a person or entity; ‘eligible applicant’, in relation to a corporation, means: (a) the Commission; or (b) a liquidator or provisional liquidator of the corporation; or (c) an administrator of the corporation; or (d) an administrator of a deed of company arrangement executed by the corporation; or (e) a person authorised in writing by the Commission to make: (i) applications under the Division of Part 5.9 in which the expression occurs; or (ii) such an application in relation to the corporation; ‘enforce’, in relation to a charge on property of a company under administration, includes: (a) appoint a receiver of property of the company under a power contained in an instrument relating to the charge; or (b) obtain an order for the appointment of a receiver of such property for the purpose of enforcing the charge; or (c) enter into possession, or assume control, of such property for that purpose; or (d) appoint a person so to enter into possession or assume control (whether as agent for the chargee or for the company); or (e) exercise, as chargee or as a receiver or person so appointed, a right, power or remedy existing because of the charge, whether arising under an instrument relating to the charge, under a written or unwritten law, or otherwise; ‘enforcement process’, in relation to property, means: (a) execution against that property; or (b) any other enforcement process in relation to that property that involves a court or a sheriff; ‘examinable affairs’, in relation to a corporation means: (a) the promotion, formation, management, administration or winding up of the corporation; or (b) any other affairs of the corporation (including anything that is included in the corporation’s affairs because of section 53); or (c) the business affairs of a connected entity of the corporation, in so far as they are, or appear to be, relevant to the corporation or to anything that is included in the corporation’s examinable affairs because of paragraph (a) or (b); ‘examinable assets and liabilities’, in relation to an entity, means all of the following: (a) the entity’s property and assets: (i) whether present or future; and (ii) whether held alone or jointly with any other person or persons; and (iii) whether or not held as agent, bailee or trustee; (b) the entity’s liabilities: (i) whether present or future; and (ii) whether actual or contingent; and (iii) whether owed alone or jointly with any other person or persons; and (iv) whether or not owed as trustee; ‘examinable officer’, in relation to a corporation, means: (a) a director, secretary or executive officer of the corporation; or (b) a receiver, or receiver and manager, of property of the corporation (whether appointed under a provision contained in an instrument, or by a court); or (c) an administrator of the corporation; or (d) an administrator of a deed of company arrangement executed by the corporation; or (e) a liquidator or provisional liquidator of the corporation (whether or not appointed by a court); or (f) a trustee or other person administering a compromise or arrangement made between the corporation and any other person or persons; ‘examinable operations’, in relation to an entity, means all of the following: (a) the entity’s business, trading, transactions and dealings: (i) whether alone or jointly with any other entity or entities; and (ii) whether or not as agent, bailee or trustee; (b) the entity’s profits, income and receipts; (c) the entity’s losses, outgoings and expenditure; ‘insolvent’ has the meaning given by subsection 95A(2) and, in Part 7.10, has a meaning affected by section 922; ‘insolvent transaction’ has the meaning given by section 588FC; ‘managing controller’, in relation to property of a corporation, means: (a) a receiver and manager of that property; or (b) any other controller of that property who has functions or powers in connection with managing the corporation; ‘misconduct’ includes fraud, negligence, default, breach of trust and breach of duty; ‘national newspaper’ means a daily newspaper that circulates generally in each State, the Capital Territory and the Northern Territory; ‘related entity’, in relation to a body corporate, means any of the following: (a) a promoter of the body; (b) a relative, or de facto spouse, of such a promoter; (c) a relative of a spouse, or of a de facto spouse, of such a promoter; (d) a director or member of the body or of a related body corporate; (e) a relative, or de facto spouse, of such a director or member; (f) a relative of a spouse, or of a de facto spouse, of such a director or member; (g) a body corporate that is related to the first-mentioned body; (h) a beneficiary under a trust of which the first-mentioned body is or has at any time been a trustee; (i) a relative, or de facto spouse, of such a beneficiary; (j) a relative of a spouse, or of a de facto spouse, of such a beneficiary; (k) a body corporate one of whose directors is also a director of the first-mentioned body; (l) a trustee of a trust under which a person is a beneficiary, where the person is a related entity of the first-mentioned body because of any other application or applications of this definition; ‘relation-back day’, in relation to a winding up of a company or Part 5.7 body, means: (a) if, because of Division 1A of Part 5.6, the winding up is taken to have begun on the day when an order that the company or body be wound up was made—the day on which the application for the order was filed; or (b) otherwise—the day on which the winding up is taken because of Division 1A of Part 5.6 to have begun; ‘section 513C day’, in relation to the administration of a company, has the meaning given by section 513C; ‘solvent’ has the meaning given by subsection 95A(1); ‘statutory demand’ means: (a) a document that is, or purports to be, a demand served under section 459E; or (b) such a document as varied by an order under subsection 459H(4); ‘statutory minimum’ means: (a) if an amount greater than $2,000 is prescribed—the prescribed amount; or (b) otherwise—$2,000; ‘swear’, in relation to an affidavit, means, in the case of an affirmation, affirm; ‘transaction’, in Part 5.7B, in relation to a body corporate or Part 5.7 body, means a transaction to which the body is a party, for example (but without limitation): (a) a conveyance, transfer or other disposition by the body of property of the body; and (b) a charge created by the body on property of the body; and (c) a guarantee given by the body; and (d) a payment made by the body; and (e) an obligation incurred by the body; and (f) a release or waiver by the body; and (g) a loan to the body; and includes such a transaction that has been completed or given effect to, or that has terminated; ‘uncommercial transaction’ has the meaning given by section 588FB; ‘unfair loan’ has the meaning given by section 588FD; ‘unfair preference’ has the meaning given by section 588FA; ‘unsecured’, in relation to a debt, has in Part 5.7B a meaning affected by section 588D; ‘winding up by the Court’ includes winding up in insolvency; ‘wound up by the Court’ includes wound up in insolvency;”. Affairs of a body corporate 30. Section 53 of the Corporations Law is amended: (a) by omitting “of section” and substituting “of the definition of ‘examinable affairs’ in section 9, section 53AA or”; (b) by omitting “or 597”; (c) by omitting subparagraph (d)(ii) and substituting the following subparagraphs: “(ii) the body is under administration; (iia) a deed of company arrangement executed by the body has not yet terminated;”; (d) by omitting from paragraph (d) “of an official manager or deputy official manager of the body,” and substituting “of an administrator of the body, of an administrator of such a deed of company arrangement,”. 31. After section 53 of the Corporations Law the following sections are inserted: Business affairs of a body corporate “53AA. A body corporate’s business affairs include (without limitation): (a) any of the body’s affairs (including anything that is included in the body’s affairs because of section 53); and (b) matters concerned with ascertaining the corporations with which the body is or has been connected. Business affairs of a natural person “53AB. A natural person’s business affairs include (without limitation): (a) the person’s examinable operations and examinable assets and liabilities; and (b) any act done (including any contract made and any transaction entered into) by or on behalf of the person, or to or in relation to the person or his or her business or property, at a time when: (i) the person was, under the Bankruptcy Act 1966 or the law of an external Territory, a bankrupt in respect of a bankruptcy from which the person had not been discharged; or (ii) the person had, under a law of an external Territory or of a foreign country, the status of an undischarged bankrupt; or (iii) the person’s property was subject to control under Division 2 of Part X of the Bankruptcy Act 1966 because of an authority given by the person under section 188 of that Act; or (iv) a deed of assignment, deed of arrangement, or composition, under Part X of the Bankruptcy Act 1966 or under the corresponding provisions of the law of an external Territory or of a foreign country was in effect in relation to the person or the person’s property; and (c) without limiting the generality of paragraph (b), any conduct of the trustee of such a bankrupt estate or of such a deed of assignment or arrangement, a person acting under such an authority or a person administering such a composition; and (d) matters concerned with ascertaining the corporations with which the person is or has been connected. Business affairs of a partnership “53AC. A partnership’s business affairs include (without limitation): (a) the partnership’s promotion, formation, membership, control, examinable operations and examinable assets and liabilities; and (b) the partnership’s management and proceedings; and (c) any act done (including any contract made and any transaction entered into) by or on behalf of the partnership, or to or in relation to the partnership, at a time when the partnership is being wound up; and (d) matters concerned with ascertaining the corporations with which the partnership is or has been connected. Business affairs of a trust “53AD. A trust’s business affairs include (without limitation): (a) the creation of the trust; and (b) matters arising under, or otherwise relating to, the terms of the trust; and (c) the appointment and removal of a trustee of the trust; and (d) the business, trading, transactions and dealings of the trustee of the trust; and (e) the profits, income and receipts of the trustee of the trust; and (f) the losses, outgoings and expenditure of the trustee of the trust; and (g) the trust property, including transactions and dealings in, and the income arising from, the trust property; and (h) the liabilities of the trustee of the trust; and (j) the management of the trust; and (k) any act done (including any contract made and any transaction entered into) by or on behalf of the trustee of the trust, or to or in relation to the trust, at a time when the trust is being wound up; and (l) matters concerned with ascertaining the corporations with which the trust is or has been connected.”. 32. After section 64 of the Corporations Law the following sections are inserted: Entities “64A. Except in Parts 3.2A, 3.6 and 3.7, a reference to an entity: (a) is a reference to a natural person, a body corporate (other than an exempt public authority), a partnership or a trust; and (b) includes, in the case of a trust, a reference to the trustee of the trust. Entities connected with a corporation \[Body corporate\] “64B.(1) A body corporate is connected with a corporation if, and only if, the corporation: (a) can control, or influence materially, the body’s activities or internal affairs; or (b) is a member of the body; or (c) is in a position to cast, or to control the casting of, a vote at a general meeting of the body; or (d) has power to dispose of, or to exercise control over the disposal of, a share in the body; or (e) is financially interested in the body’s success or failure or apparent success or failure; or (f) is owed a debt by the body; or (g) is engaged by the body under a contract for services; or (h) acts as agent for the body in any transaction or dealing. \[Natural person\] “(2) A natural person is connected with a corporation if, and only if, the corporation: (a) is a trustee of a trust under which the person is capable of benefiting; or (b) is engaged by the person under a contract for services; or (c) acts as agent for the person in any transaction or dealing; or (d) is an attorney of the person under a power of attorney; or (e) has appointed the person as the corporation’s attorney under a power of attorney; or (f) is given financial, business or legal advice by the person in the performance of the functions attaching to the person’s professional capacity. \[Partnership\] “(3) A partnership is connected with a corporation if, and only if, the corporation: (a) is a partner in the partnership; or (b) can control, or influence materially, the partnership’s activities or internal affairs; or (c) is financially interested in the partnership’s success or failure or apparent success or failure; or (d) is a creditor of the partnership; or (e) is engaged by the partnership under a contract for services; or (f) acts as agent for the partnership in any transaction or dealing. \[Trust\] “(4) A trust is connected with a corporation if, and only if, the corporation: (a) is the settlor, or one of the settlors, of the trust; or (b) has power under the terms of the trust to appoint or remove a trustee of the trust or to vary, or cause to be varied, any of the terms of the trust; or (c) is a trustee of the trust; or (d) can control, or influence materially, the activities of the trust; or (e) is capable of benefiting under the trust; or (f) is a creditor of the trustee of the trust; or (g) is engaged by the trustee of the trust under a contract for services; or (h) acts as agent for the trustee of the trust in any transaction or dealing.”. Officers of bodies corporate and other entities 33\. Section 82A of the Corporations Law is amended by omitting paragraph (1)(e) and substituting the following paragraphs: “(e) an administrator of the body or entity; and (ea) an administrator of a deed of company arrangement executed by the body or entity; and”. 34. After section 95 of the Corporations Law the following section is inserted: Solvency and insolvency “95A.(1) A person is solvent if, and only if, the person is able to pay all the person’s debts, as and when they become due and payable. “(2) A person who is not solvent is insolvent. “(3) Section 922 defines when a person becomes insolvent for the purposes of Part 7.10.”. 35. Section 206BB of the Corporations Law is amended: (a) by omitting paragraph (c) of the definition of “externally-administered company” and substituting the following paragraphs: “(c) that is under administration; or (d) that has executed a deed of company arrangement that has not yet terminated;”; (b) by omitting the definitions of “national newspaper”, “relevant date” and “solvent”. Duty and liability of officer of corporation 36. Section 232 of the Corporations Law is amended by omitting paragraph (c) of the definition of “officer” in subsection (1) and substituting the following paragraphs: “(c) an administrator of the corporation; (ca) an administrator of a deed of company arrangement executed by the corporation;”. Substitution of Part heading 37. The heading to Part 5.2 of the Corporations Law is repealed and the following heading is substituted: “PART 5.2—RECEIVERS, AND OTHER CONTROLLERS, OF PROPERTY OF CORPORATIONS”. Application of Part 38. Section 417 of the Corporations Law is amended by inserting “in this Part or Part 9.11” after “appears”. 39. After section 418 of the Corporations Law the following section is inserted: Court may declare whether controller is validly acting “418A.(1) Where there is doubt, on a specific ground, about: (a) whether a purported appointment of a person, after the commencement of this section, as receiver of property of a corporation is valid; or (b) whether a person who has entered into possession, or assumed control, of property of a corporation after the commencement of this section did so validly under the terms of a charge on that property; the person, the corporation or any of the corporation’s creditors may apply to the Court for an order under subsection (2). “(2) On an application, the Court may make an order declaring whether or not: (a) the purported appointment was valid; or (b) the person entered into possession, or assumed control, validly under the terms of the charge; as the case may be, on the ground specified in the application or on some other ground.”. 40. After section 419 of the Corporations Law the following section is inserted: Liability of controller under pre-existing agreement about property used by corporation “419A.(1) This section applies if: (a) under an agreement made before the control day in relation to a controller of property of a corporation, the corporation continues after that day to use or occupy, or to be in possession of, property (‘the third party property’) of which someone else is the owner or lessor; and (b) the controller is controller of the third party property. “(2) Subject to subsections (4) and (7), the controller is liable for so much of the rent or other amounts payable by the corporation under the agreement as is attributable to a period: (a) that begins more than 7 days after the control day; and (b) throughout which: (i) the corporation continues to use or occupy, or to be in possession of. the third party property; and (ii) the controller is controller of the third party property. “(3) Within 7 days after the control day, the controller may give to the owner or lessor a notice that specifies the third party property and states that the controller does not propose to exercise rights in relation to that property as controller of the property, whether on behalf of the corporation or anyone else. “(4) Despite subsection (2), the controller is not liable for so much of the rent or other amounts payable by the corporation under the agreement as is attributable to a period during which a notice under subsection (3) is in force, but such a notice does not affect a liability of the corporation. “(5) A notice under subsection (3) ceases to have effect if: (a) the controller revokes it by writing given to the owner or lessor; or (b) the controller exercises, or purports to exercise, a right in relation to the third party property as controller of the property, whether on behalf of the corporation or anyone else. “(6) For the purposes of subsection (5), the controller does not exercise, or purport to exercise, a right as mentioned in paragraph (5)(b) merely because the controller continues to be in possession, or to have control, of the third party property, unless the controller: (a) also uses the property; or (b) asserts a right, as against the owner or lessor, so to continue. “(7) Subsection (2) does not apply in so far as the Court, by order, excuses the controller from liability, but an order does not affect a liability of the corporation. “(8) The controller is not taken because of subsection (2): (a) to have adopted the agreement; or (b) to be liable under the agreement otherwise than as mentioned in subsection(2).”. 41. After section 420 of the Corporations Law the following sections are inserted: Controller’s duty of care in exercising power of sale “420A.(1) In exercising a power of sale in respect of property of a corporation, a controller must take all reasonable care to sell the property for: (a) if, when it is sold, it has a market value—not less than that market value; or (b) otherwise—the best price that is reasonably obtainable, having regard to the circumstances existing when the property is sold. “(2) Nothing in subsection (1) limits the generality of anything in section 232. Court may authorise managing controller to dispose of property despite prior charge “420B.(1) On the application of a managing controller of property of a corporation, the Court may by order authorise the controller to sell, or to dispose of in some other specified way, specified property of the corporation, even though it is subject to a charge (in this section called the ‘prior charge’) that has priority over a charge (in this section called the ‘controller’s charge’) on that property that the controller is enforcing. “(2) However, the Court may only make an order if satisfied that: (a) apart from the existence of the prior charge, the controller would have power to sell, or to so dispose of, the property; and (b) the controller has taken all reasonable steps to obtain the consent of the holder of the prior charge to the sale or disposal, but has not obtained that consent; and (c) sale or disposal of the property under the order is in the best interests of the corporation’s creditors and of the corporation; and (d) sale or disposal of the property under the order will not unreasonably prejudice the rights or interests of the holder of the prior charge. “(3) The Court is to have regard to the need to protect adequately the rights and interests of the holder of the prior charge. “(4) If the property would be sold or disposed of together with other property that is subject to the controller’s charge, the Court may have regard to: (a) the amount (if any) by which it is reasonable to expect that the net proceeds of selling or disposing of that other property otherwise than together with the first-mentioned property would be less than so much of the net proceeds of selling or disposing of all the property together as would be attributable to that other property; and (b) the amount (if any) by which it is reasonable to expect that the net proceeds of selling or disposing of the first-mentioned property otherwise than together with the other property would be greater than so much of the net proceeds of selling or disposing of all the property together as would be attributable to the first-mentioned property. “(5) Nothing in subsection (3) or (4) limits the matters to which the Court may have regard for the purposes of subsection (2). “(6) An order may be made subject to conditions, for example (but without limitation): (a) a condition that: (i) the net proceeds of the sale or disposal; and (ii) the net proceeds of the sale or disposal of such other property (if any) as is specified in the condition and is subject to the controller’s charge; or a specified part of those net proceeds, be applied in payment of specified amounts secured by the prior charge; or (b) a condition that the controller apply a specified amount in payment of specified amounts secured by the prior charge. Receiver’s power to carry on corporation’s business during winding up “420C.(1) A receiver of property of a corporation that is being wound up may: (a) with the written approval of the corporation’s liquidator or with the approval of the Court, carry on the corporation’s business either generally or as otherwise specified in the approval; and (b) do whatever is necessarily incidental to carrying on that business under paragraph (a). “(2) Subsection (1) does not: (a) affect a power that the receiver has otherwise than under that subsection; or (b) empower the receiver to do an act that he or she would not have power to do if the corporation were not being wound up. “(3) A receiver of property of a corporation who carries on the corporation’s business under subsection (1) does so: (a) as agent for the corporation; and (b) in his or her capacity as receiver of property of the corporation. “(4) The consequences of subsection (3) include, but are not limited to, the following: (a) for the purposes of subsection 419(1), a debt that the receiver incurs in carrying on the business as mentioned in subsection (3) of this section is incurred in the course of the receivership; (b) a debt or liability that the receiver incurs in so carrying on the business is not a cost, charge or expense of the winding up.”. Controller’s duties in relation to bank accounts and accounting records 42\. Section 421 of the Corporations Law is amended: (a) by omitting subsection (1) and substituting the following subsection: “(1) A controller of property of a corporation must: (a) open and maintain an account, with an Australian bank, bearing: (i) the controller’s own name; and (ii) in the case of a receiver of the property—the title ‘receiver’; and (iii) otherwise—the title ‘controller’; and (iv) the corporation’s name; or 2 or more such accounts; and (b) within 3 business days after money of the corporation comes under the control of the controller, pay that money into such an account that the controller maintains; and (c) ensure that no such account that the controller maintains contains money other than money of the corporation that comes under the control of the controller; and (d) keep such accounting records as correctly record and explain all transactions that the controller enters into as the controller.”; (b) by omitting from subsection (2) “receiver” and substituting “controller”. 43. After section 421 of the Corporations Law the following section is inserted: Managing controller to report within 2 months about corporation’s affairs “421A.(1) A managing controller of property of a corporation must prepare a report about the corporation’s affairs that is in the prescribed form and is made up to a day not later than 30 days before the day when it is prepared. “(2) The managing controller must prepare and lodge the report within 2 months after the control day. “(3) As soon as practicable, and in any event within 14 days, after lodging the report, the managing controller must cause to be published in a national newspaper, or in each jurisdiction in a daily newspaper that circulates generally in that jurisdiction, a notice stating: (a) that the report has been prepared; and (b) that a person can, on paying the prescribed fee, inspect the report at specified offices of the Commission. “(4) If, in the managing controller’s opinion, it would seriously prejudice: (a) the corporation’s interests; or (b) the achievement of the objectives for which the controller was appointed, or entered into possession or assumed control of property of the corporation, as the case requires; if particular information that the controller would otherwise include in the report were made available to the public, the controller need not include the information in the report. “(5) If the managing controller omits information from the report as permitted by subsection (4), the controller must include instead a notice: (a) stating that certain information has been omitted from the report; and (b) summarising what the information is about, but without disclosing the information itself.”. Supervision of controller 44. Section 423 of the Corporations Law is amended: (a) by omitting paragraphs (1)(a) and (b) and substituting the following paragraphs: “(a) it appears to the Court or to the Commission that a controller of property of a corporation has not faithfully performed, or is not faithfully performing, the controller’s functions or has not observed, or is not observing, a requirement of: (i) in the case of a receiver—the order by which, or the instrument under which, the receiver was appointed; or (ii) otherwise—an instrument under which the controller entered into possession, or took control, of that property; or (iii) in any case—the Court; or (iv) in any case—this Law, the regulations or the rules; or (b) a person complains to the Court or to the Commission about an act or omission of a controller of property of a corporation in connection with performing or exercising any of the controller’s functions and powers;”; (b) by omitting from subsection (2) “the receiver and the Court may order the receiver” and substituting “a controller of property of a corporation and the Court may order the controller”; (c) by omitting subsection (3) and substituting the following subsection: “(3) The Court may at any time: (a) require a controller of property of a corporation to answer questions about the performance or exercise of any of the controller’s functions and powers as controller; or (b) examine a person about the performance or exercise by such a controller of any of the controller’s functions and powers as controller; or (c) direct an investigation to be made of such a controller’s books.”. 45. Section 424 of the Corporations Law is repealed and the following section is substituted: Controller may apply to Court “424.(1) A controller of property of a corporation may apply to the Court for directions in relation to any matter arising in connection with the performance or exercise of any of the controller’s functions and powers as controller. “(2) In the case of a receiver of property of a corporation, subsection (1) applies only if the receiver was appointed under a power contained in an instrument.”. Court’s power to fix receiver’s remuneration 46. Section 425 of the Corporations Law is amended: (a) by omitting from subsection (1) everything before “by order” and substituting “The Court may”; (b) by omitting from subsection (1) “the corporation” and substituting “a corporation”; (c) by omitting subsection (4) and substituting the following subsections: “(4) The Court may from time to time vary or amend an order under this section. “(5) An order under this section may be made, varied or amended on the application of: (a) a liquidator of the corporation; or (b) an administrator of the corporation; or (c) an administrator of a deed of company arrangement executed by the corporation; or (d) the Commission. “(6) An order under this section may be varied or amended on the application of the receiver concerned. “(7) An order under this section may be made, varied or amended only as provided in subsections (5) and (6).”. 47. Section 426 of the Corporations Law is repealed and the following section is substituted: Controller has qualified privilege in certain cases “426\. A controller of property of a corporation has qualified privilege in respect of: (a) a matter contained in a report that the controller lodges under section 421A or 422; or (b) a comment that the controller makes under paragraph 429(2)(c).”