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Corporate Law Reform Act 1992

Authoritative Version
Act No. 210 of 1992 as made
An Act to change the Corporations Law and to amend some other Acts
Administered by: Treasury
Date of Assent 24 Dec 1992

Corporate Law Reform Act 1992

No. 210 of 1992

TABLE OF PROVISIONS

PART 1—PRELIMINARY

 

Section

 

1.

Short title

2.

Commencement

3.

Meaning of “Corporations Law” and “Principal Act”

PART 2—DUTIES OF OFFICERS OF CORPORATIONS

Division 1Amendments of the Corporations Law

4.

Dictionary

5.

Insertion of new section:

 

73A. When a court is taken to find a person guilty of an offence

6.

Being or becoming subject to a section 229 prohibition, a section 230 or 599 order, a section 600 notice or a civil penalty disqualification

7.

Effect of such a prohibition, order, notice or disqualification

8.

Vacation of office of director

9.

Certain persons not to manage corporations

10.

Court may order person not to manage corporation

11.

Duty and liability of officer of corporation

12.

Register of disqualified company directors and other officers

13.

Public companies

14.

Contravention of Part

15.

References to civil penalty disqualification inserted in certain provisions

16.

Penalty notices

17.

Insertion of new Part:


TABLE OF PROVISIONScontinued

 

Section

 

PART 9.4B—CIVIL AND CRIMINAL CONSEQUENCES OF CONTRAVENING CIVIL PENALTY PROVISIONS

 

Division 1Preliminary

 

1317DA.

Civil penalty provisions

 

1317DB.

Person involved in contravening a provision taken to have contravened the provision

 

1317DC.

Contravention committed partly in, and partly out of, the jurisdiction

 

1317DD.

Reciprocity in relation to contraventions

 

Division 2Civil penalty orders

 

1317EA.

Court may make civil penalty orders

 

1317EB.

Who may apply for civil penalty order

 

1317EC.

Time limit for application

 

1317ED.

Application for civil penalty order is a civil proceeding

 

1317EF.

Person must comply with order not to manage corporation

 

1317EG.

Enforcement of order to pay pecuniary penalty

 

1317EH.

Commission may require a person to give assistance in connection with application for civil penalty order

 

Division 3Criminal proceedings

 

1317FA.

When contravention of civil penalty provision is an offence

 

1317FB.

Application for civil penalty order precludes later criminal proceedings

 

Division 4Effect of criminal proceedings on application for civil penalty order

 

1317GA.

When Division applies

 

1317GB.

Effect during criminal proceedings

 

1317GC.

Final outcome precluding application for civil penalty order

 

1317GD.

Final outcome not precluding application for civil penalty order

 

1317GE.

After unsuccessful committal proceeding, court may preclude application for civil penalty order

 

1317GF.

Application for civil penalty order based on alternative verdict at jury trial

 

1317GG.

Application for civil penalty order based on alternative finding by court of summary jurisdiction

 

1317GH.

Application for civil penalty order based on alternative finding by appeal court

 

1317GJ.

After setting aside declaration, court may preclude application for civil penalty order

 

1317GK.

On unsuccessful appeal against declaration, Court may make civil penalty orders

 

1317GL.

Appeals under this Division

 

Division 5Compensation for loss suffered by corporation

 

1317HA.

On application for civil penalty order, Court may order compensation

 

1317HB.

Criminal court may order compensation

 

1317HC.

Enforcement of order under section 1317HA or 1317HB

 

1317HD.

Recovery of profits, and compensation for loss, resulting from contravention

 

1317HE.

Effect of sections 1317HA, 1317HB and 1317HD

 

1317HF.

Certificates evidencing contravention

 

Division 6Miscellaneous

 

1317JA.

Relief from liability for contravention of civil penalty provision

 

1317JB.

Effect of contravening civil penalty provisions of Corporations Law of 2 or more jurisdictions

 

1317JC.

Part does not limit power to award punitive damages


TABLE OF PROVISIONScontinued

 

Section

 

18.

Schedule 3

 

Division 2Amendment of the Australian Securities Commission Act 1989

19.

Recovery of expenses of investigation

 

Division 3Amendment of the Bankruptcy Act 1966

20.

Debts provable in bankruptcy

PART 3—FINANCIAL BENEFITS TO RELATED PARTIES OF PUBLIC COMPANIES

21.