. Notification of matters relating to controller 48. Section 427 of the Corporations Law is amended by omitting subsections (2), (3) and (4) and substituting the following subsections: “(1A) A person who appoints another person to enter into possession, or take control, of property of a corporation (whether or not as agent for the corporation) for the purpose of enforcing a charge otherwise than as receiver of that property must: (a) within 7 days after making the appointment, lodge notice of the appointment; and (b) within 21 days after making the appointment, cause notice of the appointment to be published in the Gazette. “(1B) A person who enters into possession, or takes control, as mentioned in subsection (1A) must: (a) within 7 days after so entering into possession or taking control, lodge notice that the person has done so; and (b) within 21 days after so entering into possession or taking control, cause to be published in the Gazette notice that the person has done so; unless another person: (c) appointed the first-mentioned person so to enter into possession or take control; and (d) complies with subsection (1A) in relation to the appointment. “(2) Within 14 days after becoming a controller of property of a corporation, a person must lodge notice in the prescribed form of the address of the person’s office. “(3) A controller of property of a corporation must, within 14 days after a change in the situation of the controller’s office, lodge notice in the prescribed form of the change. “(4) A person who ceases to be a controller of property of a corporation must: (a) within 7 days after so ceasing, lodge notice that the person has so ceased; and (b) within 21 days after so ceasing, cause notice that the person has so ceased to be published in the Gazette.”. Statement that receiver appointed or other controller acting 49. Section 428 of the Corporations Law is amended by adding at the end the following subsection: “(2) Where there is a controller (other than a receiver) of property (whether within Australia or elsewhere) of a corporation, the corporation must set out, in every public document, and in every eligible negotiable instrument, of the corporation, after the corporation’s name where it first appears, a statement that a controller is acting.”. Officers to report to controller about corporation’s affairs 50. Section 429 of the Corporations Law is amended: (a) by omitting from subsection (1) “receiver has been appointed, means a person who is” and substituting “person is controller, means a person who was”; (b) by omitting from subsections (1) and (2) “day of the appointment” and substituting “control day”; (c) by omitting from subsection (2) everything before paragraph (a) and substituting “Where a person becomes a controller of property of a corporation:”; (d) by omitting from paragraphs (2)(a), (b) and (c) “receiver” (wherever occurring) and substituting “person”; (e) by omitting from paragraph (2)(a) “of the appointment” and substituting “that the person is a controller of property of the corporation”; (f) by omitting subparagraph (2)(c)(iii) and substituting the following subparagraph: “(iii) if the person became a controller of the property: (A) because of an appointment as receiver of the property that was made by or on behalf of the holder of debentures of the corporation; or (B) by entering into possession, or taking control, of the property for the purpose of enforcing a charge securing such debentures; and there are trustees for the holders of those debentures—send to those trustees a copy of the report and a copy of the notice lodged under subparagraph (i).”; (g) by omitting from subsections (3) and (4) “receiver” (wherever occurring) and substituting “controller”; (h) by omitting subsection (6) and substituting the following subsections: “(6) Subsections (2), (3) and (4) do not apply in a case where a person becomes a controller of property of a corporation: (a) to act with an existing controller of property of the corporation; or (b) in place of a controller of such property who has died or ceased to be a controller of such property. “(6A) However, if subsection (2) applies in a case where a controller of property of a corporation dies, or ceases to be a controller of property of the corporation, before subsection (2) is fully complied with, then: (a) the references in paragraphs (2)(b) and (c) to the person; and (b) the references in subsections (3) and (4) to the controller; include references to the controller’s successor and to any continuing controller.”; (i) by omitting from subsection (7) “and section 430 apply even if the receiver” and substituting “(including subsection (6A)) and section 430 apply even if the controller”. Controller may require reports 51. Section 430 of the Corporations Law is amended: (a) by omitting from subsections (1), (3) and (5) “receiver” (wherever occurring) and substituting “controller”; (b) by omitting from paragraphs (1)(b), (c) and (d) “date of the receiver’s appointment” and substituting “control day”; (c) by omitting subsection (2) and substituting the following subsection: “(2) Without limiting the generality of subsection (1), a notice under that subsection may specify the information that the controller requires as to affairs of the corporation by reference to information that this Law requires to be included in any other report, statement or notice under this Law.”; (d) by omitting from subsections (3) and (5) “receiver’s” (wherever occurring) and substituting “controller’s”. Controller may inspect books 52. Section 431 of the Corporations Law is amended by omitting “receiver” (twice occurring) and substituting “controller”. Lodging controller’s accounts 53. Section 432 of the Corporations Law is amended: (a) by omitting subsection (1) and substituting the following subsections: “(1) A controller of property of a corporation must lodge an account: (a) within one month after the end of: (i) 6 months, or such shorter period as the controller determines, after the day when the controller became a controller of property of the corporation; and (ii) each subsequent period of 6 months throughout which the controller is a controller of property of the corporation; and (b) within one month after the controller ceases to be a controller of property of the corporation. “(1A) An account must be in the prescribed form and show: (a) the controller’s receipts and payments during: (i) in the case of an account under paragraph (1)(a)— the 6 months or shorter period, as the case requires; or (ii) in the case of an account under paragraph (1)(b)— the period beginning at the end of the period to which the last account related, or on the control day, as the case requires, and ending on the day when the controller so ceased; and (b) except in the case of an account lodged under subparagraph (1)(a)(i)—the respective aggregates of the controller’s receipts and payments since the control day; and (c) in the case of: (i) a receiver appointed under a power contained in an instrument; or (ii) anyone else who is in possession, or has control, of property of the corporation for the purpose of enforcing a charge; the following: (iii) the amount (if any) owing under that instrument or charge: (A) in the case of an account lodged under subparagraph (1)(a)(i)—at the end of the control day and at the end of the period to which the account relates; or (B) otherwise—at the end of the period to which the account relates; (iv) the controller’s estimate of the total value, at the end of the period to which the account relates, of the property of the corporation that is subject to the instrument or charge.”; (b) by omitting from subsection (2) “receiver shall” and substituting “controller must”; (c) by omitting from subsection (4) everything after “incurred by the” and substituting “controller as mentioned in subsection 419(1) and, where such an order is made, the controller is liable accordingly.”. Enforcing controller’s duty to make returns 54\. Section 434 of the Corporations Law is amended: (a) by omitting from subsection (1) “receiver” (wherever occurring) and substituting “controller”; (b) by omitting from paragraph (1)(b) “been appointed under a power contained in an instrument” and substituting “become a controller of property of the corporation otherwise than by being appointed a receiver of such property by a court and who”; (c) by omitting from paragraph (1)(b) “receiver’s” and substituting “controller’s”. 55. After section 434 of the Corporations Law the following sections are inserted in Part 5.2: Court may remove controller for misconduct “434A. Where, on the application of a corporation, the Court is satisfied that a controller of property of the corporation has been guilty of misconduct in connection with performing or exercising any of the controller’s functions and powers, the Court may order that, on and after a specified day, the controller cease to act as receiver or give up possession or control, as the case requires, of property of the corporation. Court may remove redundant controller “434B.(1) The Court may order that, on and after a specified day, a controller of property of a corporation: (a) cease to act as receiver, or give up possession or control, as the case requires, of property of the corporation; or (b) act as receiver, or continue in possession or control, as the case requires, only of specified property of the corporation. “(2) However, the Court may only make an order under subsection (1) if satisfied that the objectives for which the controller was appointed, or entered into possession or took control of property of the corporation, as the case requires, have been achieved, so far as is reasonably practicable, except in relation to any property specified in the order under paragraph (1)(b). “(3) For the purposes of subsection (2), the Court must have regard to: (a) the corporation’s interests; and (b) the interests of the holder of the charge that the controller is enforcing; and (c) the interests of the corporation’s other creditors; and (d) any other relevant matter. “(4) The Court may only make an order under subsection (1) on the application of a liquidator appointed for the purposes of winding up the corporation in insolvency. “(5) An order under subsection (1) may also prohibit the holder of the charge from doing any or all of the following, except with the leave of the Court: (a) appointing a person as receiver of property of the corporation under a power contained in an instrument relating to the charge; (b) entering into possession, or taking control, of such property for the purpose of enforcing the charge; (c) appointing a person so to enter into possession or take control (whether as agent for the chargee or for the corporation). Effect of sections 434A and 434B “434C.(1) Except as expressly provided in section 434A or 434B, an order under that section does not affect a charge on property of a corporation. “(2) Nothing in section 434A or 434B limits any other power of the Court to remove, or otherwise deal with, a controller of property of a corporation (for example, the Court’s powers under section 423).”. 56\. Part 5.3 of the Corporations Law is repealed and the following Part is substituted: “PART 5.3A—ADMINISTRATION OF A COMPANY’S AFFAIRS WITH A VIEW TO EXECUTING A DEED OF COMPANY ARRANGEMENT Object of Part “435A. The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that: (a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or (b) if it is not possible for the company or its business to continue in existence—results in a better return for the company’s creditors and members than would result from an immediate winding up of the company. “435B. In this Part, unless the contrary intention appears: ‘receiver’ includes a receiver and manager. When administration begins and ends “435C.(1) The administration of a company: (a) begins when an administrator of the company is appointed under section 436A, 436B or 436C; and (b) ends on the happening of whichever event of a kind referred to in subsection (2) or (3) happens first after the administration begins. “(2) The normal outcome of the administration of a company is that: (a) a deed of company arrangement is executed by both the company and the deed’s administrator; or (b) the company’s creditors resolve under paragraph 439C(b) that the administration should end; or (c) the company’s creditors resolve under paragraph 439C(c) that the company be wound up. “(3) However, the administration of a company may also end because: (a) the Court orders, under section 447A or otherwise, that the administration is to end, for example, because the Court is satisfied that the company is solvent; or (b) the convening period, as fixed by subsection 439A(5), for a meeting of the company’s creditors ends: (i) without the meeting being convened in accordance with section 439A; and (ii) without an application being made for the Court to extend under subsection 439A(6) the convening period for the meeting; or (c) an application for the Court to extend under subsection 439A(6) the convening period for such a meeting is finally determined or otherwise disposed of otherwise than by the Court extending the convening period; or (d) the convening period, as extended under subsection 439A(6), for such a meeting ends without the meeting being convened in accordance with section 439A; or (e) such a meeting convened under section 439A ends (whether or not it was earlier adjourned) without a resolution under section 439C being passed at the meeting; or (f) the company contravenes subsection 444B(2) by failing to execute a proposed deed of company arrangement; or (g) the Court appoints a provisional liquidator of the company, or orders that the company be wound up. “(4) During the administration of a company, the company is taken to be under administration. “Division 2—Appointment of administrator and first meeting of creditors Company may appoint administrator if board thinks it is or will become insolvent “436A.(1) A company may, by writing under its common seal, appoint an administrator of the company if the board has resolved to the effect that: (a) 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 (b) an administrator of the company should be appointed. “(2) Subsection (1) does not apply to a company that is already being wound up. Liquidator may appoint administrator “436B.(1) A liquidator or provisional liquidator of a company may by writing appoint an administrator of the company if he or she thinks that the company is insolvent, or is likely to become insolvent at some future time. “(2) With the leave of the Court, a liquidator or provisional liquidator of a company may appoint himself or herself under subsection (1). “(3) Subsection (2) has effect subject to Division 14. Chargee may appoint administrator “436C.(1) A person who is entitled to enforce a charge on the whole, or substantially the whole, of a company’s property may by writing appoint an administrator of the company if the charge has become, and is still, enforceable. “(2) Subsection (1) does not apply to a company that is already being wound up. Company already under administration “436D. An administrator cannot be appointed under section 436A, 436B or 436C if the company is already under administration. Purpose and timing of first meeting of creditors “436E.(1) The administrator of a company under administration must convene a meeting of the company’s creditors in order to determine: (a) whether to appoint a committee of creditors; and (b) if so, who are to be the committee’s members. “(2) The meeting must be held within 5 business days after the administration begins. “(3) The administrator must convene the meeting by: (ii) in each jurisdiction in which the company has its registered office or carries on business, in a daily newspaper that circulates generally in that jurisdiction; at least 2 business days before the meeting. “(4) At the meeting, the company’s creditors may also, by resolution: (a) remove the administrator from office; and (b) appoint someone else as administrator of the company. Functions of committee of creditors “436F.(1) The functions of a committee of creditors of a company under administration are: (a) to consult with the administrator about matters relating to the administration; and (b) to receive and consider reports by the administrator. “(2) A committee cannot give directions to the administrator, except as provided in subsection (3). “(3) As and when a committee reasonably requires, the administrator must report to the committee about matters relating to the administration. Membership of committee “436G. A person can be a member of a committee of creditors of a company under administration if, and only if, he or she is: (a) a creditor of the company; or (b) the attorney of such a creditor because of a general power of attorney; or (c) authorised in writing by such a creditor to be such a member. “Division 3—Administrator assumes control of company’s affairs Role of administrator “437A.(1) While a company is under administration, the administrator: (a) has control of the company’s business, property and affairs; and (b) may carry on that business and manage that property and those affairs; and (c) may terminate or dispose of all or part of that business, and may dispose of any of that property; and (d) may perform any function, and exercise any power, that the company or any of its officers could perform or exercise if the company were not under administration. “(2) Nothing in subsection (1) limits the generality of anything else in it. Administrator acts as company’s agent “437B. When performing a function, or exercising a power, as administrator of a company under administration, the administrator is taken to be acting as the company’s agent. Powers of other officers suspended “437C.(1) While a company is under administration, a person (other than the administrator) cannot perform or exercise, and must not purport to perform or exercise, a function or power as an officer of the company, except with the administrator’s written approval. “(2) Subsection (1) does not remove an officer of a company from his or her office. “(3) Section 437D does not limit the generality of subsection (1) of this section. ‘officer’, in relation to a company under administration, includes: (a) a receiver who is not also a manager; and (b) a receiver and manager appointed by a court; and (c) a liquidator or provisional liquidator appointed by the Court before the administration began. “(5) However, a person is not an officer of a company for the purposes of this section merely because he or she is an employee of the company. Only administrator can deal with company’s property “437D.(1) This section applies where: (a) a company under administration purports to enter into; or (b) a person purports to enter into, on behalf of a company under administration; a transaction or dealing affecting property of the company. “(2) The transaction or dealing is void unless: (a) the administrator entered into it on the company’s behalf; or (b) the administrator consented to it in writing before it was entered into; or (c) it was entered into under an order of the Court. “(3) Subsection (2) does not apply to a payment made: (a) by an Australian bank out of an account kept by the company with the bank; and (b) in good faith and in the ordinary course of the bank’s banking business; and (c) after the administration began and on or before the day on which: (i) the administrator gives to the bank (under subsection 450A(3) or otherwise) written notice of the appointment that began the administration; or (ii) the administrator complies with paragraph 450A(1)(b) in relation to that appointment; whichever happens first. “(4) Subsection (2) has effect subject to an order that the Court makes after the purported transaction or dealing. “(5) If, because of subsection (2), the transaction or dealing is void, or would be void apart from subsection (4), an officer of the company who: (a) purported to enter into the transaction or dealing on the company’s behalf; or (b) was in any other way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the transaction or dealing; contravenes this subsection. Order for compensation where officer involved in void transaction “437E.(1) Where: (a) a court finds a person guilty of an offence constituted by a contravention of subsection 437D(5) (including such an offence that is taken to have been committed because of section 5 of the Crimes Act 1914 or that section as it applies as a law of this jurisdiction); 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. “(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. Effect of administration on company’s members “437F. A transfer of shares in a company, or an alteration in the status of members of a company, that is made during the administration of the company is void except so far as the Court otherwise orders. “Division 4—Administrator investigates company’s affairs Administrator to investigate affairs and consider possible courses of action “438A. As soon as practicable after the administration of a company begins, the administrator must: (a) investigate the company’s business, property, affairs and financial circumstances; and (b) form an opinion about each of the following matters: (i) whether it would be in the interests of the company’s creditors for the company to execute a deed of company arrangement; (ii) whether it would be in the creditors’ interests for the administration to end; (iii) whether it would be in the creditors’ interests for the company to be wound up. Directors to help administrator “438B.(1) As soon as practicable after the administration of a company begins, each director must: (a) deliver to the administrator all books in the director’s possession that relate to the company, other than books that the director is entitled, as against the company and the administrator, to retain; and (b) if the director knows where other books relating to the company are—tell the administrator where those books are. “(2) Within 7 days after the administration of a company begins or such longer period as the administrator allows, the directors must give to the administrator a statement about the company’s business, property, affairs and financial circumstances. “(3) A director of a company under administration must: (a) attend on the administrator at such times; and (b) give the administrator such information about the company’s business, property, affairs and financial circumstances; as the administrator reasonably requires. “(4) A person must not, without reasonable excuse, fail to comply with subsection (1), (2) or (3). Administrator’s rights to company’s books “438C.(1) A person is not entitled, as against the administrator of a company under administration: (a) to retain possession of books of the company; or (b) to claim or enforce a lien on such books; but such a lien is not otherwise prejudiced. “(2) Paragraph (1)(a) does not apply in relation to books of which a secured creditor of the company is entitled to possession otherwise than because of a lien, but the administrator is entitled to inspect, and make copies of, such books at any reasonable time. “(3) The administrator of a company under administration may give to a person a written notice requiring the person to deliver to the administrator, as specified in the notice, books so specified that are in the person’s possession. “(4) A notice under subsection (3) must specify a period of at least 3 business days as the period within which the notice must be complied with. “(5) A person must comply with a notice under subsection (3) except so far as the person is entitled, as against the company and the administrator, to retain possession of the books. Reports by administrator “438D.(1) If it appears to the administrator of a company under administration that: (a) a past or present officer, or a member, of the company may have been guilty of an offence in relation to the company; or (b) a person who has taken part in the formation, promotion, administration, management or winding up of the company: (i) may have misapplied or retained, or may have become liable or accountable for, money or property (in Australia or elsewhere) of the company; or (ii) may have been guilty of negligence, default, breach of duty or breach of trust in relation to the company; the administrator must: (c) lodge a report about the matter as soon as practicable; and (d) give the Commission such information, and such access to and facilities for inspecting and taking copies of documents, as the Commission requires. “(2) The administrator may also lodge further reports specifying any other matter that, in his or her opinion, it is desirable to bring to the Commission’s notice. “(3) If it appears to the Court: (a) that a past or present officer, or a member, of a company under administration has been guilty of an offence in relation to the company; or (b) that a person who has taken part in the formation, promotion, administration, management or winding up of a company under administration has engaged in conduct of a kind referred to in paragraph (1)(b) in relation to the company; and that the administrator has not lodged a report about the matter, the Court may, on the application of an interested person or of its own motion, direct the administrator to lodge such a report. “Division 5—Meeting of creditors decides company’s future Administrator to convene meeting and inform creditors “439A.(1) The administrator of a company under administration must convene a meeting of the company’s creditors within the convening period as fixed by subsection (5) or extended under subsection (6). “(2) The meeting must be held within 5 business days after the end of the convening period. “(3) The administrator must convene the meeting by: (ii) in each jurisdiction in which the company has its registered office or carries on business, in a daily newspaper that circulates generally in that jurisdiction; at least 5 business days before the meeting. “(4) The notice given to a creditor under paragraph (3)(a) must be accompanied by a copy of: (a) a report by the administrator about the company’s business, property, affairs and financial circumstances; and (b) a statement setting out the administrator’s opinion about each of the following matters: (i) whether it would be in the creditors’ interests for the company to execute a deed of company arrangement; (ii) whether it would be in the creditors’ interests for the administration to end; (iii) whether it would be in the creditors’ interests for the company to be wound up; and his or her reasons for those opinions; and (c) if a deed of company arrangement is proposed—a statement setting out details of the proposed deed. “(5) The convening period is: (a) if the administration begins on a day that is in December, or is less than 28 days before Good Friday—the period of 28 days beginning on that day; or (b) otherwise—the period of 21 days beginning on the day when the administration begins. “(6) The Court may extend the convening period on an application made within the period referred to in paragraph (5)(a) or (b), as the case requires. Conduct of meeting “439B.(1) At a meeting convened under section 439A, the administrator is to preside. “(2) A meeting convened under section 439A may be adjourned from time to time, but cannot be adjourned to a day that is more than 60 days after the first day on which the meeting was held, even if no resolution under section 439C has been passed at the meeting. What creditors may decide “439C. At a meeting convened under section 439A, the creditors may resolve: (a) that the company execute a deed of company arrangement specified in the resolution (even if it differs from the proposed deed (if any) details of which accompanied the notice of meeting); or (b) that the administration should end; or (c) that the company be wound up. “Division 6—Protection of company’s property during administration Winding up company “440A.(1) A company under administration cannot be wound up voluntarily, except as provided by section 446A. “(2) The Court is to adjourn the hearing of an application for an order to wind up a company if the company is under administration and the Court is satisfied that it is in the interests of the company’s creditors for the company to continue under administration rather than be wound up. “(3) The Court is not to appoint a provisional liquidator of a company if the company is under administration and the Court is satisfied that it is in the interests of the company’s creditors for the company to continue under administration rather than have a provisional liquidator appointed. Charge unenforceable “440B. During the administration of a company, a person cannot enforce a charge on property of the company, except: (b) with the leave of the Court. Owner or lessor cannot recover property used by company “440C. During the administration of a company, the owner or lessor of property that is used or occupied by, or is in the possession of, the company cannot take possession of the property or otherwise recover it, except: (b) with the leave of the Court. Stay of proceedings “440D.(1) During the administration 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: (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. Administrator not liable in damages for refusing consent “440E. A company’s administrator is not liable to an action or other proceeding for damages in respect of a refusal to give an approval or consent for the purposes of this Division. Suspension of enforcement process “440F. During the administration 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. Duties of court officer in relation to property of company “440G.(1) This section applies where an officer of a court (in this section called 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 administration. “(2) During the administration, 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 administrator): (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 administrator) money received because of the attachment of such a debt. “(3) The court officer must deliver to the administrator 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 administrator 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 administrator, despite anything else in this section. Lis pendens taken to exist “440H.(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 administration of a 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. Administration not to trigger liability of director or relative under guarantee of company’s liability “440J.(1) During the administration 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, de facto 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, de facto 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 Law; 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. ‘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. “Division 7—Rights of chargee, owner or lessor Where chargee acts before or during decision period “441A.(1) This section applies where: (a) the whole, or substantially the whole, of the property of a company under administration is subject to a charge; and (b) before or during the decision period, the chargee enforced the charge in relation to all property of the company subject to the charge, whether or not the charge was enforced in the same way in relation to all that property. “(2) This section also applies where: (a) a company is under administration; and (b) the same person is the chargee in relation to each of 2 or more charges on property of the company; and (c) the property of the company (in this subsection called the ‘charged property’) subject to the respective charges together constitutes the whole, or substantially the whole, of the company’s property; and (d) before or during the decision period, the chargee enforced the charges in relation to all the charged property: (i) whether or not the charges were enforced in the same way in relation to all the charged property; and (ii) whether or not any of the charges was enforced in the same way in relation to all the property of the company subject to that charge; and (iii) in so far as the charges were enforced in relation to property of the company in a way referred to in paragraph (a), (b) or (d) of the definition of ‘enforce’ in section 9— whether or not the same person was appointed in respect of all of the last-mentioned property. “(3) Nothing in section 437C or 440B, or in an order under subsection 444F(2), prevents any of the following from enforcing the charge, or any of the charges: (a) the chargee; (b) a receiver or person appointed as mentioned in paragraph (a), (b) or (d) of the definition of ‘enforce’ in section 9 as that definition applies in relation to the charge, or any of the charges (even if appointed after the decision period). “(4) Section 437D does not apply in relation to a transaction or dealing that affects property of the company and is entered into by: (b) a receiver or person of a kind referred to in paragraph (3)(b) of this section; in the performance or exercise of a function or power as chargee, or as such a receiver or person, as the case may be. Where enforcement of charge begins before administration “441B.(1) This section applies if, before the beginning of the administration of a company, a chargee, 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 charge on that property. “(2) Nothing in section 437C or 440B prevents the chargee, receiver or other person from enforcing the charge in relation to that property. “(3) Section 437D does not apply in relation to a transaction or dealing that affects that property and is entered into: (a) in the exercise of a power of the chargee as chargee; or (b) in the performance or exercise of a function or power of the receiver or other person; as the case may be. Charge on perishable property “441C.(1) This section applies where perishable property of a company under administration is subject to a charge. “(2) Nothing in section 437C or 440B prevents: (b) a receiver or person appointed (at any time) as mentioned in paragraph (a), (b) or (d) of the definition of ‘enforce’ in section 9; from enforcing the charge, so far as it is a charge on perishable property. “(3) Section 437D does not apply in relation to a transaction or dealing that affects perishable property of the company and is entered into by: (b) a receiver or person appointed (at any time) as mentioned in paragraph (a), (b) or (d) of the definition of ‘enforce’ in section 9; in the performance or exercise of a function or power as chargee, or as such a receiver or person, as the case may be. Court may limit powers of chargee, etc. in relation to charged property “441D.(1) This section applies if: (a) for the purpose of enforcing a charge on property of a company, the chargee, or a receiver or other person, does an act of a kind referred to in a paragraph of subsection 441B(1); and (b) the company is under administration when the chargee, receiver or other person does the act, or the company later begins to be under administration; but does not apply in a case where section 441A applies. “(2) On application by the administrator, the Court may order the chargee, 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 what the administrator proposes to do during the administration will adequately protect the chargee’s interests. “(4) An order may only be made, and only has effect, during the administration. “(5) An order has effect despite sections 441B and 441C. Giving a notice under a charge “441E. Nothing in section 437C or 440B prevents a person from giving a notice under the provisions of a charge. Where recovery of property begins before administration “441F.(1) This section applies if, before the beginning of the administration 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 437C or 440C prevents the receiver or other person from performing a function, or exercising a power, in relation to the property. “(3) Section 437D does not apply in relation to a transaction or dealing that affects the property and is entered into in the performance or exercise of a function or power of the receiver or other person. Recovering perishable property “441G.(1) Nothing in section 437C or 440C prevents a person from taking possession of, or otherwise recovering, perishable property. “(2) Section 437D does not apply in relation to a transaction or dealing that affects perishable property and is entered into 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. Court may limit powers of receiver etc. in relation to property used by company “441H.(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 administration when the person does so, or the company later begins to be under administration. “(2) On application by the administrator, 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 what the administrator proposes to do during the administration will adequately protect the interests of the owner or lessor. “(4) An order may only be made, and only has effect, during the administration. “(5) An order has effect despite sections 441F and 441G. Giving a notice under an agreement about property “441J. Nothing in section 437C or 440C prevents a person from giving a notice to a company under an agreement relating to property that is used or occupied by, or is in the possession of, the company. Effect of Division “441K. Except as expressly provided, nothing in this Division limits the generality of anything else in it. “Division 8—Powers of administrator Additional powers of administrator “442A. Without limiting section 437A, the administrator of a company under administration has power to do any of the following: (a) remove from office a director of the company; (b) appoint a person as such a director, whether to fill a vacancy or not; (c) execute a document, bring or defend proceedings, or do anything else, in the company’s name and on its behalf; (d) whatever else is necessary for the purposes of this Part. Dealing with property subject to a floating charge that has crystallised “442B.(1) This section applies where a charge on property of a company under administration was a floating charge when created but has since become a fixed or specific charge. “(2) Subject to sections 442C and 442D, the administrator may deal with any of that property as if the charge were still a floating charge. When administrator may dispose of encumbered property “442C.(1) The administrator of a company under administration or of a deed of company arrangement must not dispose of: (a) property of the company that is subject to a charge; or (b) property that is used or occupied by, or is in the possession of, the company but of which someone else is the owner or lessor. “(2) Subsection (1) does not prevent a disposal: (a) in the ordinary course of the company’s business; or (b) with the written consent of the chargee, owner or lessor, as the case may be; or (c) with the leave of the Court. “(3) The Court may only give leave under paragraph (2)(c) if satisfied that arrangements have been made to protect adequately the interests of the chargee, owner or lessor, as the case may be. Administrator’s powers subject to powers of chargee, receiver etc. “442D.(1) Where section 441A applies, the administrator’s functions and powers are subject to the functions and powers of a person as: (b) a receiver or person of a kind referred to in paragraph 441A(3)(b) (even if appointed after the decision period). “(2) Where section 441C applies, then, so far as concerns perishable property of the company, the administrator’s functions and powers are subject to the functions and powers of a person as: (b) a receiver or person appointed (at any time) as mentioned in paragraph (a), (b) or (d) of the definition of ‘enforce’ in section 9. “(3) Where section 441B, 441F or 441G applies, then, so far as concerns the property referred to in subsection 441B(1), 441F(1) or 441G(1), the administrator’s functions and powers are subject to the functions and powers of the chargee, receiver or other person. Administrator has qualified privilege “442E. A person who is or has been the administrator of a company under administration has qualified privilege in respect of a statement that he or she has made, whether orally or in writing, in the course of performing or exercising any of his or her functions and powers as administrator of the company. Protection of persons dealing with administrator “442F.(1) Sections 164 and 166 apply in relation to a company under administration as if: (a) a reference in those sections to the company, or to an officer of the company, included a reference to the administrator; and (b) a reference in those sections to an assumption referred to in subsection 164(3) included a reference to an assumption that the administrator is: (i) acting within his or her functions and powers as administrator; and (ii) in particular, is complying with this Law. “(2) The effect that sections 164 and 166 have because of subsection (1) of this section is additional to, and does not prejudice, the effect that sections 164 and 166 otherwise have in relation to a company under administration. “Division 9—Administrator’s liability and indemnity for debts of administration Subdivision A—Liability General debts “443A.(1) The administrator of a company under administration is liable for debts he or she incurs, in the performance or exercise, or purported performance or exercise, of any of his or her functions and powers as administrator, for: (a) services rendered; or (b) goods bought; or (c) property hired, leased, used or occupied. “(2) Subsection (1) has effect despite any agreement to the contrary, but without prejudice to the administrator’s rights against the company or anyone else. Payments for property used or occupied by, or in the possession of, the company “443B.(1) This section applies if, under an agreement made before the administration of a company began, the company continues to use or occupy, or to be in possession of, property of which someone else is the owner or lessor. “(2) Subject to this section, the administrator is liable for so much of the rent or other amounts payable by the company under the agreement as is attributable to a period: (a) that begins more than 7 days after the administration began; and (b) throughout which: (i) the company continues to use or occupy, or to be in possession of, the property; and (ii) the administration continues. “(3) Within 7 days after the beginning of the administration, the administrator may give to the owner or lessor a notice that specifies the property and states that the company does not propose to exercise rights in relation to the property. “(4) Despite subsection (2), the administrator is not liable for so much of the rent or other amounts payable by the company under the agreement as is attributable to a period during which a notice under subsection (3) is in force, but such a notice does not affect a liability of the company. “(5) A notice under subsection (3) ceases to have effect if: (a) the administrator revokes it by writing given to the owner or lessor; or (b) the company exercises, or purports to exercise, a right in relation to the property. “(6) For the purposes of subsection (5), the company does not exercise, or purport to exercise, a right in relation to the property merely because the company continues to occupy, or to be in possession of, the property, unless the company: (a) also uses the property; or (b) asserts a right, as against the owner or lessor, so to continue. “(7) Subsection (2) does not apply in relation to so much of a period as elapses after: (a) a receiver of the property is appointed; or (b) a chargee appoints an agent, under the provisions of a charge on the property, to enter into possession, or to assume control, of the property; or (c) a chargee takes possession, or assumes control, of the property under the provisions of a charge on the property; but this subsection does not affect a liability of the company. “(8) Subsection (2) does not apply in so far as the Court, by order, excuses the administrator from liability, but an order does not affect a liability of the company. “(9) The administrator is not taken because of subsection (2): (a) to have adopted the agreement; or (b) to be liable under the agreement otherwise than as mentioned in subsection (2). Administrator not otherwise liable for company’s debts “443C. The administrator of a company under administration is not liable for the company’s debts except under section 443A or 443B. “Subdivision B—Indemnity Right of indemnity “443D. The administrator of a company under administration is entitled to be indemnified out of the company’s property for: (a) debts for which the administrator is liable under section 443A or 443B; and (b) his or her remuneration as fixed under section 449E. Right of indemnity has priority over other debts “443E.(1) Subject to section 556, a right of indemnity under section 443D has priority over: (a) all the company’s unsecured debts; and (b) subject to subsections (2) and (3) of this section, debts of the company secured by a floating charge on property of the company. “(2) Where: (a) debts of a company under administration are secured by a floating charge on property of the company; and (b) before the beginning of the administration, the chargee: (i) appointed a receiver of property of the company under a power contained in an instrument relating to the charge; or (ii) obtained an order for the appointment of a receiver of property of the company for the purpose of enforcing the charge; or (iii) entered into possession, or assumed control, of property of the company for that purpose; or (iv) appointed a person so to enter into possession or assume control (whether as agent for the chargee or for the company); and (c) the receiver or person is still in office, or the chargee is still in possession or control of the property; the right of indemnity of the administrator under section 443D does not have priority over those debts, except so far as the chargee agrees. “(3) Where: (a) debts of a company under administration are secured by a floating charge on property of the company; and (b) during the administration, the chargee, consistently with this Part: (i) appoints a receiver of property of the company under a power contained in an instrument relating to the charge; or (ii) obtains an order for the appointment of a receiver of property of the company for the purpose of enforcing the charge; or (iii) enters into possession, or assumes control, of property of the company for that purpose; or (iv) appoints a person so to enter into possession or assume control (whether as agent for the chargee or for the company); the right of indemnity of the administrator under section 443D has priority over those debts only in so far as it is a right of indemnity for debts incurred, or remuneration accruing, before written notice of the appointment, or of the entering into possession or assuming of control, as the case may be, was given to the administrator. Lien to secure indemnity “443F.(1) To secure a right of indemnity under section 443D, the administrator has a lien on the company’s property. “(2) A lien under subsection (1) has priority over a charge only in so far as the right of indemnity under section 443D has priority over debts secured by the charge. “Division 10—Execution and effect of deed of company arrangement Effect of creditors’ resolution “444A.(1) This section applies where, at a meeting convened under section 439A, a company’s creditors resolve that the company execute a deed of company arrangement. “(2) The administrator of the company is to be the administrator of the deed, unless the creditors, by resolution passed at the meeting, appoint someone else to be administrator of the deed. “(3) The administrator of the deed must prepare an instrument setting out the terms of the deed. “(4) The instrument must also specify the following: (a) the administrator of the deed; (b) the property of the company (whether or not already owned by the company when it executes the deed) that is to be available to pay creditors’ claims; (c) the nature and duration of any moratorium period for which the deed provides; (d) to what extent the company is to be released from its debts; (e) the conditions (if any) for the deed to come into operation; (f) the conditions (if any) for the deed to continue in operation; (g) the circumstances in which the deed terminates; (h) the order in which proceeds of realising the property referred to in paragraph (b) are to be distributed among creditors bound by the deed; (i) the day (not later than the day when the administration began) on or before which claims must have arisen if they are to be admissible under the deed. “(5) The instrument is taken to include the prescribed provisions, except so far as it provides otherwise. Execution of deed “444B.(1) This section applies where an instrument is prepared under section 444A. “(2) The company must execute the instrument within: (a) 21 days after the end of the meeting of creditors; or (b) such further period as the Court allows on an application made within those 21 days. “(3) The board of the company may, by resolution, authorise the instrument to be executed by or on behalf of the company. “(4) Subsection (3) has effect despite section 437C, but does not limit the functions and powers of the administrator of the company. “(5) The administrator of the deed must execute the instrument before, or as soon as practicable after, the company executes it. “(6) When executed by both the company and the deed’s administrator, the instrument becomes a deed of company arrangement. “(7) Division 12 provides for consequences of the company contravening subsection (2). Creditor etc. not to act inconsistently with deed before its execution “444C.(1) Where, at a meeting convened under section 439A, a company’s creditors resolve that the company execute a deed of company arrangement, this section applies until: (a) the deed is executed by both the company and the deed’s administrator; or (b) the period within which subsection 444B(2) requires the company to execute the deed ends; whichever happens sooner. “(2) In so far as a person would be bound by the deed if it had already been so executed, the person: (a) must not do anything inconsistent with the deed, except with the leave of the Court; and (b) is subject to section 444E. Effect of deed on creditors “444D.(1) A deed of company arrangement binds all creditors of the company, so far as concerns claims arising on or before the day specified in the deed under paragraph 444A(4)(i). “(2) Subsection (1) does not prevent a secured creditor from realising or otherwise dealing with the security, except so far as: (a) the deed so provides in relation to a secured creditor who voted in favour of the resolution of creditors because of which the company executed the deed; or (b) the Court orders under subsection 444F(2). “(3) Subsection (1) does not affect a right that an owner or lessor of property has in relation to that property, except so far as: (a) the deed so provides in relation to an owner or lessor of property who voted in favour of the resolution of creditors because of which the company executed the deed; or (b) the Court orders under subsection 444F(4). Protection of company’s property from persons bound by deed “444E.(1) Until a deed of company arrangement terminates, this section applies to a person bound by the deed. “(2) The person cannot: (a) make an application for an order to wind up the company; or (b) proceed with such an application made before the deed became binding on the person. “(3) The person cannot: (a) begin or proceed with a proceeding against the company or in relation to any of its property; or (b) begin or proceed with enforcement process in relation to property of the company; except: (c) with the leave of the Court; and (d) in accordance with such terms (if any) as the Court imposes. “(4) In subsection (3): ‘property’, in relation to the company, includes property used or occupied by, or in the possession of, the company. Court may limit rights of secured creditor or owner or lessor “444F.(1) This section applies where: (a) it is proposed that a company execute a deed of company arrangement; or (b) a company has executed such a deed. “(2) Subject to subsection 441A(3), the Court may order a secured creditor of the company not to realise or otherwise deal with the security, except as permitted by the order. “(3) The Court may only make an order under subsection (2) if satisfied that: (a) for the creditor to realise or otherwise deal with the security would have a material adverse effect on achieving the purposes of the deed; and (b) having regard to: (i) the terms of the deed; and (ii) the terms of the order; and (iii) any other relevant matter; the creditor’s interests will be adequately protected. “(4) The Court may order the owner or lessor of property that is used or occupied by, or is in the possession of, the company not to take possession of the property or otherwise recover it. “(5) The Court may only make an order under subsection (4) if satisfied that: (a) for the owner or lessor to take possession of the property or otherwise recover it would have a material adverse effect on achieving the purposes of the deed; and (b) having regard to: (i) the terms of the deed; and (ii) the terms of the order; and (iii) any other relevant matter; the interests of the owner or lessor will be adequately protected. “(6) An order under this section may be made subject to conditions. “(7) An order under this section may only be made on the application of: (a) if paragraph (1)(a) applies—the administrator of the company; or (b) if paragraph (1)(b) applies—the deed’s administrator. Effect of deed on company, officers and members “444G. A deed of company arrangement also binds: (a) the company; and (b) its officers and members; and (c) the deed’s administrator. Extent of release of company’s debts “444H. A deed of company arrangement releases the company from a debt only in so far as: (a) the deed provides for the release; and (b) the creditor concerned is bound by the deed. “Division 11—Variation, termination and avoidance of deed Variation of deed by creditors “445A. A deed of company arrangement may be varied by a resolution passed at a meeting of the company’s creditors convened under section 445F, but only if the variation is not materially different from a proposed variation set out in the notice of the meeting. Court may cancel variation “445B.(1) Where a deed of company arrangement is varied under section 445A, a creditor of the company may apply to the Court for an order cancelling the variation. “(2) On an application, the Court: (a) may make an order cancelling the variation, or confirming it, either wholly or in part, on such conditions (if any) as the order specifies; and (b) may make such other orders as it thinks appropriate. When deed terminates “445C. A deed of company arrangement terminates when: (a) the Court makes under section 445D an order terminating the deed; or (b) the company’s creditors pass a resolution terminating the deed at a meeting that was convened under section 445F by a notice setting out the proposed resolution; or (c) if the deed specifies circumstances in which it is to terminate— those circumstances exist; whichever happens first. When Court may terminate deed “445D.(1) The Court may make an order terminating a deed of company arrangement if satisfied that: (a) information about the company’s business, property, affairs or financial circumstances that: (i) was false or misleading; and (ii) can reasonably be expected to have been material to creditors of the company in deciding whether to vote in favour of the resolution that the company execute the deed; was given to the administrator of the company or to such creditors; or (b) such information was contained in a report or statement under subsection 439A(4) that accompanied a notice of the meeting at which the resolution was passed; or (c) there was an omission from such a report or statement and the omission can reasonably be expected to have been material to such creditors in so deciding; or (d) there has been a material contravention of the deed by a person bound by the deed; or (e) effect cannot be given to the deed without injustice or undue delay; or (f) the deed or a provision of it is, an act or omission done or made under the deed was, or an act or omission proposed to be so done or made would be: (i) oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more such creditors; or (ii) contrary to the interests of the creditors of the company as a whole; or (g) the deed should be terminated for some other reason. “(2) An order may be made on the application of: (a) a creditor of the company; or (b) the company; or (c) any other interested person. Creditors may terminate deed and resolve that company be wound up “445E. Where: (a) at a meeting convened under section 445F, the company’s creditors pass a resolution terminating the deed; and (b) the notice of the meeting set out a proposed resolution that the company be wound up; the creditors may also resolve at the meeting that the company be wound up. Meeting of creditors to consider proposed variation or termination of deed “445F.(1) The administrator of a deed of company arrangement: (a) may at any time convene a meeting of the company’s creditors; and (b) must convene such a meeting if so requested in writing by creditors the value of whose claims against the company is not less than 10% of the value of all the creditors’ claims against the company. “(2) A meeting under this section must be convened by the deed’s administrator: (a) giving written notice of the meeting to as many of the company’s creditors as reasonable practicable; and (ii) in each jurisdiction in which the company has its registered office or carries on business, in a daily newspaper that circulates generally in that jurisdiction; at least 5 business days before the meeting. “(3) The notice given to a creditor under paragraph (2)(a) must: (a) set out each resolution (if any) under section 445A or paragraph 445C(b) that the deed’s administrator proposes that the meeting vote on; and (b) if the meeting is convened under paragraph (1)(b) of this section—set out each proposed resolution under section 445A or paragraph 445C(b) that is set out in the request. “(4) At a meeting convened under this section, the deed’s administrator is to preside. “(5) A meeting convened under this section may be adjourned from time to time. When Court may void or validate deed “445G.(1) Where there is doubt, on a specific ground, whether a deed of company arrangement was entered into in accordance with this Part or complies with this Part, the administrator of the deed, a member or creditor of the company, or the Commission, may apply to the Court for an order under this section. “(2) On an application, the Court may make an order declaring the deed, or a provision of it, to be void or not to be void, as the case requires, on the ground specified in the application or some other ground. “(3) On an application, the Court may declare the deed, or a provision of it, to be valid, despite a contravention of a provision of this Part, if the Court is satisfied that: (a) the provision was substantially complied with; and (b) no injustice will result for anyone bound by the deed if the contravention is disregarded. “(4) Where the Court declares a provision of a deed of company arrangement to be void, the Court may by order vary the deed, but only with the consent of the deed’s administrator. Effect of termination or avoidance “445H. The termination or avoidance, in whole or in part, of a deed of company arrangement does not affect the previous operation of the deed. “Division 12—Transition to creditors’ voluntary winding up Administrator becomes liquidator in certain cases “446A.(1) This section applies if: (a) the creditors of a company under administration resolve at a particular time under paragraph 439C(c) that the company be wound up; or (b) a company under administration contravenes subsection 444B(2) at a particular time; or (c) at a meeting convened under section 445F, a company’s creditors: (i) pass a resolution terminating a deed of company arrangement executed by the company; and (ii) also resolve at a particular time under section 445E that the company be wound up. “(2) The company is taken: (a) to have passed, at the time referred to in paragraph (1)(a) or (b) or subparagraph (1)(c)(ii), as the case may be, a special resolution under section 491 that the company be wound up voluntarily; and (b) to have done so without a declaration having been made and lodged under section 494. “(3) Section 497 is taken to have been complied with in relation to the winding up. “(4) For the purposes of subsection 499(1): (a) the company is taken to have nominated: (i) if paragraph (1)(a) or (b) of this section applies—the administrator of the company; or (ii) if paragraph (1)(c) of this section applies—the administrator of the deed; to be liquidator for the purposes of the winding up; and (b) the creditors are taken not to have so nominated anyone. “(5) The liquidator must: (a) within 7 days after the day on which the company is taken to have passed the resolution, lodge a written notice stating that the company is taken because of this section to have passed such a resolution and specifying that day; and (b) cause a notice of that kind to be published, within 21 days after that day: (ii) in each jurisdiction in which the company has its registered office or carries on business, in a daily newspaper that circulates generally in that jurisdiction. “(6) Section 482 applies in relation to the winding up as if it were a winding up in insolvency or by the Court. Note: Section 482 empowers the Court to stay or terminate a winding up and give consequential directions. “(7) An application under section 482 as applying because of subsection (6) may be made: (a) despite subsection 499(4), by the company pursuant to a resolution of the board; or (b) by the liquidator; or (c) by a creditor; or (d) by a contributory. Regulations may provide for transition in other cases “446B.