How to read references to provisions of this Law

22.

Dictionary

23.

Effect of certain contraventions of this Law

24.

Directors to disclose certain interests

25.

Insertion of new sections:

 

232A.

Voting by interested director of public company

 

232B.

Commission may exempt directors from section 232A in appropriate cases

26.

Loans to directors

27.

Insertion of new Part:

 

PART 3.2A—FINANCIAL BENEFITS TO RELATED PARTIES OF PUBLIC COMPANIES

 

Division 1Object and outline of Part

 

243A.

Object

 

243B.

Outline

 

Division 2The meaning of expressions

 

243C.

Entities

 

243D.

Parent entities, child entities and sibling entities

 

243E.

Control

 

243F.

Related party of a public company

 

243G.

Giving a financial benefit

 

Division 3The prohibitions

 

243H.

Prohibited financial benefits to related parties of public companies

 

Division 4General exceptions

 

243J.

Financial benefit under contract made before section 243H begins to apply

 

243K.

Remunerating officers

 

243L.

Advances, up to prescribed amount, to director or director’s spouse

 

243M.

Financial benefit given to or by closely-held subsidiary

 

243N.

Financial benefit on arm’s length terms

 

243PA.

Financial benefits to members as such

 

243PB.

Financial benefit under court order

 

Division 5Financial benefits approved by general meeting of public company

 

Subdivision AExceptions from the prohibitions

 

243Q.

Financial benefit permitted by resolution of members

 

243R.

Financial benefit under contract permitted by resolution of members

 

243S.

Resolution may specify matters by class or kind

 

243T.

Effect of resolution


TABLE OF PROVISIONScontinued

Section

 

Subdivision BConditions to be satisfied

 

243U.

Company must lodge material that will be put to members

 

243V.

Requirements for explanatory statement to members

 

243W.

Commission may comment on proposed resolution

 

243X.

Requirements for notice of meeting

 

243Y.

Other material put to members

 

243ZA.

Proposed resolution cannot be varied

 

243ZB.

Voting on the resolution

 

243ZC.

Notice of resolution to be lodged

 

243ZD.

Declaration by Court of substantial compliance

Division 6Enforcement

 

243ZE.

Consequences of giving financial benefit when not permitted

 

243ZF.

Voting by or on behalf of related party interested in proposed

 

 

resolution under Division 5

 

243ZG.

Contraventions by an entity that is not a legal person

 

243ZH.

Retaining records made under section 243ZB

 

243ZI.

Effect of Part

28.

Schedule 3

PART 4—EXTERNAL ADMINISTRATION OF COMPANIES AND PART 5.7 BODIES

Division 1Amendments of the Corporations Law

29.

Dictionary

 

30.

Affairs of a body corporate

31.

Insertion of new sections:

 

53AA.

Business affairs of a body corporate

 

53AB.

Business affairs of a natural person.

 

53AC.

Business affairs of a partnership

 

53AD.

Business affairs of a trust

32.

Insertion of new sections:

 

64A.

Entities

 

64B.

Entities connected with a corporation

33.

Officers of bodies corporate and other entities

34.

Insertion of new section:

 

95A.

Solvency and insolvency

35.

Interpretation

36.

Duty and liability of officer of corporation

37.

Substitution of Part heading

38.

Application of Part

39.

Insertion of new section:

 

418A.

Court may declare whether controller is validly acting

40.

Insertion of new section:

 

419A.

Liability of controller under pre-existing agreement about property used by corporation

41.

Insertion of new sections:

 

420A.

Controller’s duty of care in exercising power of sale

 

420B.

Court may authorise managing controller to dispose of property despite prior charge

 

420C.

Receiver’s power to carry on corporation’s business during winding up

42.

Controller’s duties in relation to bank accounts and accounting records

43.

Insertion of new section:

 

421A. Managing controller to report within 2 months about corporation’s affairs

44.

Supervision of controller


TABLE OF PROVISIONScontinued

Section

 

 

45.

Substitution of section:

 

424.

Controller may apply to Court

46.

Court’s power to fix receiver’s remuneration

47.

Repeal of section 426 and substitution of new section:

 

426.

Controller has qualified privilege in certain cases

48.

Notification of matters relating to controller

49.

Statement that receiver appointed or other controller acting

50.