(1) The regulations may prescribe cases where: (a) a company under administration; or (b) a company that has executed a deed of company arrangement (even if the deed has terminated); is taken to have passed a special resolution under section 491 that the company be wound up voluntarily. “(2) The regulations may provide for Part 5.5 to apply with prescribed modifications in cases prescribed for the purposes of subsection (1). “(3) Without limiting subsection (2), the regulations may provide, in relation to such cases, for matters of a kind provided for by any of subsections 446A(2) to (7), inclusive. “(4) Regulations in force for the purposes of this section have effect accordingly. “Division 13—Powers of Court General power to make orders “447A.(1) The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company. “(2) For example, if the Court is satisfied that the administration of a company should end: (a) because the company is solvent; or (b) because provisions of this Part are being abused; or (c) for some other reason; the Court may order under subsection (1) that the administration is to end. “(3) An order may be made subject to conditions. “(4) An order may be made on the application of: (a) the company; or (b) a creditor of the company; or (c) in the case of a company under administration—the administrator of the company; or (d) in the case of a company that has executed a deed of company arrangement—the deed’s administrator; or (e) the Commission; or (f) any other interested person. Orders to protect creditors during administration “447B.(1) On the application of the Commission, the Court may make such order as it thinks necessary to protect the interests of a company’s creditors while the company is under administration. “(2) On the application of a creditor of a company, the Court may make such order as it thinks necessary to protect the creditor’s interests while the company is under administration. “(3) An order may be made subject to conditions. Court may declare whether administrator validly appointed “447C.(1) If there is doubt, on a specific ground, about whether a purported appointment of a person as administrator of a company, or of a deed of company arrangement, is valid, the person, the company or any of the company’s creditors may apply to the Court for an order under subsection (2). “(2) On an application, the Court may make an order declaring whether or not the purported appointment was valid on the ground specified in the application or on some other ground. Administrator may seek directions “447D.(1) The administrator of a company under administration, or of a deed of company arrangement, may apply to the Court for directions about a matter arising in connection with the performance or exercise of any of the administrator’s functions and powers. “(2) The administrator of a deed of company arrangement may apply to the Court for directions about a matter arising in connection with the operation of, or giving effect to, the deed. Supervision of administrator of company or deed “447E.(1) Where the Court is satisfied that the administrator of a company under administration, or of a deed of company arrangement: (a) has managed, or is managing, the company’s business, property or affairs in a way that is prejudicial to the interests of some or all of the company’s creditors or members; or (b) has done an act, or made an omission, or proposes to do an act, or to make an omission, that is or would be prejudicial to such interests; the Court may make such order as it thinks just. “(2) Where the Court is satisfied that: (a) a company is under administration but: (i) there is a vacancy in the office of administrator of the company; or (ii) no administrator of the company is acting; or (b) a deed of company arrangement has not yet terminated but: (i) there is a vacancy in the office of administrator of the deed; or (ii) no administrator of the deed is acting; the Court may make such order as it thinks just. “(3) An order may only be made on the application of the Commission or of a creditor or member of the company. Effect of Division “447F. Nothing in this Division limits the generality of anything else in it. “Division 14—Qualifications of administrators Appointee must consent “448A. A person cannot be appointed as administrator of a company or of a deed of company arrangement 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. Administrator must be registered liquidator “448B. A person must not consent to be appointed, and must not act, as administrator of a company or of a deed of company arrangement unless he or she is a registered liquidator. Disqualification of person connected with company “448C.(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, administrator of a company or of a deed of company arrangement if: (a) the person, or a body corporate in which the person is a substantial shareholder for the purposes of Part 6.7, 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 administrator or liquidator of, or as administrator of a deed of company arrangement executed 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 an officer of the company (otherwise than because of being an administrator or liquidator of, or an administrator of a deed of company arrangement executed by, a body corporate related to the company); or (d) the person is an officer of a body corporate that is a mortgagee of 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) The reference in paragraph (1)(a) to indebtedness to a body corporate does not, in relation to indebtedness of a natural person, include a reference to indebtedness of that person to a body corporate that is a prescribed corporation for the purposes of Part 4.5 where: (a) the indebtedness arose as a result of a loan made to that person by the body corporate in the ordinary course of its ordinary business; and (b) the amount of that loan was used by the person to pay the whole or part of the purchase price of premises used by the person as his or her principal place of residence. “(3) For the purposes of subsection (1), a person is taken to be an officer or auditor of a company if: (a) the person is an officer or auditor of the company or of a related body corporate; or (b) except where the Commission, if it thinks fit in the circumstances of the case, directs that this paragraph not apply in relation to the person—the person has, within the last 2 years, been an officer, auditor or promoter of the company or of a related body corporate. Disqualification of insolvent under administration “448D. A person must not consent to be appointed, and must not act, as administrator of a company or of a deed of company arrangement if he or she is an insolvent under administration. “Division 15—Removal, replacement and remuneration of administrator Appointment of administrator cannot be revoked “449A. The appointment of a person as administrator of a company or of a deed of company arrangement cannot be revoked. Court may remove administrator “449B. On the application of the Commission or of a creditor of the company concerned, the Court may: (a) remove from office the administrator of a company under administration or of a deed of company arrangement; and (b) appoint someone else as administrator of the company or deed. Vacancy in office of administrator of company “449C.(1) Where the administrator of a company under administration: (a) dies; or (b) becomes prohibited from acting as administrator of the company; or (c) resigns by notice in writing given to his or her appointer and to the company; his or her appointer may appoint someone else as administrator of the company. “(2) In subsection (1): ‘appointer’, in relation to the administrator of a company under administration, means: (a) if the administrator was appointed by the Court under section 449B or subsection (6) of this section—the Court; or (b) otherwise: (i) if the administration began because of an appointment under section 436A—the company; or (ii) if the administration began because of an appointment under section 436B—a liquidator or provisional liquidator of the company; or (iii) if the administration began because of an appointment under section 436C—a person who is entitled, or would apart from section 440B or 441D be entitled, to enforce the charge. “(3) An appointment under subsection (1) by the company under administration must be made pursuant to a resolution of the board. “(4) Within 5 business days after being appointed under subsection (1) as administrator of a company otherwise than by the Court, a person must convene a meeting of the company’s creditors so that they may: (a) determine whether to remove the person from office; and (b) if so, appoint someone else as administrator of the company. “(5) A person must convene a meeting under subsection (4) by: (ii) in each jurisdiction in which the company has its registered office or carries on business, in a daily newspaper that circulates generally in that jurisdiction; at least 2 business days before the meeting. “(6) Where a company is under administration, but for some reason no administrator is acting, the Court may appoint a person as administrator on the application of the Commission or of an officer, member or creditor of the company. “(7) Subsections (3) and (6) have effect despite section 437C. Vacancy in office of administrator of deed of company arrangement “449D.(1) Where the administrator of a deed of company arrangement: (a) dies; or (b) becomes prohibited from acting as administrator of the deed; or (c) resigns by notice in writing given to the company; the Court may appoint someone else as administrator of the deed. “(2) Where a deed of company arrangement has not yet terminated, but for some reason no administrator of the deed is acting, the Court may appoint a person as administrator of the deed. “(3) An appointment may be made on the application of the Commission or of an officer, member or creditor of the company. Remuneration of administrator “449E.(1) The administrator of a company under administration, or of a deed of company arrangement, is entitled to: (a) such remuneration as is fixed by a resolution of the company’s creditors passed at a meeting convened under section 439A, or under section 439A or 445F, as the case may be; or (b) if no remuneration is so fixed—such remuneration as the Court fixes on the application of the administrator. “(2) Where remuneration is fixed under paragraph (1)(a), the Court may, on the application of the administrator or of an officer, member or creditor of the company: (a) review the remuneration; and (b) confirm, increase or reduce it. “(3) Subsection (2) has effect despite section 437C. “Division 16—Notices about steps taken under Part Appointment of administrator “450A.(1) Where an administrator of a company is appointed under section 436A, 436B or 436C, the administrator must: (a) lodge a notice of the appointment before the end of the next business day after the appointment; and (b) cause such a notice to be published, within 3 business days after the appointment: (ii) in each jurisdiction in which the company has its registered office or carries on business, in a daily newspaper that circulates generally in that jurisdiction. “(2) As soon as practicable, and in any event before the end of the next business day, after appointing an administrator of a company under section 436C, a person must give to the company a written notice of the appointment. “(3) As soon as practicable, and in any event before the end of the next business day, after an administrator of a company is appointed under section 436A, 436B or 436C, he or she must give a written notice of the appointment to: (a) each person who holds a charge on the whole, or substantially the whole, of the company’s property; and (b) each person who holds 2 or more charges on property of the company where the property of the company subject to the respective charges together constitutes the whole, or substantially the whole, of the company’s property. “(4) An administrator need not give a notice under subsection (3) to the person who appointed the administrator. Execution of deed of company arrangement “450B. As soon as practicable after a deed of company arrangement is executed, the deed’s administrator must: (a) send to each creditor of the company a written notice of the execution of the deed; and (b) cause such a notice to be published: (ii) in each jurisdiction in which the company has its registered office or carries on business, in a daily newspaper that circulates generally in that jurisdiction; and (c) lodge a copy of the deed. Failure to execute deed of company arrangement “450C. As soon as practicable after a company contravenes subsection 444B(2), the deed’s administrator must: (a) lodge a notice that the company has failed to execute the instrument within the required period; and (b) cause a notice of the failure to be published as prescribed. Termination of deed of company arrangement “450D. Where a deed of company arrangement terminates because of paragraph 445C(b), the deed’s administrator must: (a) lodge a notice of the termination; and (b) send such a notice to each of the company’s creditors; and (c) cause such a notice to be published as prescribed. Notice in public documents etc. of company “450E.(1) A company under administration must set out, in every public document, and in every eligible negotiable instrument, of the company, after the company’s name where it first appears, the expression ‘(administrator appointed)’. “(2) Until a deed of company arrangement terminates, the company must set out, in every public document, and in every eligible negotiable instrument, of the company, after the company’s name where it first appears, the expression ‘(subject to deed of company arrangement)’. Effect of contravention of this Division “450F. A contravention of this Division does not affect the validity of anything done or omitted under this Part, except so far as the Court otherwise orders. “Division 17—Miscellaneous Appointment of 2 or more administrators of company “451A.(1) Where a provision of this Law provides for an administrator of a company to be appointed, 2 or more persons may be appointed as administrators of the company. “(2) Where, because of subsection (1), there are 2 or more administrators of a company: (a) a function or power of an administrator of the company may be performed or exercised by any one of them, or by any 2 or more of them together, except so far as the instrument or resolution appointing them otherwise provides; and (b) a reference in this Law to an administrator, or to the administrator, of a company is, in the case of the first-mentioned company, a reference to whichever one or more of those administrators the case requires. Appointment of 2 or more administrators of deed of company arrangement “451B.(1) Where a provision of this Law provides for an administrator of a deed of company arrangement to be appointed, 2 or more persons may be appointed as administrators of the deed. “(2) Where, because of subsection (1), there are 2 or more administrators of a deed of company arrangement: (a) a function or power of an administrator of the deed may be performed or exercised by any one of them, or by any 2 or more of them together, except so far as the deed, or the resolution or instrument appointing them, otherwise provides; and (b) a reference in this Law to an administrator, or to the administrator, of a deed of company arrangement is, in the case of the first-mentioned deed, a reference to whichever one or more of those administrators the case requires. Effect of things done during administration of company “451C. A payment made, transaction entered into, or any other act or thing done, in good faith, by, or with the consent of, the administrator of a company under administration: (a) is valid and effectual for the purposes of this Law; and (b) is not liable to be set aside in a winding up of the company. Time for doing act does not run while act prevented by this Part “451D. Where: (a) for any purpose (for example, the purposes of a law, agreement or instrument) an act must or may be done within a particular period or before a particular time; and (b) this Part prevents the act from being done within that period or before that time; the period is extended, or the time is deferred, because of this section, according to how long this Part prevented the act from being done.”. 57. The respective headings to Part 5.4 of the Corporations Law, and to Division 1 of that Part, are repealed and the following Part and heading are substituted: “PART 5.4—WINDING UP IN INSOLVENCY “Division 1—When company to be wound up in insolvency Order that insolvent company be wound up in insolvency “459A. On an application under section 459P, the Court may order that an insolvent company be wound up in insolvency. Order made on application under section 260, 462 or 464 “459B. Where, on an application under section 260, 462 or 464, the Court is satisfied that the company is insolvent, the Court may order that the company be wound up in insolvency. Presumptions to be made in certain proceedings “459C.(1) This section has effect for the purposes of: (a) an application under section 260, 459P, 462 or 464; or (b) an application for leave to make an application under section 459P. “(2) The Court must presume that the company is insolvent if, during or after the 3 months ending on the day when the application was made: (a) the company failed (as defined by section 459F) to comply with a statutory demand; or (b) execution or other process issued on a judgment, decree or order of an Australian court in favour of a creditor of the company was returned wholly or partly unsatisfied; or (c) a receiver, or receiver and manager, of property of the company was appointed under a power contained in an instrument relating to a floating charge on such property; or (d) an order was made for the appointment of such a receiver, or receiver and manager, for the purpose of enforcing such a charge; or (e) a person entered into possession, or assumed control, of such property for such a purpose; or (f) a person was appointed so to enter into possession or assume control (whether as agent for the chargee or for the company). “(3) A presumption for which this section provides operates except so far as the contrary is proved for the purposes of the application. Contingent or prospective liability relevant to whether company solvent “459D.(1) In determining, for the purposes of an application of a kind referred to in subsection 459C(1), whether or not the company is solvent, the Court may take into account a contingent or prospective liability of the company. “(2) Subsection (1) does not limit the matters that may be taken into account in determining, for a particular purpose, whether or not a company is solvent. “Division 2—Statutory demand Creditor may serve statutory demand on company “459E.(1) A person may serve on a company a demand relating to: (a) a single debt that the company owes to the person, that is due and payable and whose amount is at least the statutory minimum; or (b) 2 or more debts that the company owes to the person, that are due and payable and whose amounts total at least the statutory minimum. “(2) The demand: (a) if it relates to a single debt—must specify the debt and its amount; and (b) if it relates to 2 or more debts—must specify the total of the amounts of the debts; and (c) must require the company to pay the amount of the debt, or the total of the amounts of the debts, or to secure or compound for that amount or total to the creditor’s reasonable satisfaction, within 21 days after the demand is served on the company; and (d) must be in writing; and (e) must be in the prescribed form (if any); and (f) must be signed by or on behalf of the creditor. “(3) Unless the debt, or each of the debts, is a judgment debt, the demand must be accompanied by an affidavit that: (a) verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and (b) complies with the rules. “(4) A person may make a demand under this section relating to a debt even if the debt is owed to the person as assignee. When company taken to fail to comply with statutory demand “459F.(1) If, as at the end of the period for compliance with a statutory demand, the demand is still in effect and the company has not complied with it, the company is taken to fail to comply with the demand at the end of that period. “(2) The period for compliance with a statutory demand is: (a) if the company applies in accordance with section 459G for an order setting aside the demand: (i) if, on hearing the application under section 459G, or on an application by the company under this paragraph, the Court makes an order that extends the period for compliance with the demand—the period specified in the order, or in the last such order, as the case requires, as the period for such compliance; or (ii) otherwise—the period beginning on the day when the demand is served and ending 7 days after the application under section 459G is finally determined or otherwise disposed of; or (b) otherwise—21 days after the demand is served. “Division 3—Application to set aside statutory demand Company may apply “459G.(1) A company may apply to the Court for an order setting aside a statutory demand served on the company. “(2) An application may only be made within 21 days after the demand is so served. “(3) An application is made in accordance with this section only if, within those 21 days: (a) an affidavit supporting the application is filed with the Court; and (b) a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company. Determination of application where there is a dispute or offsetting claim “459H.(1) This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following: (a) that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates; (b) that the company has an offsetting claim. “(2) The Court must calculate the substantiated amount of the demand in accordance with the formula:  ‘Admitted total’ means: (a) the admitted amount of the debt: or (b) the total of the respective admitted amounts of the debts; as the case requires, to which the demand relates; ‘Offsetting total’ means: (a) if the Court is satisfied that the company has only one offsetting claim—the amount of that claim; or (b) if the Court is satisfied that the company has 2 or more offsetting claims—the total of the amounts of those claims; or (c) otherwise—a nil amount. “(3) If the substantiated amount is less than the statutory minimum, the Court must, by order, set aside the demand. “(4) If the substantiated amount is at least as great as the statutory minimum, the Court may make an order: (a) varying the demand as specified in the order; and (b) declaring the demand to have had effect, as so varied, as from when the demand was served on the company. “(5) In this section: ‘admitted amount’, in relation to a debt, means: (a) if the Court is satisfied that there is a genuine dispute between the company and the respondent about the existence of the debt—a nil amount; or (b) if the Court is satisfied that there is a genuine dispute between the company and the respondent about the amount of the debt—so much of that amount as the Court is satisfied is not the subject of such a dispute; or (c) otherwise—the amount of the debt; ‘offsetting claim’ means a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates); ‘respondent’ means the person who served the demand on the company. “(6) This section has effect subject to section 459J. Setting aside demand on other grounds “459J.(1) On an application under section 459G, the Court may by order set aside the demand if it is satisfied that: (a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or (b) there is some other reason why the demand should be set aside. “(2) Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect. Effect of order setting aside demand “459K. A statutory demand has no effect while there is in force under section 459H or 459J an order setting aside the demand. Dismissal of application “459L. Unless the Court makes, on an application under section 459J, an order under section 459H or 459J, the Court is to dismiss the application. Order subject to conditions “459M. An order under section 459H or 459J may be made subject to conditions. Costs where company successful “459N. Where, on an application under section 459G, the Court sets aside the demand, it may order the person who served the demand to pay the company’s costs in relation to the application. “Division 4—Application for order to wind up company in insolvency Who may apply for order under section 459A “459P.(1) Any one or more of the following may apply to the Court for a company to be wound up in insolvency: (a) the company; (b) a creditor (even if the creditor is a secured creditor or is only a contingent or prospective creditor); (c) a contributory; (d) a director; (e) a liquidator or provisional liquidator of the company; (f) the Commission; (g) a prescribed agency. “(2) An application by any of the following, or by persons including any of the following, may only be made with the leave of the Court: (a) a person who is a creditor only because of a contingent or prospective debt; (b) a contributory; (c) a director; (d) the Commission. “(3) The Court may give leave if satisfied that there is a prima facie case that the company is insolvent, but not otherwise. “(4) The Court may give leave subject to conditions. “(5) Except as permitted by this section, a person cannot apply for a company to be wound up in insolvency. Application relying on failure to comply with statutory demand “459Q. If an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the application: (a) must set out particulars of service of the demand on the company and of the failure to comply with the demand; and (b) must have attached to it: (i) a copy of the demand; and (ii) if the demand has been varied by an order under subsection 459H(4)—a copy of the order; and (c) unless the debt, or each of the debts, to which the demand relates is a judgment debt—must be accompanied by an affidavit that: (i) verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and (ii) complies with the rules. Period within which application must be determined “459R.(1) An application for a company to be wound up in insolvency is to be determined within 6 months after it is made. “(2) The Court may by order extend the period within which an application must be determined, but only if: (a) the Court is satisfied that special circumstances justify the extension; and (b) the order is made within that period as prescribed by subsection (1), or as last extended under this subsection, as the case requires. “(3) An application is, because of this subsection, dismissed if it is not determined as required by this section. “(4) An order under subsection (2) may be made subject to conditions. Company may not oppose application on certain grounds “459S.(1) In so far as an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the company may not, without the leave of the Court, oppose the application on a ground: (a) that the company relied on for the purposes of an application by it for the demand to be set aside; or (b) that the company could have so relied on, but did not so rely on (whether it made such an application or not). “(2) The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent. Application to wind up joint debtors in insolvency “459T.(1) A single application may be made for 2 or more companies to be wound up in insolvency if they are joint debtors, whether partners or not. “(2) On such an application, the Court may order that one or more of the companies be wound up in insolvency, even if it dismisses the application in so far as it relates to another or others. “PART 5.4A—WINDING UP BY THE COURT ON OTHER GROUNDS”. Repeal of section 460 58. Section 460 of the Corporations Law is repealed. General grounds on which company may be wound up by Court 59. Section 461 of the Corporations Law is amended by inserting in paragraph (d) “or of a recognised company” after “another company”. Standing to apply for winding up 60. Section 462 of the Corporations Law is amended: (a) by inserting before subsection (2) the following subsection: “(1) A reference in this section to an order to wind up a company is a reference to an order to wind up the company on a ground provided for by section 461.”; (b) by omitting from subsection (2) “on a ground provided for by subsection 460(1) or section 461”; (c) by omitting from paragraph (2)(e) “or 453;” and substituting “; or”; (d) by omitting paragraphs (2)(f) and (g). Repeal of section 463 61. Section 463 of the Corporations Law is repealed. 62. Section 465 of the Corporations Law is repealed and the following headings and sections are substituted: “PART 5.4B—WINDING UP IN INSOLVENCY OR BY THE COURT “Division 1—General Notice of application “465A. A person who applies under section 459P, 462 or 464 for a company to be wound up must: (a) lodge notice in the prescribed form that the application has been made; and (b) within 14 days after the application is made, serve a copy of it on the company; and (c) advertise the application as prescribed by the rules. Substitution of applicants “465B.(1) The Court may by order substitute, as applicant or applicants in an application under section 459P, 462 or 464 for a company to be wound up, a person or persons who might otherwise have so applied for the company to be wound up. “(2) The Court may only make an order if the Court thinks it appropriate to do so: (a) because the application is not being proceeded with diligently enough; or (b) for some other reason. “(3) The substituted applicant may be, or the substituted applicants may be or include, the person who was the applicant, or any of the persons who were the applicants, before the substitution. “(4) After an order is made, the application may proceed as if the substituted applicant or applicants had been the original applicant or applicants. Applicant to be given notice of grounds for opposing application “465C. On the hearing of an application under section 459P, 462 or 464, a person may not, without the leave of the Court, oppose the application unless, within the period prescribed by the rules, the person has filed, and served on the applicant: (a) notice of the grounds on which the person opposes the application; and (b) an affidavit verifying the matters stated in the notice.”. Court’s powers on hearing application 63. Section 467 of the Corporations Law is amended: (a) by inserting in subsection (1) “and section 467A” after “(2)”; (b) by omitting from paragraph (1)(a) “costs;” and substituting “costs, even if a ground has been proved on which the Court may order the company to be wound up on the application; or”; (c) by omitting from subsection (5) “a person referred to in paragraph 462(2)(c)” and substituting “a contributory”. 