Officers to report to controller about corporation’s affairs

51.

Controller may require reports

52.

Controller may inspect books

53.

Lodging controller’s accounts

54.

Enforcing controller’s duty to make returns

55.

Insertion of new sections:

 

434A.

Court may remove controller for misconduct

 

434B.

Court may remove redundant controller

 

434C.

Effect of sections 434A and 434B

56.

Repeal of Part 5.3 and substitution of new Part:

 

PART 5.3A—ADMINISTRATION OF A COMPANY’S AFFAIRS WITH A VIEW TO EXECUTING A DEED OF COMPANY ARRANGEMENT

 

Division 1Preliminary

 

435A.

Object of Part

 

435B.

Interpretation

 

435C.

When administration begins and ends

 

Division 2Appointment of administrator and first meeting of creditors

 

436A.

Company may appoint administrator if board thinks it is or will become insolvent

 

436B.

Liquidator may appoint administrator

 

436C.

Chargee may appoint administrator

 

436D.

Company already under administration

 

436E.

Purpose and timing of first meeting of creditors

 

436F.

Functions of committee of creditors

 

436G.

Membership of committee

 

Division 3Administrator assumes control of company’s affairs

 

437A.

Role of administrator

 

437B.

Administrator acts as company’s agent

 

437C.

Powers of other officers suspended

 

437D.

Only administrator can deal with company’s property

 

437E.

Order for compensation where officer involved in void transaction

 

437F.

Effect of administration on company’s members

 

Division 4Administrator investigates company’s affairs

 

438A.

Administrator to investigate affairs and consider possible courses of action

 

438B.

Directors to help administrator

 

438C.

Administrator’s rights to company’s books

 

438D.

Reports by administrator

 

Division 5Meeting of creditors decides company’s future

 

439A.

Administrator to convene meeting and inform creditors

 

439B.

Conduct of meeting

 

439C.

What creditors may decide


TABLE OF PROVISIONScontinued

Section

 

Division 6Protection of company’s property during administration

 

440A.

Winding up company

 

440B.

Charge unenforceable

 

440C.

Owner or lessor cannot recover property used by company

 

440D.

Stay of proceedings

 

440E.

Administrator not liable in damages for refusing consent

 

440F.

Suspension of enforcement process

 

440G.

Duties of court officer in relation to property of company

 

440H.

Lis pendens taken to exist.

 

440J.

Administration not to trigger liability of director or relative under guarantee of company’s liability

 

Division 7—Rights of chargee, owner or lessor

 

441A.

Where chargee acts before or during decision period

 

441B.

Where enforcement of charge begins before administration

 

441C.

Charge on perishable property

 

441D.

Court may limit powers of chargee, etc. in relation to charged property

 

441E.

Giving a notice under a charge

 

441F.

Where recovery of property begins before administration

 

441G.

Recovering perishable property

 

441H.

Court may limit powers of receiver etc. in relation to property used by company

 

441J.

Giving a notice under an agreement about property

 

441K.

Effect of Division

 

Division 8Powers of administrator

 

442A.

Additional powers of administrator

 

442B.

Dealing with property subject to a floating charge that has crystallised

 

442C.

When administrator may dispose of encumbered property

 

442D.

Administrator’s powers subject to powers of chargee, receiver etc.

 

442E.

Administrator has qualified privilege

 

442F.

Protection of persons dealing with administrator

 

Division 9Administrator’s liability and indemnity for debts of administration

 

Subdivision ALiability

 

443A.

General debts

 

443B.

Payments for property used or occupied by, or in the possession of, the company

 

443C.

Administrator not otherwise liable for company’s debts

 

Subdivision BIndemnity

 

443D.

Right of indemnity

 

443E.

Right of indemnity has priority over other debts

 

443F.

Lien to secure indemnity

 

Division 10Execution and effect of deed of company arrangement

 

444A.

Effect of creditors’ resolution

 

444B.

Execution of deed

 

444C.

Creditor etc. not to act inconsistently with deed before its execution

 

444D.

Effect of deed on creditors

 

444E.

Protection of company’s property from persons bound by deed

 

444F.

Court may limit rights of secured creditor or owner or lessor

 

444G.

Effect of deed on company, officers and members

 

444H.

Extent of release of company’s debts


TABLE OF PROVISIONScontinued

Section

 

Division 11Variation, termination and avoidance of deed

 

445A.

Variation of deed by creditors

 

445B.

Court may cancel variation

 

445C.

When deed terminates

 

445D.

When Court may terminate deed

 

445E.

Creditors may terminate deed and resolve that company be wound up

 

445F.

Meeting of creditors to consider proposed variation or termination of deed

 

445G.

When Court may void or validate deed

 

445H.

Effect of termination or avoidance

 

Division 12Transition to creditors’ voluntary winding up

 

446A.

Administrator becomes liquidator in certain cases

 

446B.

Regulations may provide for transition in other cases

 

 

Division 13Powers of Court

 

447A.

General power to make orders

 

447B.

Orders to protect creditors during administration

 

447C.

Court may declare whether administrator validly appointed

 

447D.

Administrator may seek directions

 

447E.

Supervision of administrator of company or deed

 

447F.

Effect of Division

 

Division 14Qualifications of administrators

 

448A.

Appointee must consent

 

448B.

Administrator must be registered liquidator

 

448C.

Disqualification of person connected with company

 

448D.

Disqualification of insolvent under administration

 

Division 15Removal, replacement and remuneration of administrator

 

449A.

Appointment of administrator cannot be revoked

 

449B.

Court may remove administrator

 

449C.

Vacancy in office of administrator of company

 

449D.

Vacancy in office of administrator of deed of company arrangement

 

449E.

Remuneration of administrator

 

Division 16Notices about steps taken under Part

 

450A.

Appointment of administrator

 

450B.

Execution of deed of company arrangement

 

450C.

Failure to execute deed of company arrangement

 

450D.

Termination of deed of company arrangement

 

450E.

Notice in public documents etc. of company

 

450F.

Effect of contravention of this Division

 

Division 17Miscellaneous

 

451A.

Appointment of 2 or more administrators of company

 

451B.

Appointment of 2 or more administrators of deed of company arrangement

 

451C.

Effect of things done during administration of company

 

451D.

Time for doing act does not run while act prevented by this Part

57.

Insertion of new Part and heading:


TABLE OF PROVISIONScontinued

Section

 

 

PART 5.4—WINDING UP IN INSOLVENCY

 

Division 1When company to be wound up in insolvency

 

459A.

Order that insolvent company be wound up in insolvency

 

459B.

Order made on application under section 260, 462 or 464

 

459C.

Presumptions to be made in certain proceedings

 

459D.

Contingent or prospective liability relevant to whether company solvent

 

Division 2Statutory demand

 

459E.

Creditor may serve statutory demand on company

 

459F.

When company taken to fail to comply with statutory demand

 

Division 3Application to set aside statutory demand

 

459G.

Company may apply

 

459H.

Determination of application where there is a dispute or offsetting claim

 

459J.

Setting aside demand on other grounds

 

459K.

Effect of order setting aside demand

 

459L.

Dismissal of application

 

459M.

Order subject to conditions

 

459N.

Costs where company successful

 

Division 4Application for order to wind up company in insolvency

 

459P.

Who may apply for order under section 459A

 

459Q.

Application relying on failure to comply with statutory demand

 

459R.

Period within which application must be determined

 

459S.

Company may not oppose application on certain grounds

 

459T.

Application to wind up joint debtors in insolvency

PART 5.4A—WINDING UP BY THE COURT ON OTHER GROUNDS

58.

Repeal of section 460

59.

General grounds on which company may be wound up by Court

60.

Standing to apply for winding up

61.

Repeal of section 463

62.

Repeal of section 465 and substitution of headings and new section:

 

PART 5.4B—WINDING UP IN INSOLVENCY OR BY THE COURT

 

Division 1General

 

465A.

Notice of application

 

465B.

Substitution of applicants

 

465C.

Applicant to be given notice of grounds for opposing application

63.

Court’s powers on hearing application

64.

Insertion of new sections:

 

467A.

Effect of defect or irregularity on application under Part 5.4 or 5.4A

 

467B.

Court may order winding up of company that is being wound up voluntarily

65.

Avoidance of dispositions of property, attachments etc.

66.

Insertion of Division heading

67.

Effect on creditors and contributories

68.

Insertion of new sections:

 

471A.

Powers of other officers suspended during winding up

 

471B.