64. After section 467 of the Corporations Law the following sections are inserted: Effect of defect or irregularity on application under Part 5.4 or 5.4A “467A. An application under Part 5.4 or 5.4A must not be dismissed merely because of one or more of the following: (a) in any case—a defect or irregularity in connection with the application; (b) in the case of an application for a company to be wound up in insolvency—a defect in a statutory demand; unless the Court is satisfied that substantial injustice has been caused that cannot otherwise be remedied (for example, by an adjournment or an order for costs). Court may order winding up of company that is being wound up voluntarily “467B. The Court may make an order under section 260, 459A, 459B or 461 even if the company is already being wound up voluntarily.”. Avoidance of dispositions of property, attachments etc. 65. Section 468 of the Corporations Law is amended by omitting paragraph (2)(a) and substituting the following paragraphs: “(a) a disposition made by the liquidator, or by a provisional liquidator, of the company pursuant to a power conferred on him or her by: (i) this Law; or, (ii) rules of the Court that appointed him or her; or (iii) an order of the Court; or (k) a disposition made in good faith by, or with the consent of, an administrator of the company; or (l) a disposition under a deed of company arrangement executed by the company; or”. Insertion of Division heading 66. After section 470 of the Corporations Law the following heading is inserted: “Division 1A—Effect of winding up order”. Effect on creditors and contributories 67. Section 471 of the Corporations Law is amended by omitting subsection (2). 68. After section 471 of the Corporations Law the following sections are inserted in Division 1A of Part 5.4B: Powers of other officers suspended during winding up “471A.(1) While a company is being wound up in insolvency or by the Court, a person cannot perform or exercise, and must not purport to perform or exercise, a function or power as an officer of the company, except: (a) as a liquidator appointed for the purposes of the winding up; or (b) as an administrator appointed for the purposes of an administration of the company beginning after the winding up order was made; or (c) with the liquidator’s written approval; or (d) with the approval of the Court. “(2) While a provisional liquidator of a company is acting, a person cannot perform or exercise, and must not purport to perform or exercise, a function or power as an officer of the company, except: (a) as a provisional liquidator of the company; or (b) as an administrator appointed for the purposes of an administration of the company beginning after the provisional liquidator was appointed; or (c) with the provisional liquidator’s written approval; or (d) with the approval of the Court. “(3) This section does not remove an officer of a company from office. “(4) For the purposes of this section, a person is not an officer of a company merely because he or she is: (a) a receiver and manager, appointed under a power contained in an instrument, of property of the company; or (b) an employee of the company. Stay of proceedings and suspension of enforcement process “471B. While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with: (a) a proceeding in a court against the company or in relation to property of the company; or (b) enforcement process in relation to such property; except with the leave of the Court and in accordance with such terms (if any) as the Court imposes. Secured creditor’s rights not affected “471C. Nothing in section 471A or 471B affects a secured creditor’s right to realise or otherwise deal with the security.”. Court to appoint official liquidator 69. Section 472 of the Corporations Law is amended by adding at the end the following subsections: “(4) A liquidator of a company appointed provisionally also has: (a) power to carry on the company’s business; and (b) the powers that a liquidator of the company would have under paragraph 477(1)(d), subsection 477(2) (except paragraph 477(2)(m)) and subsection 477(3) if the company were being wound up in insolvency or by the Court. “(5) Subsections 477(2A) and (2B) apply in relation to a company’s provisional liquidator, with such modifications (if any) as the circumstances require, as if he or she were a liquidator appointed for the purposes of a winding up in insolvency or by the Court. “(6) The exercise by a company’s provisional liquidator of the powers conferred by subsection (4) is subject to the control of the Court, and a creditor or contributory, or the Commission, may apply to the Court in relation to the exercise or proposed exercise of any of those powers.”. General provisions about liquidators 70. Section 473 of the Corporations Law is amended by omitting subparagraph (3)(b)(i) and substituting the following subparagraph: “(i) by resolution of the creditors; or”. Custody and vesting of company’s property 71. Section 474 of the Corporations Law is amended by omitting from subsection (1) everything before “appointed” and substituting “If a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company has been”. References to liquidator in certain provisions to include references to provisional liquidator 72. Sections 475, 536, 537, 538, 539 and 540 of the Corporations Law are each amended by inserting before subsection (1) the following subsection: “(1A) In this section: ‘liquidator’ includes a provisional liquidator.”. Powers of liquidator 73. Section 477 of the Corporations Law is amended: (a) by omitting from subsection (1) everything before paragraph (1)(a) and substituting “Subject to this section, a liquidator of a company may:”; (b) by omitting from subsection (2) “The liquidator” and substituting “Subject to this section, a liquidator of a company”; (c) by inserting after paragraph (2)(c) the following paragraph: “(ca) exercise the Court’s powers under subsection 483(3) (except paragraph 483(3)(b)) in relation to calls on contributories;”; (d) by omitting paragraph (2)(j); (e) by inserting after subsection (2) the following subsections: “(2A) Except with the approval of the Court, of the committee of inspection or of a resolution of the creditors, a liquidator of a company must not compromise a debt to the company if the amount claimed by the company is more than: (a) if an amount greater than $20,000 is prescribed—the prescribed amount; or (b) otherwise—$20,000. “(2B) Except with the approval of the Court, of the committee of inspection or of a resolution of the creditors, a liquidator of a company must not enter into an agreement on the company’s behalf (for example, but without limitation, a lease or a charge) if: (a) without limiting paragraph (b), the term of the agreement may end; or (b) obligations of a party to the agreement may, according to the terms of the agreement, be discharged by performance; more than 3 months after the agreement is entered into, even if the term may end, or the obligations may be discharged, within those 3 months.”; (f) by omitting subsection (4); (g) by inserting in subsection (6) “, or the Commission,” after “contributory”. Application of property; list of contributories 74. Section 478 of the Corporations Law is amended by omitting subsections (1) and (2) and substituting the following subsections: “(1) As soon as practicable after the Court orders that a company be wound up, the liquidator must: (a) cause the company’s property to be collected and applied in discharging the company’s liabilities; and (b) consider whether subsection (1A) requires him or her to settle a list of contributories. “(1A) A liquidator of a company that is being wound up in insolvency or by the Court must settle a list of contributories if it appears to him or her likely that: (a) either: (i) there are persons liable as members or past members to contribute to the company’s property on the winding up; or (ii) there will be a surplus available for distribution; and (b) it will be necessary: (i) to make calls on contributories; or (ii) to adjust the rights of the contributories among themselves. “(1B) A liquidator of such a company may rectify the register of members so far as required under this Part.”. Orders for release or dissolution 75. Section 481 of the Corporations Law is amended by omitting from paragraph (1)(a) “557” and substituting “539”. Delivery of property to liquidator 76. Section 483 of the Corporations Law is amended by omitting from paragraph (3)(b) “so made” and substituting “made by the Court or the company’s liquidator”. 77. After section 486 of the Corporations Law the following sections are inserted: Court may make order to prevent officer or related entity from avoiding liability to company “486A.(1) On the application of a liquidator or provisional liquidator of a company, the Court may make one or more of the following: (a) an order prohibiting, either absolutely or subject to conditions, an officer or related entity of the company from taking or sending out of this jurisdiction or out of Australia money or other property of the company or of the officer or related entity; (b) an order appointing: (i) a receiver or trustee, with specified powers, of property of an officer of the company, or of property of a related entity of the company that is a natural person; or (ii) a receiver, or a receiver and manager, with specified powers, of property of a related entity of the company that is not a natural person; (c) an order requiring an officer of the company, or a related entity of the company that is a natural person, to surrender to the Court his or her passport and any other specified documents; (d) an order prohibiting an officer of the company, or a related entity of the company that is a natural person, from leaving Australia without the Court’s consent. “(2) The Court may only make an order under subsection (1) if: (a) the company is being wound up in insolvency or by the Court, or an application has been made for the company to be so wound up; and (b) the Court is satisfied that there is at least a prima facie case that the officer or related entity is or will become liable: (i) to pay money to the company, whether in respect of a debt, by way of damages or compensation or otherwise; or (ii) to account for property of the company; and (c) the Court is also satisfied that there is substantial evidence that the officer or related entity: (i) has concealed or removed money or other property, has tried to do so, or intends to do so; or (ii) has tried to leave Australia, or intends to do so; in order to avoid that liability or its consequences; and (d) the Court thinks it necessary or desirable to make the order in order to protect the company’s rights against the officer or related entity. “(3) On hearing an application under subsection (1), the Court must have regard to any relevant application under section 1323. “(4) Before considering an application under subsection (1), the Court may, if in the Court’s opinion it is desirable to do so, grant an interim order of the kind applied for that is expressed to have effect until the application is determined. “(5) The Court must not require an applicant under subsection (1) or any other person, as a condition of granting an interim order under subsection (4), to give an undertaking as to damages. “(6) On the application of a person who applied for, or is affected by, an order under this section, the Court may make a further order discharging or varying the first-mentioned order. “(7) An order under subsection (1) may be expressed to operate for a specified period or until it is discharged by a further order. “(8) A person must not contravene an order under this section that is applicable to the person. “(9) This section has effect subject to the Bankruptcy Act 1966. “(10) Nothing in this section affects any other powers of the Court. Warrant to arrest person who is absconding, or who has dealt with property or books, in order to avoid obligations in connection with winding up “486B.(1) The Court may issue a warrant for a person to be arrested and brought before the Court if: (a) a company is being wound up in insolvency or by the Court, or an application has been made for a company to be so wound up; and (b) the Court is satisfied that the person: (i) is about to leave Australia in order to avoid: (A) paying money payable to the company; or (B) being examined about the company’s affairs; or (C) complying with an order of the Court, or some other obligation, under this Chapter in connection with the winding up; or (ii) has concealed or removed property of the company in order to prevent or delay the taking of the property into the liquidator’s custody or control; or (iii) has destroyed, concealed or removed books of the company or is about to do so. “(2) A warrant under subsection (1) may also provide for property or books of the company in the person’s possession to be seized and delivered into the custody of a specified person. “(3) A warrant under subsection (1) may only be issued on the application of: (a) a liquidator or provisional liquidator of the company; or (b) the Commission.”. Delegation to liquidator of certain powers of Court 78. Section 488 of the Corporations Law is amended: (a) by omitting from paragraph (1)(c) “the making of calls and”; (b) by omitting subsection (2) and substituting the following subsection: “(2) Despite anything in rules or regulations made for the purposes of subsection (1), a liquidator may distribute a surplus only with the Court’s special leave.”. 79. Section 490 of the Corporations Law is repealed and the following section is substituted: When company cannot wind up voluntarily “490\. Except with the leave of the Court, a company cannot resolve that it be wound up voluntarily if: (a) an application for the company to be wound up in insolvency has been filed; or (b) the Court has ordered that the company be wound up in insolvency, whether or not the order was made on such an application.”. Repeal of section 492 80. Section 492 of the Corporations Law is repealed. Duty of liquidator where company turns out to be insolvent 81. Section 496 of the Corporations Law is amended by omitting from subsection (1) “shall as soon as practicable convene a meeting of the creditors.” and substituting the following: “must do one of the following as soon as practicable: (a) apply under section 459P for the company to be wound up in insolvency; (b) appoint an administrator of the company under section 436B; (c) convene a meeting of the company’s creditors; and if he or she convenes such a meeting, the following subsections apply.”. Powers and duties of liquidator 82. Section 506 of the Corporations Law is amended: (a) by omitting paragraphs (1)(a) and (b) and substituting the following paragraph: “(b) exercise any of the powers that this Law confers on a liquidator in a winding up in insolvency or by the Court;”; (b) by omitting paragraph (1)(d) and substituting the following paragraph: “(d) exercise the Court’s powers under subsection 483(3) (except paragraph 483(3)(b)) in relation to calls on contributories;”; (c) by inserting after subsection (1) the following subsection: “(1A) Subsections 477(2A) and (2B) apply in relation to the liquidator as if: (a) he or she were a liquidator in a winding up in insolvency or by the Court; and (b) in the case of a members’ voluntary winding up—a reference in those subsections to an approval were a reference to the approval of a special resolution of the company.”. Arrangement: when binding on creditors 83. Section 510 of the Corporations Law is amended by omitting paragraph (1)(b) and substituting the following paragraph: “(b) binding on the creditors if sanctioned by a resolution of the creditors.”. Application of Part 84. Section 513 of the Corporations Law is amended by inserting “in insolvency,” after “whether”. 85. After section 513 of the Corporations Law the following Division is inserted: “Division 1A—When winding up taken to begin Winding up ordered by the Court “513A. If the Court orders under section 260, 459A, 459B or 461 that a company be wound up, the winding up is taken to have begun or commenced: (a) if, when the order was made, a winding up of the company was already in progress—when the last-mentioned winding up is taken because of this Division to have begun or commenced; or (b) if, immediately before the order was made, the company was under administration—on the section 513C day in relation to the administration; or (c) if: (i) when the order was made, a provisional liquidator of the company was acting; and (ii) immediately before the provisional liquidator was appointed, the company was under administration; on the section 513C day in relation to the administration; or (d) if, immediately before the order was made, a deed of company arrangement had been executed by the company and had not yet terminated—on the section 513C day in relation to the administration that ended when the deed was executed; or (e) otherwise—on the day when the order was made. Voluntary winding up “513B. Where a company resolves by special resolution that it be wound up voluntarily, the winding up is taken to have begun or commenced: (a) if, when the resolution was passed, a winding up of the company was already in progress—when the last-mentioned winding up is taken because of this Division to have begun or commenced; or (b) if, immediately before the resolution was passed, the company was under administration—on the section 513C day in relation to the administration; or (c) if, immediately before the resolution was passed, a deed of company arrangement had been executed by the company but had not yet terminated—on the section 513C day in relation to the administration that ended when the deed was executed; or (d) if the resolution is taken to have been passed because, at a meeting convened under section 445F, the company’s creditors: (i) passed a resolution terminating a deed of company arrangement executed by the company; and (ii) also resolved under section 445E that the company be wound up; on the section 513C day in relation to the administration that ended when the deed was executed; (e) otherwise—on the day on which the resolution was passed. Section 513C day in relation to an administration under Part 5.3A “513C. The section 513C day in relation to the administration of a company is: (a) if, when the administration began, a winding up of the company was in progress—the day on which the winding up is taken because of this Division to have begun; or (b) otherwise—the day on which the administration began. Validity of proceedings in earlier winding up “513D. Where, at the time when: (a) the Court orders under section 260, 459A, 459B or 461 that a company be wound up; or (b) a company resolves by special resolution that it be wound up voluntarily; a winding up of the company is already in progress, all proceedings in the last-mentioned winding up are taken to have been valid, except so far as the Court otherwise orders because fraud or mistake has been proved.”. Repeal of section 525 86. Section 525 of the Corporations Law is repealed. 87. Before section 531 of the Corporations Law the following sections are inserted in Division 3 of Part 5.6: Officers to help liquidator “530A.(1) As soon as practicable after the Court orders that a company be wound up or appoints a provisional liquidator of a company, or a company resolves that it be wound up, each officer of the company must: (a) deliver to the liquidator appointed for the purposes of the winding up, or to the provisional liquidator, as the case may be, all books in the officer’s possession that relate to the company, other than books possession of which the officer is entitled, as against the company and the liquidator or provisional liquidator, to retain; and (b) if the officer knows where other books relating to the company are—tell the liquidator or provisional liquidator where those books are. “(2) Where a company is being wound up, or a provisional liquidator of a company is acting, an officer of the company must: (a) attend on the liquidator or provisional liquidator at such times; and (b) give the liquidator or provisional liquidator such information about the company’s business, property, affairs and financial circumstances; and (c) attend such meetings of the company’s creditors or members; as the liquidator or provisional liquidator reasonably requires. “(3) An officer of a company that is being wound up must do whatever the liquidator reasonably requires the officer to do to help in the winding up. “(4) An officer of a company must do whatever a provisional liquidator of the company reasonably requires the officer to do to help in the performance or exercise of any of the provisional liquidator’s functions and powers. “(5) The liquidator or provisional liquidator of a company may require an officer of the company: (a) to tell the liquidator the officer’s residential address and work or business address; or (b) to keep the liquidator informed of any change in either of those addresses that happens during the winding up. “(6) A person must not, without reasonable excuse, fail to comply with subsection (1), (2), (3) or (4), or with a requirement under subsection (5). “(7) In this section: ‘officer’, in relation to a company, means a person who is, or has been but is no longer, an officer (as defined by section 82A) of the company. “(8) However, a person is not an officer of a company for the purposes of this section merely because he or she is or has been an employee of the company. “(9) Nothing in this section limits the generality of anything else in it. Liquidator’s rights to company’s books “530B.(1) A person is not entitled, as against the liquidator of a company: (a) to retain possession of books of the company; or (b) to claim or enforce a lien on such books; but such a lien is not otherwise prejudiced. “(2) Paragraph (1)(a) does not apply in relation to books of which a secured creditor of the company is entitled to possession otherwise than because of a lien, but the liquidator is entitled to inspect, and make copies of, such books at any reasonable time. “(3) A person must not hinder or obstruct a liquidator of a company in obtaining possession of books of the company, unless the person is entitled, as against the company and the liquidator, to retain possession of the books. “(4) The liquidator of a company may give to a person a written notice requiring the person to deliver to the liquidator, as specified in the notice, books so specified that are in the person’s possession. “(5) A notice under subsection (4) must specify a period of at least 3 days as the period within which the notice must be complied with. “(6) A person must comply with a notice under subsection (4) except so far as the person is entitled, as against the company and the liquidator, to retain possession of the books. “(7) In this section: ‘liquidator’ includes a provisional liquidator. Warrant to search for, and seize, company’s property or books “530C.(1) The Court may issue a warrant under subsection (2) if: (a) a company is being wound up or a provisional liquidator of a company is acting; and (b) on application by the liquidator or provisional liquidator, as the case may be, by the Commission, the Court is satisfied that a person: (i) has concealed or removed property of the company with the result that the taking of the property into the custody or control of the liquidator or provisional liquidator will be prevented or delayed; or (ii) has concealed, destroyed or removed books of the company or is about to do so. “(2) The warrant may authorise a specified person, with such help as is reasonably necessary: (a) to search for and seize property or books of the company in the possession of the person referred to in subsection (1); and (b) to deliver, as specified in the warrant, property or books seized under it. “(3) In order to seize property or books under the warrant, the specified person may break open a building, room or receptacle where the property is or the books are, or where the person reasonably believes the property or books to be. “(4) A person who has custody of property or a book because of the execution of the warrant must retain it until the Court makes an order for its disposal.”. Books to be kept by liquidator 88. Section 531 of the Corporations Law is amended by inserting “or provisional liquidator” after “liquidator”. Disqualification of liquidator 89. Section 532 of the Corporations Law is amended: (a) by inserting before subsection (1) the following subsection: “(1A) In this section: ‘liquidator’ includes a provisional liquidator.”; (b) by omitting from subsection (5) “carried by a majority of the creditors in number and value present and voting, either in person or by proxy, at a meeting” and substituting “of the creditors passed at a meeting of the creditors”. When liquidator has qualified privilege 90. Section 535 of the Corporations Law is amended by adding at the end the following subsection: ‘liquidator’ includes a provisional liquidator.”. Books of company 91. Section 542 of the Corporations Law is amended by inserting in paragraph (3)(c) “by resolution” after “company”. 92. Section 553 of the Corporations Law is repealed and the following headings and sections are substituted: “Subdivision A—Admission to proof of debts and claims Debts or claims that are provable in winding up “553.(1) Subject to this Division, in every winding up, all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages), being debts or claims the circumstances giving rise to which occurred before the relevant date, are admissible to proof against the company. “(2) Where, after the relevant date, an order is made under section 91 of the ASC Law against a company that is being wound up, the amount that, pursuant to the order, the company is liable to pay is admissible to proof against the company. Member cannot prove debt unless contributions paid “553A. A debt owed by a company to a person in the person’s capacity as a member of the company, whether by way of dividends, profits or otherwise, is not admissible to proof against the company unless the person has paid to the company or the liquidator all amounts that the person is liable to pay as a member of the company. Insolvent companies—penalties and fines not generally provable “553B.(1) Subject to subsection (2), penalties or fines imposed by a court in respect of an offence against a law are not admissible to proof against an insolvent company. “(2) An amount payable under a pecuniary penalty order, or an interstate pecuniary penalty order, within the meaning of the Proceeds of Crime Act 1987, is admissible to proof against an insolvent company. Insolvent companies—mutual credit and set-off “553C.(1) Subject to subsection (2), where there have been mutual credits, mutual debts or other mutual dealings between an insolvent company that is being wound up and a person who wants to have a debt or claim admitted against the company: (a) an account is to be taken of what is due from the one party to the other in respect of those mutual dealings; and (b) the sum due from the one party is to be set off against any sum due from the other party; and (c) only the balance of the account is admissible to proof against the company, or is payable to the company, as the case may be. “(2) A person is not entitled under this section to claim the benefit of a set-off if, at the time of giving credit to the company, or at the time of receiving credit from the company, the person had notice of the fact that the company was insolvent. Debts or claims may be proved formally or informally “553D.(1) A debt or claim must be proved formally if the liquidator, in accordance with the regulations, requires it to be proved formally. “(2) A debt or claim that is not required to be proved formally: (a) may be proved formally; or (b) may be proved in some other way, subject to compliance with the requirements of the regulations (if any) relating to the informal proof of debts and claims. “(3) A debt or claim is proved formally if it satisfies the requirements of the regulations relating to the formal proof of debts and claims. Application of Bankruptcy Act to winding up of insolvent company “553E. Subject to this Division and to sections 206RD and 279, in the winding up of an insolvent company the same rules are to prevail and be observed with regard to debts provable as are in force for the time being under the Bankruptcy Act 1966 in relation to the estates of bankrupt persons (except the rules in sections 82 to 94 (inclusive) and 96 of that Act), and all persons who in any such case would be entitled to prove for and receive dividends out of the property of the company may come in under the winding up and make such claims against the company as they respectively are entitled to because of this section. “Subdivision B—Computation of debts and claims”. General rule — compute amount as at relevant date 93. Section 554 of the Corporations Law is amended: (a) by inserting in subsection (1) “or claim” after “debt” (wherever occurring); (b) by omitting from subsection (2) “required to be paid under subsection 557(1)” and substituting “admissible to proof under subsection 553(2)”. 94. After section 554 of the Corporations Law the following sections and headings are inserted: Determination of value of debts and claims of uncertain value “554A.(1) This section applies where, in the winding up of a company, the liquidator admits a debt or claim that, as at the relevant date, did not bear a certain value. “(2) The liquidator must: (a) make an estimate of the value of the debt or claim as at the relevant date; or (b) refer the question of the value of the debt or claim to the Court. “(3) A person who is aggrieved by the liquidator’s estimate of the value of the debt or claim may, in accordance with the regulations, appeal to the Court against the liquidator’s estimate. (a) the liquidator refers the question of the value of the debt or claim to the Court; or (b) a person appeals to the Court against the liquidator’s estimate of the value of the debt or claim; the Court must: (c) make an estimate of the value of the debt or claim as at the relevant date; or (d) determine a method to be applied by the liquidator in working out the value of the debt or claim as at the relevant date. “(5) If the Court determines a method to be applied by the liquidator in working out the value of the debt or claim, the liquidator must work out the value of the debt or claim as at the relevant date in accordance with that method. “(6) If: (a) the Court has determined a method to be applied by the liquidator in working out the value of the debt or claim as at the relevant date; and (b) a person is aggrieved by the way in which that method has been applied by the liquidator in working out that value; the person may, in accordance with the regulations, appeal to the Court against the way in which the method was applied. “(7) If: (a) a person appeals to the Court against the way in which the liquidator, in working out the value of the debt or claim, applied a method determined by the court; and (b) the Court is satisfied that the liquidator did not correctly apply that method; the Court must work out the value of the debt or claim as at the relevant date in accordance with that method. “(8) For the purposes of this Division, the amount of the debt or claim that is admissible to proof is the value as estimated or worked out under this section. Discounting of debts payable after relevant date “554B. The amount of a debt that is admissible to proof but that, as at the relevant date, was not payable by the company until an ascertained or ascertainable date (‘the future date’) after the relevant date is the amount payable on the future date reduced by the amount of the discount worked out in accordance with the regulations. Conversion into Australian currency of foreign currency debts or claims “554C.(1) This section applies if the amount of a debt or claim admissible to proof against a company would, apart from this section, be an amount of foreign currency. “(2) If the company and the creditor or claimant have, in an instrument created before the relevant date, agreed on a method to be applied for the purpose of converting the company’s liability in respect of the debt or claim into Australian currency, the amount of the debt or claim that is admissible to proof is the equivalent in Australian currency of the amount of foreign currency, worked out as at the relevant date and in accordance with the agreed method. “(3) If subsection (2) does not apply, the amount of the debt or claim that is admissible to proof is the equivalent in Australian currency of the amount of foreign currency, worked out by reference to the opening carded on demand airmail buying rate in relation to the foreign currency available at the Commonwealth Bank of Australia on the relevant date. “Subdivision C—Special provisions relating to secured creditors of insolvent companies Application of Subdivision “554D.(1) This Subdivision applies in relation to the proof of a secured debt in the winding up of an insolvent company. “(2) For the purposes of the application of this Subdivision in relation to a secured debt of an insolvent company that is being wound up, the amount of the debt is taken to be the amount of the debt as at the relevant date (as worked out in accordance with Subdivision B). Proof of debt by secured creditor “554E.(1) In the winding up of an insolvent company, a secured creditor is not entitled to prove the whole or a part of the secured debt otherwise than in accordance with this section and with any other provisions of this Law or the regulations that are applicable to proving the debt. “(2) The creditor’s proof of debt must be in writing. “(3) If the creditor surrenders the security to the liquidator for the benefit of creditors generally, the creditor may prove for the whole of the amount of the secured debt. “(4) If the creditor realises the security, the creditor may prove for any balance due after deducting the net amount realised, unless the liquidator is not satisfied that the realisation has been effected in good faith and in a proper manner. “(5) If the creditor has not realised or surrendered the security, the creditor may: (a) estimate its value; and (b) prove for the balance due after deducting the value so estimated. “(6) If subsection (5) applies, the proof of debt must include particulars of the security and the creditor’s estimate of its value. Redemption of security by liquidator “554F.(1) This section applies where a secured creditor’s proof of debt is in respect of the balance due after deducting the creditor’s estimate of the value of the security. “(2) The liquidator may, at any time, redeem the security on payment to the creditor of the amount of the creditor’s estimate of its value. “(3) If the liquidator is dissatisfied with the amount of the creditor’s estimate of the value of the security, the liquidator may require the property comprised in the security to be offered for sale at such times and on such terms and conditions as are agreed on by the creditor and the liquidator or, in default of agreement, as the Court determines. “(4) If the property is offered for sale by public auction, both the creditor and the liquidator are entitled to bid for, and purchase, the property. “(5) The creditor may at any time, by notice in writing, require the liquidator to elect whether to exercise the power to redeem the security or to require it to be sold and, if the liquidator does not, within 3 months after receiving the notice, notify the creditor, in writing, that the liquidator elects to exercise the power: (a) the liquidator is not entitled to exercise it; and (b) subject to subsection (6), any equity of redemption or other interest in the property comprised in the security that is vested in the company or the liquidator vests in the creditor; and (c) the amount of the creditor’s debt is, for the purposes of this Division, taken to be reduced by the amount of the creditor’s estimate of the value of the security. “(6) The vesting of an equity of redemption or other interest in property because of paragraph (5)(b) is subject to compliance with any law requiring the transmission of such interests in property to be registered. Amendment of valuation “554G.(1) If a secured creditor’s proof of debt is in respect of the balance due after deducting the creditor’s estimate of the value of the security, the creditor may, at any time, apply to the liquidator or the Court for permission to amend the proof of debt by altering the estimated value. “(2) If the liquidator or the Court is satisfied: (a) that the estimate of the value of the security was made in good faith on a mistaken basis; or (b) that the value of the security has changed since the estimate was made; the liquidator or the Court may permit the creditor to amend the proof of debt accordingly. “(3) If the Court permits the creditor to amend the proof of debt, it may do so on such terms as it thinks just and equitable. Repayment of excess “554H.(1) Where a creditor who has amended a proof of debt under section 554G has received, in the winding up of the debtor company, an amount in excess of the amount to which the creditor would have been entitled under the amended proof of debt, the creditor must, without delay, repay the amount of the excess to the liquidator. “(2) Where a creditor who has so amended a proof of debt has received, in the winding up of the debtor company, less than the amount to which the creditor would have been entitled under the amended proof of debt, the creditor is entitled to be paid, out of the money remaining for distribution in the winding up, the amount of the deficiency before any of that money is applied in the payment of future distributions, but the creditor is not entitled to affect a distribution made before the amendment of the proof of debt. Subsequent realisation of security “554J. Where: (a) a secured creditor’s proof of debt is in respect of the balance due after deducting the creditor’s estimate of the value of the security; and (b) subsequently: (i) the creditor realises the security; or (ii) the security is realised under section 554F; the net amount realised is to be substituted for the estimated value of the security and section 554H applies as if the proof of debt had been amended accordingly under section 554G. “Subdivision D—Priorities”. Debts and claims proved to rank equally except as otherwise provided 95. Section 555 of the Corporations Law is amended by inserting “and claims” after “debts”. Priority payments 96. Section 556 of the Corporations Law is amended: (a) by omitting subsection (1) and substituting the following subsections: “(1) Subject to this Division, in the winding up of a company the following debts and claims must be paid in priority to all other unsecured debts and claims: (a) first, expenses (except deferred expenses) properly incurred by a relevant authority in preserving, realising or getting in property of the company, or in carrying on the company’s business; (b) if the Court ordered the winding up—next, the costs in respect of the application for the order (including the applicant’s taxed costs payable under section 466); (c) next, the debts for which paragraph 443D(a) entitles an administrator of the company to be indemnified (even if the administration ended before the relevant date), except expenses covered by paragraph (a) of this subsection and deferred expenses; (d) if the winding up began within 2 months after the end of a period of official management of the company— next, debts of the company properly incurred by an official manager in carrying on the company’s business during the period of official management, except expenses covered by paragraph (a) of this subsection and deferred expenses; (da) if the Court ordered the winding up—next, costs and expenses that are payable under subsection 475(8) out of the company’s property; (db) next, costs that form part of the expenses of the winding up because of subsection 539(6); (dc) if the winding up began within 2 months after the end of a period of official management of the company— next, the remuneration, in respect of the period of official management, of any auditor appointed in accordance with Part 3.7; (dd) next, any other expenses (except deferred expenses) properly incurred by a relevant authority; (de) next, the deferred expenses; (df) if a committee of inspection has been appointed for the purposes of the winding up—next, expenses incurred by a person as a member of the committee; (e) subject to subsection (1A)—next, wages and superannuation contributions payable by the company in respect of services rendered to the company by employees before the relevant date; (f) next, amounts due in respect of injury compensation, being compensation the liability for which arose before the relevant date; (g) subject to subsection (1B)—next, all amounts due: (i) on or before the relevant date; and (ii) because of an industrial instrument; and (iii) to, or in respect of, employees of the company; and (iv) in respect of leave of absence; (h) subject to subsection (1C)—next, retrenchment payments payable to employees of the company. “(1A) The amount or total paid under paragraph (1)(e) to, or in respect of, an excluded employee of the company must be such that so much (if any) of it as is attributable to non-priority days does not exceed $2,000. “(1B) The amount or total paid under paragraph (1)(g) to, or in respect of, an excluded employee of the company must be such that so much (if any) of it as is attributable to non-priority days does not exceed $1,500. “(1C) A payment under paragraph (1)(h) to an excluded employee of the company must not include an amount attributable to non-priority days.”; (b) by inserting in subsection (2) the following definitions: “ ‘deferred expenses’, in relation to a company, means expenses properly incurred by a relevant authority, in so far as they consist of: (a) remuneration, or fees for services, payable to the relevant authority; or (b) expenses incurred by the relevant authority in respect of the supply of services to the relevant authority by: (i) a partnership of which the relevant authority is a member; or (ii) an employee of the relevant authority; or (iii) a member or employee of such a partnership; or (c) expenses incurred by the relevant authority in respect of the supply to the relevant authority of services that it is reasonable to expect could have instead been supplied by: (i) the relevant authority; or (ii) a partnership of which the relevant authority is a member; or (iii) an employee of the relevant authority; or (iv) a member or employee of such a partnership; ‘non-priority day’, in relation to an excluded employee of a company, means a day on which the employee was: (a) if paragraph (a) of the definition of ‘excluded employee’ applies—a director of the company; or (b) if paragraph (b) of that definition applies—a spouse of an employee of the kind referred to in paragraph (a) of that definition; or (c) if paragraph (c) of that definition applies—a relative (other than a spouse) of an employee of the kind referred to in paragraph (a) of that definition; even if the day was more than 12 months before the relevant date; ‘official manager’ includes a deputy official manager; ‘relevant authority’, in relation to a company, means any of the following: (a) in any case—a liquidator or provisional liquidator of the company; (b) if the winding up began within 2 months after the end of a period of official management of the company—an official manager appointed for the purposes of the official management; (c) in any case—an administrator of the company, even if the administration ended before the winding up began; (d) in any case—an administrator of a deed of company arrangement executed by the company, even if the deed terminated before the winding up began; ‘spouse’ includes a de facto spouse; ‘superannuation contribution’, in relation to a company, means a contribution by the company to a fund for the purposes of making provision for, or obtaining, superannuation benefits for an employee of the company, or for dependants of such an employee.”. Repeal of section 557 97\. Section 557 of the Corporations Law is repealed. Debts of a class to rank equally 98. Section 559 of the Corporations Law is amended by omitting all the words from and including “After” to and including “subsection 556(1)” and substituting “The debts of a class referred to in each of the paragraphs of subsection 556(1)”. Advances for company to make priority payments in respect of employees 99. Section 560 of the Corporations Law is amended by inserting “or of superannuation contributions (within the meaning of section 556)” after “wages”. Application of proceeds of contracts of insurance 100. Section 562 of the Corporations Law is amended by inserting in subsection (1) “(not being a contract of reinsurance)” after “insurance”. 101. After section 562 of the Corporations Law the following section is inserted: Application of proceeds of contracts of reinsurance “562A.(1) This section applies where: (a) a company is insured, under a contract of reinsurance entered into before the relevant date, against liability to pay amounts in respect of a relevant contract of insurance or relevant contracts of insurance; and (b) an amount in respect of that liability has been or is received by the company or the liquidator under the contract of reinsurance. “(2) Subject to subsection (4), if the amount received, after deducting expenses of or incidental to getting in that amount, equals or exceeds the total of all the amounts that are payable by the company under relevant contracts of insurance, the liquidator must, out of the amount received and in priority to all payments in respect of the debts mentioned in section 556, pay the amounts that are so payable under those contracts of insurance. “(3) Subject to subsection (4), if subsection (2) does not apply, the liquidator must, out of the amount received and in priority to all payments in respect of the debts mentioned in section 556, pay to each person to whom an amount is payable by the company under a relevant contract of insurance an amount calculated in accordance with the formula:  ‘Particular amount owed’ means the amount payable to the person under the relevant contract of insurance; ‘Total amount owed’ means the total of all the amounts payable by the company under relevant contracts of insurance; ‘Reinsurance payment’ means the amount received under the contract of reinsurance, less any expenses of or incidental to getting in that amount. “(4) The Court may, on application by a person to whom an amount is payable under a relevant contract of insurance, make an order to the effect that subsections (2) and (3) do not apply to the amount received under the contract of reinsurance and that that amount must, instead, be applied by the liquidator in the manner specified in the order, being a manner that the Court considers just and equitable in the circumstances. “(5) The matters that the Court may take into account in considering whether to make an order under subsection (4) include, but are not limited to: (a) whether it is possible to identify particular relevant contracts of insurance as being the contracts in respect of which the contract of reinsurance was entered into; and (b) whether it is possible to identify persons who can be said to have paid extra in order to have particular relevant contracts of insurance protected by reinsurance; and (c) whether particular relevant contracts of insurance include statements to the effect that the contracts are to be protected by reinsurance; and (d) whether a person to whom an amount is payable under a relevant contract of insurance would be severely prejudiced if subsections (2) and (3) applied to the amount received under the contract of reinsurance. “(6) If receipt of a payment under this section only partially discharges a liability of the company to a person, nothing in this section affects the rights of the person in respect of the balance of the liability. “(7) This section has effect despite any agreement to the contrary. “(8) in this section: ‘relevant contract of insurance’ means a contract of insurance entered into by the company, as insurer, before the relevant date.”. 102\. After section 563 of the Corporations Law the following sections and heading are inserted: Member’s debts to be postponed until other debts and claims satisfied “563A. Payment of a debt owed by a company to a person in the person’s capacity as a member of the company, whether by way of dividends, profits or otherwise, is to be postponed until all debts owed to, or claims made by, persons otherwise than as members of the company have been satisfied. ‘‘Subdivision E—Miscellaneous Interest on debts and claims from relevant date to date of payment “563B.(1) If, in the winding up of a company, the liquidator pays an amount in respect of an admitted debt or claim, there is also payable to the debtor or claimant, as a debt payable in the winding up, interest, at the prescribed rate, on the amount of the payment in respect of the period starting on the relevant date and ending on the day on which the payment is made. “(2) Subject to subsection (3), payment of the interest is to be postponed until all other debts and claims in the winding up have been satisfied, other than debts owed to members of the company as members of the company (whether by way of dividends, profits or otherwise). “(3) If the admitted debt or claim is a debt to which section 554B applied, subsection (2) does not apply to postpone payment of so much of the interest as is attributable to the period starting at the relevant date and ending on the earlier of: (a) the day on which the payment is made; and (b) the future date, within the meaning of section 554B. Debt subordination “563C.(1) Nothing in this Division renders a debt subordination by a creditor of a company unlawful or unenforceable, except so far as the debt subordination would disadvantage any creditor of the company who was not a party to, or otherwise concerned in, the debt subordination. ‘debt subordination’ means an agreement or declaration by a creditor of a company, however expressed, to the effect that, in specified circumstances: (a) a specified debt that the company owes the creditor; or (b) a specified part of such a debt; will not be repaid until other specified debts that the company owes are repaid to a specified extent.”. 103\. The heading to Division 7 of Part 5.6 of the Corporations Law is repealed and the following heading is substituted: “Division 7—Effect on certain transactions”. Undue preference 104. Section 565 of the Corporations Law is amended: (a) by inserting in subsection (1) “before the commencement of Part 5.7B,” after “incurred,”; (b) by omitting paragraphs (2)(a) and (b) and substituting the following paragraphs: “(a) if the company was under official management at any time during the 6 months ending on the relation-back day—the day on which the official management commenced; or (b) otherwise—the relation-back day.”; (c) by omitting from subsection (3) everything after “bankrupt is” and substituting “the relation-back day.”; (d) by omitting from subsection (4) “Any” and substituting “Subject to Part 5.3A, a”. Effect of floating charge 105. Section 566 of the Corporations Law is amended by omitting “within 6 months before the commencement of the winding up” and substituting “before the commencement of Part 5.7B and within 6 months before the relation-back day”. Liquidator’s right to recover in respect of certain transactions 106. Section 567 of the Corporations Law is amended: (a) by omitting from subsections (1) and (2) “within a period of 4 years before the commencement of the” and substituting “before the commencement of Part 5.7B and within 4 years before the relation-back day in relation to a”; (b) by omitting from paragraph (5)(a) “within the period of 6 months before the commencement of the” and substituting “before the commencement of Part 5.7B and within 6 months before the relation-back day in relation to a”. Insertion of heading 107. Before section 568 of the Corporations Law the following heading is inserted: “Division 7A—Disclaimer of onerous property”. Disclaimer by liquidator; application to Court by party to contract 108. Section 568 of the Corporations Law is amended: (a) by omitting subsections (1), (2), (3), (4), (5), (6) and (7) and substituting the following subsections: “(1) Subject to this section, a liquidator of a company may at any time, on the company’s behalf, by signed writing disclaim property of the company that consists of: (a) land burdened with onerous covenants; or (b) shares; or (c) property that is unsaleable or is not readily saleable; or (d) property that may give rise to a liability to pay money or some other onerous obligation; or (e) property where it is reasonable to expect that the costs, charges and expenses that would be incurred in realising the property would exceed the proceeds of realising the property; or (f) a contract; (g) except in the case of a contract—the liquidator has tried to sell the property, has taken possession of it or exercised an act of ownership in relation to it; or (h) in the case of a contract—the company or the liquidator has tried to assign, or has exercised rights in relation to, the contract or any property to which it relates. “(1A) A liquidator cannot disclaim a contract (other than an unprofitable contract or a lease of land) except with the leave of the Court. “(1B) On an application for leave under subsection (1A), the Court may: (a) grant leave subject to such conditions; and (b) make such orders in connection with matters arising under, or relating to, the contract; as the Court considers just and equitable.”; (b) by omitting subsections (11) and (12). 109\. After section 568 of the Corporations Law the following sections and heading are inserted: Liquidator must give notice of disclaimer “568A.(1) As soon as practicable after disclaiming property, a liquidator must: (a) lodge a written notice of the disclaimer; and (b) give written notice of the disclaimer to each person who appears to the liquidator to have, or to claim to have, an interest in the property; and (c) if the liquidator has reason to suspect that some person or persons may have, or may claim to have, an interest or interests in the property, but either does not know who, or does not know where, the person is or the persons are—comply with subsection (2); and (d) if a law of the Commonwealth or of a State or Territory requires the transfer or transmission of the property to be registered—give written notice of the disclaimer to the registrar or other person who has the function under that law of registering the transfer or transmission of the property. “(2) If paragraph (1)(c) applies, the liquidator must cause notice of the disclaimer to be published: (a) if the property is situated in a jurisdiction and a daily newspaper circulates generally in that jurisdiction—in a daily newspaper that so circulates; and (b) in each jurisdiction in which: (i) the company has carried on business during or after the period of 6 months ending when the winding up began; and (ii) a daily newspaper circulates generally; in a daily newspaper that circulates generally in that jurisdiction; whether on the same or different days. Application to set aside disclaimer before it takes effect “568B.(1) A person who has, or claims to have, an interest in disclaimed property may apply to the Court for an order setting aside the disclaimer before it takes effect, but may only do so within 14 days after: (a) if the liquidator gives to the person notice of the disclaimer, because of paragraph 568A(1)(b), before the end of 14 days after the liquidator lodges such notice—the liquidator gives such notice to the person; or (b) if paragraph (a) does not apply but notice of the disclaimer is published under subsection 568A(2) before the end of the 14 days referred to in that paragraph—the last such notice to be so published is so published; or (c) otherwise—the liquidator lodges notice of the disclaimer. “(2) On an application under subsection (1), the Court: (a) may by order set aside the disclaimer; and (b) if it does so—may make such further orders as it thinks appropriate. “(3) However, the Court may set aside a disclaimer under this section only if satisfied that the disclaimer would cause, to persons who have, or claim to have, interests in the property, prejudice that is grossly out of proportion to the prejudice that setting aside the disclaimer would cause to the company’s creditors. When disclaimer takes effect “568C.(1) A disclaimer takes effect if, and only if: (a) in a case where only one application under section 568B for an order setting aside the disclaimer, or each of 2 or more such applications, is made within the period that that section prescribes for making the application—the application, or each of the applications, is unsuccessful; or (b) no such application is so made. “(2) For the purposes of subsection (1), an application under section 568B is successful if, and only if, the result of the application, and all appeals (if any) arising out of the application, being finally determined or otherwise disposed of is an order setting aside the disclaimer (whether or not further orders are also made). “(3) A disclaimer that takes effect because of subsection (1) is taken to have taken effect on the day after: (a) if: (i) the liquidator gave to a person notice of the disclaimer because of paragraph 568A(1)(b); or (ii) notice of the disclaimer was published under subsection 568A(2); before the end of 14 days after the liquidator lodged notice of the disclaimer—the last day when the liquidator so gave such notice or such notice was so published; or (b) otherwise—the day when the liquidator lodged notice of the disclaimer. Effect of disclaimer “568D.(1) A disclaimer is taken to have terminated, as from the day on which it is taken because of subsection 568C(3) to take effect, the company’s rights, interests, liabilities and property in or in respect of the disclaimer property, but does not affect any other person’s rights or liabilities except so far as necessary in order to release the company and its property from liability. “(2) A person aggrieved by the operation of a disclaimer is taken to be a creditor of the company to the extent of any loss suffered by the person because of the disclaimer and may prove such a loss as a debt in the winding up. Application to set aside disclaimer after it has taken effect “568E.(1) With the leave of the Court, a person who has, or claims to have, an interest in disclaimed property may apply to the Court for an order setting aside the disclaimer after it has taken effect. “(2) The Court may give leave only if it is satisfied that it is unreasonable in all the circumstances to expect the person to have applied for an order setting aside the disclaimer before it took effect. “(3) The Court may give leave subject to conditions. “(4) On an application under subsection (1), the Court: (a) may by order set aside the disclaimer; and (b) if it does so—may make such further orders as it thinks appropriate, including orders necessary to put the company, the liquidator or anyone else in the same positon, as nearly as practicable, as if the disclaimer had never taken effect. “(5) However, the Court may set aside a disclaimer only if satisfied that the disclaimer has caused, or would cause, to persons who have, or claim to have, interests in the property, prejudice that is grossly out of proportion to the prejudice that setting aside the disclaimer (and making any further orders) would cause to: (a) the company’s creditors; and (b) persons who have changed their position in reliance on the disclaimer taking effect. Court may dispose of disclaimed property “568F.(1) The Court may order that disclaimed property vest in, or be delivered to: (a) a person entitled to the property; or (b) a person in or to whom it seems to the Court appropriate that the property be vested or delivered; or (c) a person as trustee for a person of a kind referred to in paragraph (a) or (b). “(2) The Court may make an order under subsection (1): (a) on the application of a person who claims an interest in the property, or is under a liability in respect of the property that this Law has not discharged; and (b) after hearing such persons as it thinks appropriate. “(3) Subject to subsection (4), where an order is made under subsection (1) vesting property, the property vests immediately, for the purposes of the order, without any conveyance, transfer or assignment. “(4) Where: (a) a law of the Commonwealth or of a State or Territory requires the transfer of property vested by an order under subsection (1) to be registered; and (b) that law enables the order to be registered; the property vests in equity because of the order but does not vest at law until that law has been complied with. “Division 7B—Effect on enforcement process against company’s property”. 110\. Before section 588A of the Corporations Law the following headings and sections are inserted in Part 5.7A: “Division 1—Application of Part 5.3A to matters arising under corresponding laws Application in this jurisdiction “588AA.(1) This section has effect for the purposes of: (a) the administration of a recognised company; or (b) a deed of company arrangement executed by a recognised company; in so far as those purposes concern this jurisdiction. “(2) Part 5.3A applies in relation to the recognised company in the same way, as nearly as practicable, as it applies in relation to a company. “(3) Without limiting subsection (2), the administrator of the recognised company, or of the deed, as the case may be, may perform or exercise any function or power under Part 5.3A of a kind that an administrator of a company, or of a deed of company arrangement executed by a company, may perform or exercise under that Part. Enforcement of orders “588AB.