Stay of proceedings and suspension of enforcement process

 

471C.

Secured creditor’s rights not affected


TABLE OF PROVISIONScontinued

Section

 

69.

Court to appoint official liquidator

70.

General provisions about liquidators

71.

Custody and vesting of company’s property

72.

References to liquidator in certain provisions to include references to provisional liquidator

73.

Powers of liquidator

74.

Application of property; list of contributories

75.

Orders for release or dissolution

76.

Delivery of property to liquidator

77.

Insertion of new sections:

 

486A.

Court may make order to prevent officer or related entity from avoiding liability to company

 

486B.

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

78.

Delegation to liquidator of certain powers of Court

79.

Insertion of new section:

 

490.

When company cannot wind up voluntarily

80.

Repeal of section 492

81.

Duty of liquidator where company turns out to be insolvent

82.

Powers and duties of liquidator

83.

Arrangement: when binding on creditors

84.

Application of Part

85.

Insertion of new Division:

 

Division 1AWhen winding up taken to begin

 

513A.

Winding up ordered by the Court

 

513B.

Voluntary winding up

 

513C.

Section 513C day in relation to an administration under Part 5.3A

 

513D.

Validity of proceedings in earlier winding up

86.

Repeal of section 525

87.

Insertion of new sections:

 

530A.

Officers to help liquidator

 

530B.

Liquidator’s rights to company’s books

 

530C.

Warrant to search for, and seize, company’s property or books

88.

Books to be kept by liquidator

89.

Disqualification of liquidator

90.

When liquidator has qualified privilege

91.

Books of company

92.

Repeal of section 553 and substitution of headings and sections:

 

Subdivision A—Admission to proof of debts and claims

 

553.

Debts or claims that are provable in winding up

 

553A.

Member cannot prove debt unless contributions paid

 

553B.

Insolvent companies—penalties and fines not generally provable

 

553C.

Insolvent companies—mutual credit and set-off

 

553D.

Debts or claims may be proved formally or informally

 

553E.

Application of Bankruptcy Act to winding up of insolvent company

 

Subdivision BComputation of debts and claims

93.

General rule—compute amount as at relevant date

94.

Insertion of sections and headings:

 

554A.

Determination of value of debts and claims of uncertain value

 

554B.

Discounting of debts payable after relevant date

 

554C.

Conversion into Australian currency of foreign currency debts or claims

 

Subdivision CSpecial provisions relating to secured creditors of insolvent companies

 

554D.

Application of Subdivision


TABLE OF PROVISIONScontinued

Section

 

 

 

554E.

Proof of debt by secured creditor

 

554F.

Redemption of security by liquidator

 

554G.

Amendment of valuation

 

554H.

Repayment of excess

 

554J.

Subsequent realisation of security

Subdivision DPriorities

95.

Debts and claims proved to rank equally except as otherwise provided

96.

Priority payments

97.

Repeal of section 557

98.

Debts of a class to rank equally

99.

Advances for company to make priority payments in respect of employees

100.

Application of proceeds of contracts of insurance

101.

Insertion of new section:

 

562A.

Application of proceeds of contracts of reinsurance

102.

Insertion of new sections and heading:

 

563A.

Member’s debts to be postponed until other debts and claims satisfied

 

Subdivision EMiscellaneous

 

563B.

Interest on debts and claims from relevant date to date of payment

 

563C.

Debt subordination

103.

Substitution of heading

104.

Undue preference

105.

Effect of floating charge

106.

Liquidator’s right to recover in respect of certain transactions

107.

Insertion of heading

108.

Disclaimer by liquidator; application to Court by party to contract

109.

Insertion of new sections and heading:

 

568A.

Liquidator must give notice of disclaimer

 

568B.

Application to set aside disclaimer before it takes effect

 

568C.

When disclaimer takes effect

 

568D.

Effect of disclaimer

 

568E.

Application to set aside disclaimer after it has taken effect

 

568F.

Court may dispose of disclaimed property

 

Division 7BEffect on enforcement process against company’s property

110.

Insertion of new headings and new sections:

 

Division 1Application of Part 5.3A to matters arising under corresponding laws

 

588AA.

Application in this jurisdiction

 

588AB.

Enforcement of orders

 

Division 2Winding up recognised companies

111.

Insertion of new Part:

 

PART 5.7B—RECOVERING PROPERTY OR COMPENSATION FOR THE BENEFIT OF CREDITORS OF INSOLVENT COMPANY

 

Division 1—Preliminary

 

588D.

Secured debt may become unsecured

 

588E.

Presumptions to be made in recovery proceedings

 

Division 2Voidable transactions

 

588FA.

Unfair preferences

 

588FB.

Uncommercial transactions

 

588FC.

Insolvent transactions

 

588FD.

Unfair loans to a company

 

588FE.

Voidable transactions


TABLE OF PROVISIONScontinued

Section

 

 

 

588FF.

Court may make orders about voidable transactions

 

588FG.

Transaction not voidable as against certain persons

 

588FH.

Liquidator may recover from related entity benefit resulting from insolvent transaction

 

588FI.

Creditor who gives up benefit of unfair preference may prove for preferred debt

 

588FJ.

Floating charge created within 6 months before relation-back day

 

Division 3Director’s duty to prevent insolvent trading

 

588G.

Director’s duty to prevent insolvent trading by company

 

588H.

Defences

 

Division 4Director liable to compensate company

 

Subdivision AProceedings against director

 

588J.

On application for civil penalty order, Court may order compensation

 

588K.

Criminal court may order compensation

 

588L.

Enforcement of order under section 588J or 588K

 

588M.

Recovery of compensation for loss resulting from insolvent trading

 

588N.

Avoiding double recovery

 

588P.

Effect of sections 588J, 588K and 588M

 

588Q.

Certificates evidencing contravention

 

Subdivision BProceedings by creditor

 

588R.

Creditor may sue for compensation with liquidator’s consent

 

588S.

Creditor may give liquidator notice of intention to sue for compensation

 

588T.

When creditor may sue for compensation without liquidator’s consent

 

588U.

Events preventing creditor from suing

 

Division 5Liability of holding company for insolvent trading by subsidiary

 

588V.

When holding company liable

 

588W.

Recovery of compensation for loss resulting from insolvent trading

 

588X.

Defences

 

Division 6Application of compensation under Division 4 or 5

 

588Y.

Application of amount paid as compensation

 

Division 7Person managing company while disqualified may become liable for company’s debts

 

588Z.

Court may make order imposing liability

112.

Interpretation and application

113.

Offences by officers of certain companies

114.

Incurring of certain debts; fraudulent conduct

115.

Inducement to be appointed liquidator etc. of company

116.

Insertion of heading and new sections:

 

Division 1Examining a person about a corporation

 

596A.

Mandatory examination

 

596B.

Discretionary examination

 

596C.

Affidavit in support of application under section 596B

 

596D.

Content of summons

 

596E.

Notice of examination

 

596F.

Court may give directions about examination

117.

Conduct of examination

118.

Insertion of new sections and heading:

 

597A.

When Court is to require affidavit about corporation’s examinable affairs

 

597B.

Costs of unnecessary examination or affidavit

 


TABLE OF PROVISIONScontinued

Section

 

 

Division 2Orders against a person in relation to a corporation

119.

Order against person concerned with corporation

120.

Insertion of new Division and heading:

 

Division 3Provisions applying to various kinds of external administration

 

600A.

Powers of Court where outcome of voting at creditors’ meeting determined by related entity

 

600B.

Review by Court of resolution of creditors passed on casting vote of chairperson of meeting

 

600C.

Court’s powers where proposed resolution of creditors lost on casting vote of chairperson of meeting

 

600D.

Interim order on application under section 600A, 600B or 600C

 

600E.

Order under section 600A or 600B does not affect act already done pursuant to resolution

 

600F.

Limitation on right of suppliers of essential services to insist on payment as condition of supply

 

Division 4Transitional

121.

Insertion of new section:

 

1091A.

Rights of trustee of estate of bankrupt shareholder

122.

Schedule 3

 

123.

Consequential amendments of the Corporations Law

 

Division 2Consequential amendment of the Australian Securities Commission Act 1989

124.

Interpretation

 

Division 3Consequential amendments of other Acts

125.

Schedule 2

 

PART 5—IMPLEMENTING THE CLEARING HOUSE SUBREGISTER SYSTEM

126.

Dictionary

 

127.

Application not to be granted unless applications also made under corresponding laws

128.

Insertion of new Part:

 

PART 7.2A—THE SECURITIES CLEARING HOUSE

 

779A.