(1) This section applies if: (a) the Federal Court makes under Part 5.3A of the Corporations Law of another jurisdiction; or (b) the Supreme Court of another jurisidiction makes under Part 5.3A of the Corporations Law of any jurisdiction; or (c) the Supreme Court of this jurisdiction makes under Part 5.3A of the Corporations Law of another jurisdiction; an order in connection with the administration of, or a deed of company arrangement executed by, a company within the meaning of that Part of that Law. “(2) The order has effect, and may be enforced in all respects, in this jurisdiction as if it were an order made under Part 5.3A, in relation to a company, by: (a) if paragraph (1)(a) applies—the Federal Court; or (b) if paragraph (1)(b) or (c) applies—the Supreme Court of this jurisdiction. “Division 2—Winding up recognised companies”. 111\. After Part 5.7A of the Corporations Law the following Part is inserted: “PART 5.7B—RECOVERING PROPERTY OR COMPENSATION FOR THE BENEFIT OF CREDITORS OF INSOLVENT COMPANY Secured debt may become unsecured “588D. For the purposes of this Part, a secured debt becomes an unsecured debt to the extent that the creditor proves for the debt as an unsecured creditor. Presumptions to be made in recovery proceedings “588E.(1) In this section: ‘recovery proceeding’, in relation to a company, means: (a) an application under section 588FF by the company’s liquidator; or (b) proceedings begun under subsection 588FH(2) by the company’s liquidator; or (c) proceedings, in so far as they relate to the question whether a charge created by the company is void to any extent, as against the company’s liquidator, because of subsection 588FJ(2); or (d) proceedings begun under subsection 588FJ(6) by the company’s liquidator; or (e) proceedings for a contravention of section 588G in relation to the incurring of a debt by the company (including proceedings under section 588M in relation to the incurring of the debt but not including proceedings for an offence); or (f) proceedings under section 588W in relation to the incurring of a debt by the company. “(2) Subsections (3) to (9), inclusive, have effect for the purposes of a recovery proceeding in relation to a company. (a) the company is being wound up; and (b) it is proved, or because of subsection (4) or (8) it must be presumed, that the company was insolvent at a particular time during the 12 months ending on the relation-back day; it must be presumed that the company was insolvent throughout the period beginning at that time and ending on that day. “(4) Subject to subsections (5), (6) and (7), if it is proved that the company: (a) has contravened subsection 289(1) by failing to keep accounting records that correctly record and explain: (i) its transactions (including any transactions as trustee) during a particular period (‘the relevant period’); and (ii) its financial position during the relevant period; or by failing to keep such accounting records in the manner required by paragraph 289(1)(b); or (b) has contravened subsection 289(2) by failing to retain such accounting records for the period required by that subsection; it must be presumed that the company was insolvent throughout the relevant period. “(5) Paragraph (4)(a) does not apply in relation to a contravention of subsection 289(1) that is only minor or technical. “(6) Subsection (4) does not have effect, in so far as it would prejudice a right or interest of a person for the company to be presumed insolvent because of a contravention of subsection 289(2), if it is proved that: (a) the contravention was due solely to someone destroying, concealing or removing accounting records of the company; and (b) none of those accounting records was destroyed, concealed or removed by the first-mentioned person; and (c) the person was not in any way, by act or omission, directly or indirectly, knowingly or recklessly, concerned in, or party to, destroying, concealing or removing any of those accounting records. “(7) If the recovery proceeding is an application under section 588FF, subsection (4) of this section does not have effect for the purposes of proving, for the purposes of the application, that an unfair preference given by the company to a creditor of the company is an insolvent transaction, unless it is proved, for the purposes of the application, that a related entity of the company was a party to the unfair preference. “(8) If, for the purposes of another recovery proceeding in relation to the company, there has been proved: (a) if the other proceeding is of the kind referred to in paragraph (1)(a) of this section—a matter of the kind referred to in a paragraph of section 588FC or of subsection 588FG(2); or (b) if the other proceeding is of the kind referred to in paragraph (1)(b) of this section—a matter of the kind referred to in a paragraph of section 588FC or of subsection 588FG(2) or 588FH(1), or a defence under subsection 588FH(3); or (c) if the other proceeding is of the kind referred to in paragraph (1)(c) or (d) of this section—a matter of the kind referred to in subsection 588FJ(3); or (d) if the other proceeding is of the kind referred to in paragraph (1)(e) of this section—a matter of the kind referred to in a paragraph of section 588G, or a defence under section 588H; or (e) if the other proceeding is of the kind referred to in paragraph (1)(f) of this section—a matter of the kind referred to in a paragraph of subsection 588V(1), or a defence under section 588X; it must be presumed that that matter was the case, or that the matters constituting that defence were the case. “(9) A presumption for which this section provides operates except so far as the contrary is proved for the purposes of the proceeding concerned. “Division 2—Voidable transactions Unfair preferences “588FA.(1) A transaction is an unfair preference given by a company to a creditor of the company if, and only if: (a) the company and the creditor are parties to the transaction (even if someone else is also a party); and (b) the transaction results in the creditor receiving from the company, in respect of an unsecured debt that the company owes to the creditor, more than the creditor would receive from the company in respect of the debt if the transaction were set aside and the creditor were to prove for the debt in a winding up of the company; even if the transaction is entered into, is given effect to, or is required to be given effect to, because of an order of an Australian court or a direction by an agency. “(2) For the purposes of subsection (1), a secured debt is taken to be unsecured to the extent of so much of it (if any) as is not reflected in the value of the security. “(3) Where: (a) a transaction is, for commercial purposes, an integral part of a continuing business relationship (for example, a running account) between a company and a creditor of the company (including such a relationship to which other persons are parties); and (b) in the course of the relationship, the level of the company’s net indebtedness to the creditor is increased and reduced from time to time as the result of a series of transactions forming part of the relationship; (c) subsection (1) applies in relation to all the transactions forming part of the relationship as if they together constituted a single transaction; and (d) the transaction referred to in paragraph (a) may only be taken to be an unfair preference given by the company to the creditor if, because of subsection (1) as applying because of paragraph (c) of this subsection, the single transaction referred to in the last-mentioned paragraph is taken to be such an unfair preference. Uncommercial transactions “588FB.(1) A transaction of a company is an uncommercial transaction of the company if, and only if, it may be expected that a reasonable person in the company’s circumstances would not have entered into the transaction, having regard to: (a) the benefits (if any) to the company of entering into the transaction; and (b) the detriment to the company of entering into the transaction; and (c) the respective benefits to other parties to the transaction of entering into it; and (d) any other relevant matter. “(2) A transaction may be an uncommercial transaction of a company because of subsection (1): (a) whether or not a creditor of the company is a party to the transaction; and (b) even if the transaction is given effect to, or is required to be given effect to, because of an order of an Australian court or a direction by an agency. Insolvent transactions “588FC. A transaction of a company is an insolvent transaction of the company if, and only if, it is an unfair preference given by the company, or an uncommercial transaction of the company, and: (a) any of the following happens at a time when the company is insolvent: (i) the transaction is entered into; (ii) an act is done, or an omission is made, for the purpose of giving effect to the transaction; or (b) the company becomes insolvent because of, or because of matters including: (i) entering into the transaction; or (ii) a person doing an act, or making an omission, for the purpose of giving effect to the transaction. Unfair loans to a company “588FD.(1) A loan to a company is unfair if, and only if: (a) the interest on the loan was extortionate when the loan was made, or has since become extortionate because of a variation; or (b) the charges in relation to the loan were extortionate when the loan was made, or have since become extortionate because of a variation; even if the interest is, or the charges are, no longer extortionate. “(2) In determining: (a) whether interest on a loan was or became extortionate at a particular time as mentioned in paragraph (1)(a); or (b) whether charges in relation to a loan were or became extortionate at a particular time as mentioned in paragraph (1)(b); regard is to be had to the following matters as at that time: (c) the risk to which the lender was exposed; and (d) the value of any security in respect of the loan; and (e) the term of the loan; and (f) the schedule for payments of interest and charges and for repayments of principal; and (g) the amount of the loan; and (h) any other relevant matter. Voidable transactions “588FE.(1) Where a company is being wound up, a transaction of the company that was entered into at or after the commencement of this Part may be voidable because of any one or more of the following subsections. “(2) The transaction is voidable if: (b) it was entered into, or an act was done for the purpose of giving effect to it: (i) during the 6 months ending on the relation-back day; or (ii) after that day but on or before the day when the winding up began. “(3) The transaction is voidable if: (a) it is an insolvent transaction, and also an uncommercial transaction, of the company; and (b) it was entered into, or an act was done for the purpose of giving effect to it, during the 2 years ending on the relation-back day. (4) The transaction is voidable if: (b) a related entity of the company is a party to it; and (c) it was entered into, or an act was done for the purpose of giving effect to it, during the 4 years ending on the relation-back day. “(5) The transaction is voidable if: (b) the company became a party to the transaction for the purpose, or for purposes including the purpose, of defeating, delaying, or interfering with, the rights of any or all of its creditors on a winding up of the company; and (c) the transaction was entered into, or an act done was for the purpose of giving effect to the transaction, during the 10 years ending on the relation-back day. “(6) The transaction is voidable if it is an unfair loan to the company made at any time on or before the day when the winding up began. “(7) A reference in this section to doing an act includes a reference to making an omission. Court may make orders about voidable transactions “588FF.(1) Where, on the application of a company’s liquidator, the Court is satisfied that a transaction of the company is voidable because of section 588FE, the Court may make one or more of the following orders: (a) an order directing a person to pay to the company an amount equal to some or all of the money that the company has paid under the transaction; (b) an order directing a person to transfer to the company property that the company has transferred under the transaction; (c) an order requiring a person to pay to the company an amount that, in the Court’s opinion, fairly represents some or all of the benefits that the person has received because of the transaction; (d) an order requiring a person to transfer to the company property that, in the Court’s opinion, fairly represents the application of either or both of the following: (i) money that the company has paid under the transaction; (ii) proceeds of property that the company has transferred under the transaction; (e) an order releasing or discharging, wholly or partly, a debt incurred, or a security or guarantee given, by the company under or in connection with the transaction; (f) if the transaction is an unfair loan and such a debt, security or guarantee has been assigned—an order directing a person to indemnify the company in respect of some or all of its liability to the assignee; (g) an order providing for the extent to which, and the terms on which, a debt that arose under, or was released or discharged to any extent by or under, the transaction may be proved in a winding up of the company; (h) an order declaring an agreement constituting, forming part of, or relating to, the transaction, or specified provisions of such an agreement, to have been void at and after the time when the agreement was made, or at and after a specified later time; (i) an order varying such an agreement as specified in the order and, if the Court thinks fit, declaring the agreement to have had effect, as so varied, at and after the time when the agreement was made, or at and after a specified later time; (j) an order declaring such an agreement, or specified provisions of such an agreement, to be unenforceable. “(2) Nothing in subsection (1) limits the generality of anything else in it. “(3) An application under subsection (1) may only be made: (a) within 3 years after the relation-back day; or (b) within such longer period as the Court orders on an application under this paragraph made by the liquidator within those 3 years. Transaction not voidable as against certain persons “588FG.(1) The Court is not to make under section 588FF an order materially prejudicing a right or interest of a person other than a party to the transaction if it is proved that: (a) the person received no benefit because of the transaction; or (b) in relation to each benefit that the person received because of the transaction: (i) the person received the benefit in good faith; and (ii) at the time when the person received the benefit: (A) the person had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as mentioned in paragraph 588FC(b); and (B) a reasonable person in the person’s circumstances would have had no such grounds for so suspecting. “(2) The Court is not to make under section 588FF an order materially prejudicing a right or interest of a person if the transaction is not an unfair loan to the company and it is proved that: (a) the person became a party to the transaction in good faith; and (b) at the time when the person became such a party: (i) the person had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as mentioned in paragraph 588FC(b); and (ii) a reasonable person in the person’s circumstances would have had no such grounds for so suspecting; and (c) the person has provided valuable consideration under the transaction or has changed his, her or its position in reliance on the transaction. Liquidator may recover from related entity benefit resulting from insolvent transaction “588FH.(1) This section applies where a company is being wound up and a transaction of the company: (a) is an insolvent transaction of the company; and (b) is voidable under section 588FE; and (c) has had the effect of discharging, to the extent of a particular amount, a liability (whether under a guarantee or otherwise and whether contingent or otherwise) of a related entity of the company. “(2) The company’s liquidator may, by proceedings in a court of competent jurisdiction, recover from the related entity, as a debt due to the company, an amount equal to the amount referred to in paragraph (1)(c). “(3) In deciding what orders (if any) to make under section 588FF on an application relating to the transaction, the Court must take into account any amount recovered under subsection (2) of this section. “(4) If the liquidator recovers an amount under subsection (2) from the related entity, the related entity has the same rights: (a) whether by way of indemnity, subrogation, contribution or otherwise; and (b) against the company or anyone else; as if the related entity had paid the amount in discharging, to the extent of that amount, the liability referred to in paragraph (1)(c). Creditor who gives up benefit of unfair preference may prove for preferred debt “588FI.(1) This section applies where: (a) a transaction is an unfair preference given by a company to a creditor of the company after the commencement of this Part; and (b) at the request of the company’s liquidator, because of an order under section 588FF, or for any other reason, the creditor has put the company in the same position as if the transaction had not been entered into. “(2) The Court must not make under section 588FF, on an application relating to the transaction, an order prejudicing a right or interest of the creditor. “(3) The creditor may prove in the winding up as if the transaction had not been entered into. Floating charge created within 6 months before relation-back day “588FJ.(1) This section applies if: (a) a company is being wound up in insolvency; and (b) the company created a floating charge on property of the company at a particular time that is at or after the commencement of this Part and: (i) during the 6 months ending on the relation-back day; or (ii) after that day but on or before the day when the winding up began. “(2) The charge is void, as against the company’s liquidator, except so far as it secures: (a) an advance paid to the company, or at its direction, at or after that time and as consideration for the charge; or (b) interest on such an advance; or (c) the amount of a liability under a guarantee or other obligation undertaken at or after that time on behalf of, or for the benefit of, the company; or (d) an amount payable for property or services supplied to the company at or after that time; or (e) interest on an amount so payable. “(3) Subsection (2) does not apply if it is proved that the company was solvent immediately after that time. “(4) Paragraphs (2)(a) and (b) do not apply in relation to an advance so far as it was applied to discharge, directly or indirectly, an unsecured debt, whether contingent or otherwise, that the company owed to: (b) if the chargee was a body corporate—a related entity of the body. “(5) Paragraphs (2)(d) and (e) do not apply in relation to an amount payable as mentioned in paragraph (2)(d) in so far as the amount exceeds the market value of the property or services when supplied to the company. “(6) If, during the 6 months ending on the relation-back day, or after that day but on or before the day when the winding up began, a debt secured by the charge was discharged, out of the company’s money or property, to the extent of a particular amount (in this subsection called the ‘realised amount’), the liquidator may, by proceedings in a court of competent jurisdiction, recover from the chargee, as a debt due to the company, the amount worked out in accordance with the formula: Unsecured amount — Realisation costs ‘Unsecured amount’ means so much of the realised amount as does not exceed so much of the debt as would, if the debt had not been so discharged, have been unsecured, as against the liquidator, because of subsection (2); ‘Realisation costs’ means so much (if any) of the costs and expenses of enforcing the charge as is attributable to realising the realised amount. “Division 3—Director’s duty to prevent insolvent trading Director’s duty to prevent insolvent trading by company “588G.(1) This section applies if: (a) a person is a director of a company at the time when the company incurs a debt; and (b) the company is insolvent at that time, or becomes insolvent by incurring that debt, or by incurring at that time debts including that debt; and (c) at that time, there are reasonable grounds for suspecting that the company is insolvent, or would so become insolvent, as the case may be; and (d) that time is at or after the commencement of this Part. “(2) By failing to prevent the company from incurring the debt, the person contravenes this section if: (a) the person is aware at that time that there are such grounds for so suspecting; or (b) a reasonable person in a like position in a company in the company’s circumstances would be so aware. “(3) This section is a civil penalty provision as defined by section 1317DA, so Part 9.4B provides for civil and criminal consequences of contravening it, or of being involved in a contravention of it. “(4) The provisions of Division 4 of this Part are additional to, and do not derogate from, Part 9.4B as it applies in relation to a contravention of this section. Defences “588H.(1) This section has effect for the purposes of proceedings for a contravention of section 588G in relation to the incurring of a debt (including proceedings under section 588M in relation to the incurring of the debt). “(2) It is a defence if it is proved that, at the time when the debt was incurred, the person had reasonable grounds to expect, and did expect, that the company was solvent at that time and would remain solvent even if it incurred that debt and any other debts that it incurred at that time. “(3) Without limiting the generality of subsection (2), it is a defence if it is proved that, at the time when the debt was incurred, the person: (a) had reasonable grounds to believe, and did believe: (i) that a competent and reliable person (‘the other person’) was responsible for providing to the first-mentioned person adequate information about whether the company was solvent; and (ii) that the other person was fulfilling that responsibility; and (b) expected, on the basis of information provided to the first-mentioned person by the other person, that the company was solvent at that time and would remain solvent even if it incurred that debt and any other debts that it incurred at that time. “(4) If the person was a director of the company at the time when the debt was incurred, it is a defence if it is proved that, because of illness or for some other good reason, he or she did not take part at that time in the management of the company. “(5) It is a defence if it is proved that the person took all reasonable steps to prevent the company from incurring the debt. “(6) In determining whether a defence under subsection (5) has been proved, the matters to which regard is to be had include, but are not limited to: (a) any action the person took with a view to appointing an administrator of the company; and (b) when that action was taken; and (c) the results of that action. “Division 4—Director liable to compensate company “Subdivision A—Proceedings against director On application for civil penalty order, Court may order compensation “588J.(1) Where, on an application for a civil penalty order against a person in relation to a contravention of section 588G, the Court is satisfied that: (a) the person committed the contravention in relation to the incurring of a debt by a company; and (b) the debt is wholly or partly unsecured; and (c) the person to whom the debt is owed has suffered loss or damage in relation to the debt because of the company’s insolvency; the Court may (whether or not it makes an order under subsection 1317EA(3)) order the first-mentioned person to pay to the company compensation equal to the amount of that loss or damage. “(2) A company’s liquidator may intervene in an application for a civil penalty order against a person in relation to a contravention of section 588G, unless the application was made under Division 4 of Part 9.4B. “(3) A company’s liquidator who so intervenes is entitled to be heard: (a) only if the Court is satisfied that the person committed the contravention in relation to the incurring of a debt by that company; and (b) only on the question whether the Court should order the person to pay compensation to the company. Criminal court may order compensation “588K.(1) If: (a) a court finds a person guilty of an offence constituted by a contravention of section 588G in relation to the incurring of a debt by a company; and (b) the court is satisfied that: (i) the debt is wholly or partly unsecured; and (ii) the person to whom the debt is owed has suffered loss or damage in relation to the debt because of the company’s insolvency; the court may (whether or not it imposes a penalty) order the first-mentioned person to pay to the company compensation equal to the amount of that loss or damage. (a) a court declares under Division 4 of Part 9.4B that a person has, by failing to prevent a company from incurring a debt, contravened section 588G in relation to the company; and (b) the court is satisfied that: (i) the debt is wholly or partly unsecured; and (ii) the person to whom the debt is owed has suffered loss or damage in relation to the debt because of the company’s insolvency; the court may (whether or not it makes an order under subsection 1317EA(3)) order the first-mentioned person to pay to the company compensation equal to the amount of that loss or damage. Enforcement of order under section 588J or 588K “588L. An order to pay compensation that a court makes under section 588J or 588K may be enforced as if it were a judgment of the court. Recovery of compensation for loss resulting from insolvent trading “588M.(1) This section applies where: (a) a person (in this section called the ‘director’) has contravened section 588G in relation to the incurring of a debt by a company; and (b) the person (in this section called the ‘creditor’) to whom the debt is owed has suffered loss or damage in relation to the debt because of the company’s insolvency; and (c) the debt was wholly or partly unsecured when the loss or damage was suffered; and (d) the company is being wound up; (e) the director has been convicted of an offence in relation to the contravention; or (f) a civil penalty order has been made against the director in relation to the contravention. “(2) The company’s liquidator may, by proceedings in a court of competent jurisdiction, recover from the director, as a debt due to the company, an amount equal to the amount of the loss or damage. “(3) The creditor may, as provided in Subdivision B but not otherwise, by proceedings in a court of competent jurisdiction, recover from the director, as a debt due to the creditor, an amount equal to the amount of the loss or damage. “(4) Proceedings under this section may only be begun within 6 years after the beginning of the winding up. Avoiding double recovery “588N. An amount recovered in proceedings under section 588M in relation to the incurring of a debt by a company is to be taken into account in working out the amount (if any) recoverable in any other proceedings under that section in relation to the incurring of the debt. Effect of sections 588J, 588K and 588M “588P. Sections 588J, 588K and 588M: (a) have effect in addition to, and not in derogation of, any rule of law about the duty or liability of a person because of the person’s office or employment in relation to a company; and (b) do not prevent proceedings from being instituted in respect of a breach of such a duty or in respect of such a liability. Certificates evidencing contravention “588Q. For the purposes of this Part, a certificate that: (a) purports to be signed by the Registrar or other proper officer of an Australian court; and (b) states: (i) that that court has declared that a specified person has, by failing to prevent a specified company from incurring a specified debt, contravened section 588G in relation to the company; or (ii) that a specified person was convicted by that court for an offence constituted by a contravention of section 588G in relation to the incurring of a specified debt by a specified company; or (iii) that a specified person charged before that court with such an offence was found in that court to have committed the offence but that the court did not proceed to convict the person of the offence; is, unless it is proved that the declaration, conviction or finding was set aside, quashed or reversed, conclusive evidence: (c) that the declaration was made, that the person was convicted of the offence, or that the person was so found, as the case may be; and (d) that the person committed the contravention. “Subdivision B—Proceedings by creditor Creditor may sue for compensation with liquidator’s consent “588R.(1) A creditor of a company that is being wound up may, with the written consent of the company’s liquidator, begin proceedings under section 588M in relation to the incurring by the company of a debt that is owed to the creditor. “(2) Subsection (1) has effect despite section 588T, but subject to section 588U. Creditor may give liquidator notice of intention to sue for compensation “588S. After the end of 6 months beginning when a company begins to be wound up, a creditor of the company may give to the company’s liquidator a written notice: (a) stating that the creditor intends to begin proceedings under section 588M in relation to the incurring by the company of a specified debt that is owed to the creditor; and (b) asking the liquidator to give to the creditor, within 3 months after receiving the notice: (i) a written consent to the creditor beginning the proceedings; or (iii) a written Statement of the reasons why the liquidator thinks that proceedings under section 588M in relation to the incurring of that debt should not be begun. When creditor may sue for compensation without liquidator’s consent “588T.(1) This section applies where a notice is given under section 588S. “(2) The creditor may begin proceedings in a court under section 588M in relation to the incurring by the company of the debt specified in the notice if: (a) as at the end of 3 months after the liquidator receives the notice, he or she has not consented to the creditor beginning such proceedings; and (b) on an application made after those 3 months, the court has given leave for the proceedings to begin. (a) during those 3 months, the liquidator gives to the creditor a written statement of the reasons why the liquidator thinks that such proceedings should not be begun; and (b) the creditor applies for leave under paragraph (2)(b); then: (c) the creditor must file the statement with the court when so applying; and (d) in determining the application, the court is to have regard to the reasons set out in the statement. Events preventing creditor from suing “588U.(1) A creditor of a company that is being wound up cannot begin proceedings under section 588M in relation to the incurring of a debt by the company if: (a) the company’s liquidator has applied under section 588FF in relation to the debt, or in relation to a transaction under which the debt was incurred; or (b) the company’s liquidator has begun proceedings under section 588M in relation to the incurring of the debt; or (c) the company’s liquidator has intervened in an application for a civil penalty order against a person in relation to a contravention of section 588G in relation to the incurring of the debt. “(2) Subsection (1) has effect despite sections 588R and 588T. “Division 5—Liability of holding company for insolvent trading by subsidiary When holding company liable “588V.(1) A corporation contravenes this section if: (a) the corporation is the holding company of a company at the time when the company incurs a debt; and (b) the company is insolvent at that time, or becomes insolvent by incurring that debt, or by incurring at that time debts including that debt; and (c) at that time, there are reasonable grounds for suspecting that the company is insolvent, or would so become insolvent, as the case may be; and (d) one or both of the following subparagraphs applies: (i) the corporation, or one or more of its directors, is or are aware at that time that there are such grounds for so suspecting; (ii) having regard to the nature and extent of the corporation’s control over the company’s affairs and to any other relevant circumstances, it is reasonable to expect that: (A) a holding company in the corporation’s circumstances would be so aware; or (B) one or more of such a holding company’s directors would be so aware; and (e) that time is at or after the commencement of this Part. “(2) A corporation that contravenes this section is not guilty of an offence. Recovery of compensation for loss resulting from insolvent trading “588W.(1) Where: (a) a corporation has contravened section 588V in relation to the incurring of a debt by a company; and (b) the person to whom the debt is owed has suffered loss or damage in relation to the debt because of the company’s insolvency; and (c) the debt was wholly or partly unsecured when the loss or damage was suffered; and (d) the company is being wound up; the company’s liquidator may, by proceedings in a court of competent jurisdiction, recover from the corporation, as a debt due to the company, an amount equal to the amount of the loss or damage. “(2) Proceedings under this section may only be begun within 6 years after the beginning of the winding up. Defences “588X.(1) This section has effect for the purposes of proceedings under section 588W. “(2) It is a defence if it is proved that, at the time when the debt was incurred, the corporation, and each relevant director (if any), had reasonable grounds to expect, and did expect, that the company was solvent at that time and would remain solvent even if it incurred that debt and any other debts that it incurred at that time. “(3) Without limiting the generality of subsection (2), it is a defence if it is proved that, at the time when the debt was incurred, the corporation, and each relevant director (if any): (a) had reasonable grounds to believe, and did believe: (i) that a competent and reliable person was responsible for providing to the corporation adequate information about whether the company was solvent; and (ii) that the person was fulfilling that responsibility; and (b) expected, on the basis of the information provided to the corporation by the person, that the company was solvent at that time and would remain solvent even if it incurred that debt and any other debts that it incurred at that time. “(4) If it is proved that, because of illness or for some other good reason, a particular relevant director did not take part in the management of the corporation at the time when the company incurred the debt, the fact that the director was aware as mentioned in subparagraph 588V(1)(d)(i) is to be disregarded. “(5) It is a defence if it is proved that the corporation took all reasonable steps to prevent the company from incurring the debt. “(6) In subsections (2), (3) and (4): ‘relevant director’ means a director of the corporation who was aware as mentioned in subparagraph 588V(1)(d)(i). “Division 6—Application of compensation under Division 4 or 5 Application of amount paid as compensation “588Y.(1) An amount paid to a company under section 588J, 588K, 588M or 588W is not available to pay a secured debt of the company unless all the company’s unsecured debts have been paid in full. “(2) Where: (a) under section 588J or 588K, or in proceedings under section 588M or 588W, a court orders a person to pay to the company compensation, or an amount, equal to the amount of loss or damage suffered by a person in relation to a debt because of the company’s insolvency; and (b) the court is satisfied that, at the time when the company incurred the debt, the person who suffered the loss or damage knew that the company was insolvent at that time or would become insolvent by incurring the debt, or by incurring at that time debts including the debt, as the case requires; the court may order that the compensation or amount paid to the company is not available to pay that debt unless all the company’s unsecured debts (other than debts to which orders under this subsection relate) have been paid in full. “(3) Subsection (2) does not apply in relation to proceedings under section 588M in relation to the incurring of a debt by a company if the proceedings are begun by a creditor of the company (as provided for in Subdivision B of Division 4). “ ‘Division 7—Person managing company while disqualified may become liable for company’s debts Court may make order imposing liability “588Z. Where: (a) a company is being wound up; and (b) at or after the commencement of this Part and within 4 years before the relation-back day, a person contravened: (i) section 229, 230, 599, 600 or 1317EF; or (ii) a previous law corresponding to a section referred to in subparagraph (i); by managing the company (as defined by section 91A); the Court may, on the application of the company’s liquidator, order that the person is personally liable for so much of the company’s debts and liabilities as does not exceed an amount specified in the order.”. Interpretation and application 112\. Section 589 of the Corporations Law is amended: (a) by omitting paragraph (1)(c) and substituting the following paragraphs: “(ba) of which a provisional liquidator has been appointed; (c) that is or has been under administration; (ca) that has executed a deed of company arrangement, even if the deed has since terminated;”; (b) by omitting from paragraph (2)(a) “4” and substituting “3”; (c) by omitting paragraph (b) of the definition of “appropriate officer” in subsection (5) and substituting the following paragraphs: “(aa) in relation to a company of which a provisional liquidator has been appointed—the provisional liquidator; (b) in relation to a company that is or has been under administration—the administrator; (ba) in relation to a company that has executed a deed of company arrangement—the deed’s administrator;”; (d) by omitting paragraph (a) of the definition of “relevant day” in subsection (5) and substituting the following paragraphs: “(a) in relation to a company that has been wound up, has been in the course of being wound up, or is being wound up: (i) if, because of Division 1A of Part 5.6, the winding up is taken to have begun on the day when an order that the company be wound up was made— the application for the order was filed; or (ii) otherwise—the winding up is taken because of Division 1A of Part 5.6 to have begun; (aa) in relation to a company of which a provisional liquidator has been appointed—the provisional liquidator was appointed;”; (e) by omitting paragraph (b) of the definition of “relevant day” in subsection (5) and substituting the following paragraphs: “(b) in relation to a company that is or has been under administration—the administration began; (ba) in relation to a company that has executed a deed of company arrangement—the deed was executed;”. Offences by officers of certain companies 113. Section 590 of the Corporations Law is amended: (a) by omitting from each of paragraphs (1)(a), (c), (g) and (h) “5 years” and substituting “10 years”; (b) by inserting in subparagraph (1)(b)(ii) “(except books of which the person is entitled, as against the company and the appropriate officer, to retain possession)” after “company”. Incurring of certain debts; fraudulent conduct 114. Section 592 of the Corporations Law is amended by inserting in paragraph (1)(a) “before the commencement of Part 5.7B” after “debt”. Inducement to be appointed liquidator etc. of company 115. Section 595 of the Corporations Law is amended by omitting everything after “some other person,” and substituting the following: “as: (a) a liquidator or provisional liquidator of the company; or (b) an administrator of the company; or (c) an administrator of a deed of company arrangement executed, or to be executed, by the company; or (d) a receiver, or a receiver and manager, of property of the company; or (e) a trustee or other person to administer a compromise or arrangement made between the company and any other person or persons.”. 116\. Before section 597 of the Corporations Law the following heading and sections are inserted in Part 5.9: “Division 1—Examining a person about a corporation Mandatory examination “596A. The Court is to summon a person for examination about a corporation’s examinable affairs if: (a) an eligible applicant applies for the summons; and (b) the Court is satisfied that the person is an examinable officer of the corporation or was such an officer during or after the 2 years ending: (i) if the corporation is under administration—on the section 513C day in relation to the administration; or (ii) if the corporation has executed a deed of company arrangement that has not yet terminated—on the section 513C day in relation to the administration that ended when the deed was executed; or (iii) if the corporation is being, or has been, wound up— when the winding up began; or (iv) otherwise—when the application is made. Discretionary examination “596B.(1) The Court may summon a person for examination about a corporation’s examinable affairs if: (a) an eligible applicant applies for the summons; and (b) the Court is satisfied that the person: (i) has taken part or been concerned in examinable affairs of the corporation and has been, or may have been, guilty of misconduct in relation to the corporation; or (ii) may be able to give information about examinable affairs of the corporation. “(2) This section has effect subject to section 596A. Affidavit in support of application under section 596B “596C.(1) A person who applies under section 596B must file an affidavit that supports the application and complies with the rules. “(2) The affidavit is not available for inspection except so far as the Court orders. Content of summons “596D.(1) A summons to a person under section 596A or 596B is to require the person to attend before the Court: (a) at a specified place and at a specified time on a specified day, being a place, time and day that are reasonable in the circumstances; and (b) to be examined on oath about the corporation’s examinable affairs. “(2) A summons to a person under section 596A or 596B may require the person to produce at the examination specified books that: (a) are in the person’s possession; and (b) relate to the corporation or to any of its examinable affairs. “(3) A summons under section 596A is to require under subsection (2) of this section the production of such of the books requested in the application for the summons as the summons may so require. Notice of examination “596E. If the Court summons a person for examination, the person who applied for the summons must give written notice of the examination to: (a) as many of the corporation’s creditors as reasonably practicable; and (b) each eligible applicant in relation to the corporation, except: (i) the person who applied for the examination; and (ii) if a person authorised by the Commission applied for the examination—the Commission; and (iii) a person who is such an eligible applicant only because the person is authorised by the Commission. Court may give directions about examination “596F.(1) Subject to section 597, the Court may at any time give one or more of the following: (a) a direction about the matters to be inquired into at an examination; (b) a direction about the procedure to be followed at an examination; (c) a direction about who may be present at an examination while it is being held in private; (d) a direction that a person be excluded from an examination, even while it is being held in public; (e) a direction about access to records of the examination; (f) a direction prohibiting publication or communication of information about the examination (including questions asked, and answers given, at the examination); (g) a direction that a document that relates to the examination and was created at the examination be destroyed. “(2) The Court may give a direction under paragraph (1)(e), (f) or (g) in relation to all or part of an examination even if the examination, or that part, was held in public. “(3) A person must not contravene a direction under subsection (1).”. Conduct of examination 117\. Section 597 of the Corporations Law is amended: (a) by omitting subsections (1), (2) and (3); (b) by omitting from subsection (4) “under this section shall” and substituting “is to”; (c) by omitting subsection (5) and substituting the following subsections: “(5A) Any of the following may take part in an examination: (a) the Commission; (b) any other eligible applicant in relation to the corporation; and for that purpose may be represented by a lawyer or by an agent authorised in writing for the purpose. “(5B) The Court may put, or allow to be put, to a person being examined such questions about the corporation or any of its examinable affairs as the Court thinks appropriate.”. (d) by omitting from subsection (6) “ordered under subsection (3)” and substituting “summoned under section 596A or 596B”; (e) by omitting from paragraph (6)(a) “order” and substituting “summons”; (f) by omitting subsections (7), (8) and (9) and substituting the following subsections: “(7) A person who attends before the Court for examination must not: (a) without reasonable excuse, refuse or fail to take an oath or make an affirmation; or (b) without reasonable excuse, refuse or fail to answer a question that the Court directs him or her to answer; or (c) make a statement that is false or misleading in a material particular; or (d) without reasonable excuse, refuse or fail to produce books that the summons requires him or her to produce. “(9) The Court may direct a person to produce, at an examination of that or any other person, books that are in the first-mentioned person’s possession and are relevant to matters to which the examination relates or will relate. “(9A) A person may comply with a direction under subsection (9) by causing the books to be produced at the examination.”; (g) by omitting subsection (11) and substituting the following subsection: “(10A) A person must not, without reasonable excuse, refuse or fail to comply with a direction under subsection (9).”; (h) by omitting from subsections (12) and (12A) “held under an order under subsection (3)”; (i) by omitting from subsection (13) “under this section”; (j) by inserting after subsection (14) the following subsection: “(14A) A written record made under subsection (13): (a) is to be open for inspection, without fee, by: (i) the person who applied for the examination; or (ii) an officer of the corporation; or (iii) a creditor of the corporation; and (b) is to be open for inspection by anyone else on paying the prescribed fee.”; (k) by omitting from subsections (15), (16) and (17) “section” (wherever occurring) and substituting “Division”; (l) by omitting subsection (18). 118\. After section 597 of the Corporations Law the following sections and heading are inserted: When Court is to require affidavit about corporation’s examinable affairs “597A.(1) The Court is to require a person to file an affidavit about a corporation’s examinable affairs if: (a) an eligible applicant applies for the requirement to be made; and (b) the Court is satisfied that the person is an examinable officer of the corporation or was such an officer during or after the 2 years ending: (i) if the corporation is under administration—on the section 513C day in relation to the administration; or (ii) if the corporation has executed a deed of company arrangement that has not yet terminated—on the section 513C day in relation to the administration that ended when the deed was executed; or (iii) if the corporation is being, or has been, wound up— when the winding up began; or (iv) otherwise—when the application is made; even if the person has been summoned under section 596A or 596B for examination about those affairs. “(2) The requirement is to: (a) specify such of the information requested in the application as relates to examinable affairs of the corporation; and (b) require the affidavit to set out the specified information; and (c) require the affidavit to be filed on or before a specified day that is reasonable in the circumstances. “(3) A person must not, without reasonable excuse, refuse or fail to comply with a requirement made of the person under subsection (1). “(4) The Court may excuse a person from answering a question at an examination about a corporation’s examinable affairs if the person has already filed an affidavit under this section about that corporation’s examinable affairs that sets out information that answers the question. Costs of unnecessary examination or affidavit “597B. Where the Court is satisfied that a summons to a person under section 596A or 596B, or a requirement made of a person under section 597A, was obtained without reasonable cause, the Court may order some or all of the costs incurred by the person because of the summons or requirement to be paid by: (a) in any case—the applicant for the summons or requirement; or (b) in the case of a summons—any person who took part in the examination. “Division 2—Orders against a person in relation to a corporation”. Order against person concerned with corporation 119. Section 598 of the Corporations Law is amended: (a) by omitting subsection (1); (b) by omitting from subsection (2) “the Commission or a prescribed person,” and substituting “an eligible applicant,”. 120. After section 600 of the Corporations Law the following Division and heading are inserted: “Division 3—Provisions applying to various kinds of external administration Powers of Court where outcome of voting at creditors’ meeting determined by related entity “600A.(1) Subsection (2) applies where, on the application of a creditor of a company or Part 5.1 body, the Court is satisfied: (a) that a proposed resolution has been voted on at: (i) in the case of a company—a meeting of creditors of the company held: (A) under Part 5.3A or a deed of company arrangement executed by the company; or (B) in connection with winding up the company; or (ii) in the case of a Part 5.1 body—a meeting of creditors, or of a class of creditors, of the body held under Part 5.1; and (b) that, if the vote or votes that a particular related creditor, or particular related creditors, of the company or body cast on the proposed resolution had been disregarded for the purposes of determining whether or not the proposed resolution was passed, the proposed resolution: (i) if it was in fact passed—would not have been passed; or (ii) if in fact it was not passed—would have been passed; or the question would have had to be decided on a casting vote; and (c) that the passing of the proposed resolution, or the failure to pass it, as the case requires: (i) is contrary to the interests of the creditors as a whole or of that class of creditors as a whole, as the case may be; or (ii) has prejudiced, or is reasonably likely to prejudice, the interests of the creditors who voted against the proposed resolution, or for it, as the case may be, to an extent that is unreasonable having regard to: (A) the benefits resulting to the related creditor, or to some or all of the related creditors, from the resolution, or from the failure to pass the proposed resolution, as the case may be; and (B) the nature of the relationship between the related creditor and the company or body, or of the respective relationships between the related creditors and the company or body; and (C) any other relevant matter. “(2) The Court may make one or more of the following: (a) if the proposed resolution was passed—an order setting aside the resolution; (b) an order that the proposed resolution be considered and voted on at a meeting of the creditors of the company or body, or of that class of creditors, as the case may be, convened and held as specified in the order; (c) an order directing that the related creditor is not, or such of the related creditors as the order specifies are not, entitled to vote on: (i) the proposed resolution; or (ii) a resolution to amend or vary the proposed resolution; (d) such other orders as the Court thinks necessary. “(3) In this section: ‘related creditor’, in relation to a company or Part 5.1 body, in relation to a vote, means a person who, when the vote was cast, was a related entity, and a creditor, of the company or body. Review by Court of resolution of creditors passed on casting vote of chairperson of meeting “600B.(1) This section applies if, because the person presiding at the meeting exercises a casting vote, a resolution is passed at a meeting of creditors of a company held: (a) under Part 5.3A or a deed of company arrangement executed by the company; or (b) in connection with winding up the company. “(2) A person may apply to the Court for an order setting aside or varying the resolution, but only if: (a) the person voted against the resolution in some capacity (even if the person voted for the resolution in another capacity); or (b) a person voted against the resolution on the first-mentioned person’s behalf. “(3) On an application, the Court may: (a) by order set aside or vary the resolution; and (b) if it does so—make such further orders, and give such directions, as it thinks necessary. “(4) On and after the making of an order varying the resolution, the resolution has effect as varied by the order. Court’s powers where proposed resolution of creditors lost on casting vote of chairperson of meeting “600C.(1) This section applies if, because the person presiding at the meeting exercises a casting vote, or refuses or fails to exercise such a vote, a proposed resolution is not passed at a meeting of creditors of a company held: (a) under Part 5.3A or a deed of company arrangement executed by the company; or (b) in connection with winding up the company. “(2) A person may apply to the Court for an order under subsection (3), but only if: (a) the person voted for the proposed resolution in some capacity (even if the person voted against the proposed resolution in another capacity); or (b) a person voted for the proposed resolution on the first-mentioned person’s behalf. “(3) On an application, the Court may: (a) order that the proposed resolution is taken to have been passed at the meeting; and (b) if it does so—make such further orders, and give such directions, as it thinks necessary. “(4) If an order is made under paragraph (3)(a), the proposed resolution: (a) is taken for all purposes (other than those of subsection (1)) to have been passed at the meeting; and (b) is taken to have taken effect: (i) if the order specifies a time when the proposed resolution is to be taken to have taken effect—at that time, even if it is earlier than the making of the order; or (ii) otherwise—on the making of the order. Interim order on application under section 600A, 600B or 600C “600D.(1) Where: (a) an application under subsection 600A(1), 600B(2) or 600C(2) has not yet been determined; and (b) the Court is of the opinion that it is desirable to do so; the Court may make such interim orders as it thinks appropriate. “(2) An interim order must be expressed to apply until the application is determined, but may be varied or discharged. Order under section 600A or 600B does not affect act already done pursuant to resolution “600E. An act done pursuant to a resolution as in force before the making under section 600A or 600B of an order setting aside or varying the resolution is as valid and binding on and after the making of the order as if the order had not been made. Limitation on right of suppliers of essential services to insist on payment as condition of supply “600F.(1) If: (a) a relevant authority of an eligible company requests, or authorises someone else to request, a person or authority (the supplier’) to supply an essential service to the company in this jurisdiction; and (b) the company owes an amount to the supplier in respect of the supply of the essential service before the effective day; the supplier must not: (c) refuse to comply with the request for the reason only that the amount is owing; or (d) make it a condition of the supply of the essential service pursuant to the request that the amount is to be paid. ‘effective day’, in relation to a relevant authority of an eligible company, means the day when the relevant authority became a relevant authority of the company, even if that day began before this section commenced; ‘eligible company’ means a company: (a) that is being wound up; or (b) a provisional liquidator of which is acting; or (c) that is under administration; or (d) that has executed a deed of company arrangement that has not yet terminated; or (e) a receiver, or receiver and manager, of property of which is acting; ‘essential service’ means: (a) electricity; or (b) gas; or (c) water; or (d) a telecommunications service within the meaning of the Telecommunications Act 1991; ‘relevant authority’, in relation to an eligible company, means: (a) the liquidator; or (b) the provisional liquidator; or (c) the administrator of the company; or (d) the administrator of the deed of company arrangement; or (e) the receiver, or receiver and manager; as the case requires. “Division 4—Transitional”. 121\. After section 1091 of the Corporations Law the following section is inserted: Rights of trustee of estate of bankrupt shareholder “1091A.(1) Where: (a) because of the Bankruptcy Act 1966, a share in a company, being part of the property of a bankrupt, vests in the trustee of the bankrupt’s estate; and (b) the bankrupt is the registered holder of that share; this section applies whether or not the trustee has been registered as the holder of the share. “(2) On producing such information as the company’s directors properly require, the trustee is entitled to: (a) the same dividends and other benefits; and (b) the same rights, for example, but without limitation, rights in relation to: (i) meetings of the company; or (ii) documents, including notices of such meetings; or (iii) voting; or (iv) inspection of the company’s records; as the bankrupt would be entitled to if he or she were not a bankrupt. “(3) The trustee has the same rights: (a) to transfer the share; and (b) to require a person to do an act or give a consent in connection with completing or registering a transfer of the share; as the bankrupt would have if he or she were not a bankrupt. “(4) If the trustee transfers the share, the transfer is as valid as if the trustee had been registered as the holder of the share when the trustee executed the instrument of transfer. “(5) A person or body whose consent or approval is required for the transfer of shares in the company must not unreasonably withhold consent or approval for the transfer of the share by the trustee. “(6) A person who contravenes subsection (5) is not guilty of an offence. “(7) If: (a) the company’s constitution requires: (i) the share to be offered for purchase to a member of the company; or (ii) an invitation to buy the share to be issued to such a member; and (b) as at the end of a reasonable period after the trustee so offers the share, or so issues such an invitation, no such member has agreed to buy the share from the trustee at a reasonable price; the trustee may sell and transfer the share to a person other than such a member. “(8) A provision of the company’s constitution is void as against the trustee in so far as, apart from this section, it would affect rights attached to the share: (a) because the bankrupt is a bankrupt; or (b) because of some event that led to the bankrupt becoming, or that indicated that the bankrupt was about to become, or might be about to become, a bankrupt; or (c) for reasons including a reason referred to in paragraph (a) or (b). “(9) Nothing in this section limits the generality of anything else in it. “(10) This section has effect despite anything in the company’s constitution.”. 122\. Schedule 3 to the Corporations Law is amended: (a) by omitting: “Section 436: Penalty: $1,000 or imprisonment for 3 months, or both. Section 437: Penalty: $1,000 or imprisonment for 3 months, or both. Section 457: Penalty: $1,000 or imprisonment for 3 months, or both.” and substituting: “Subsection 437C(1): Subsection 437D(5): Subsection 438B(4): Subsection 438C(5): Penalty: $5,000 or imprisonment for 1 year, or both.”; Section 448B: Section 448C: Section 448D: Section 450E: Penalty: $1,000. Section 471A: Penalty: $2,500 or imprisonment for 6 months, or both.”; (b) by inserting before “Section 494:”: “Subsection 486A(8): Penalty: $10,000 or imprisonment for 2 years, or both.”; (c) by inserting before “Section 532:”: “Subsection 530A(6): Subsections 530B(3) and (6): Penalty: $5,000 or imprisonment for 1 year, or both.”; (d) by omitting: “Section 597: Penalty: $10,000 or imprisonment for 2 years, or both.” and substituting: “Subsection 596F(3): Penalty: $10,000 or imprisonment for 2 years, or both. Subsections 597(6), (7), (10A) and (13): Penalty: $10,000 or imprisonment for 2 years, or both. Subsection 597A(3): Penalty: $10,000 or imprisonment for 2 years, or both.”. Consequential amendments of the Corporations Law 123. The Corporations Law is amended as set out in Schedule 1. Division 2—Consequential amendment of the Australian Securities Commission Act 19892 124. Section 5 of the Principal Act is amended by inserting after paragraph (b) of the definition of “officer” in subsection (1) the following paragraphs: “(ba) an administrator of the body; (bb) an administrator of a deed of company arrangement executed by the body;”. Division 3—Consequential amendments of other Acts