Interpretation

 

779B.

Approval of securities clearing house

 

779C.

Commission to be notified of amendments of business rules

 

779D.

Securities clearing house to assist Commission

 

779E.

Securities clearing house to notify Commission of disciplinary action

 

779F.

Issuers of quoted securities and quoted rights to comply with SCH business rules

 

779G.

Power of Court to order compliance with provisions of SCH business rules

 

779H.

Qualified privilege in respect of disciplinary proceedings

 

779J.

Provision of settlement facilities not a securities business etc.

129.

Interpretation

130.

Transfer of securities etc. and payment of money

131.

Novation of agreements

132.

Definitions

133.

Effect of using a transfer delivery service

134.

Claim by selling dealer in respect of default by buying dealer

135.

Claim by buying dealer in respect of default by selling dealer

136.

Effect of novation, under business rules, of agreement for purchase


TABLE OF PROVISIONScontinued

Section

 

137.

Claim by selling client in respect of default by selling dealer

138.

Claim by buying client in respect of default by buying dealer

139.

Insertion of new section:

 

952A.

Cash settlement of claims—SCH-regulated transfers

140.

Cash settlement of claims—transfers other than SCH-regulated transfers

141.

Effect of using a transfer delivery service

142.

Effect of novation, under business rules, of guaranteed securities loan

143.

Effect of using a transfer delivery service

144.

Claim in respect of failure to pay net amount in respect of transactions

145.

Claim in respect of failure to transfer net number of securities in respect of transactions

146.

How claim under subsection 954P(2) is to be satisfied

147.

How claim under subsection 954P(3) is to be satisfied

148.

Claims in respect of default by TDS nominee

149.

How claim under subsection 954X(2) is to be satisfied

150.

Nexus with this jurisdiction

151.

Interpretation

152.

Repeal of section 956 and substitution of new section:

 

956.

Situations to which Division applies

153.

Claim by transferee or sub-transferee

154.

Discretion to pay amounts not received etc. because of failure to transfer securities

155.

Application of Fund in respect of certain claims

156.

Arbitration of amount of cash settlement of certain claims

157.

Subrogation of SEGC to claimant’s rights etc.

158.

Nature of shares and other interests

159.

Numbering shares

160.

Instrument of transfer

161.

Duties of company with respect to issue of certificates

162.

Insertion of heading

163.

Interpretation

164.

Insertion of new sections:

 

1097A.

Quoted securities and rights

 

1097B.

SCH business rules may provide that securities or rights continue to be quoted securities or rights

 

1097C.

Commission may declare Law applies to securities as if they were quoted securities or rights

 

1097D.

Transfer that substantially complies with SCH business rules

165.

Insertion of new heading and section:

 

Subdivision BSufficient transfers (transfers other than SCH-regulated transfers)

 

1099A.

Subdivision does not apply to SCH-regulated transfers

166.

Insertion of new headings and sections:

 

Subdivision CSCH-regulated transfers

 

1109A.

Member organisation’s authority to enter into transaction continues despite client’s death

 

1109B.

Authority to enter into transaction gives authority to transfer

 

1109C.

Effect of proper SCH transfer

 

1109D.

Effect of proper SCH transfer on transferee

 

1109E.

Warranties by member organisation whose identification code is included in transfer document

 

1109F.

Indemnities in respect of warranted matters

 

1109G.

Joint and several warranties and liabilities

 

1109H.

Quoted securities and rights from other jurisdictions: effect of sections 1109E, 1109F and 1109G

 

1109J.

Securities clearing house entitled to assume its business rules complied with

 

1109K.

SCH-regulated transfer not to be registered unless proper SCH transfer

 

1109L.

Issuing body not to refuse to register proper SCH transfer

 

1109M.

Trustees and legal representatives may be SCH participants etc.


TABLE OF PROVISIONScontinued

Section

Subdivision DMiscellaneous

167.

Operation of Division

168.

Occupation need not appear in transfer document, register etc.

169.

Insertion of new section:

 

1112A.

Offences: inclusion of identification codes in proper SCH transfers

170.

Power of Court to make certain orders

171.

Repeal of section 1301 and substitution of new section:

 

1301.

Location of books on computers

172.

Form and evidentiary value of books

173.

Schedule 3

 

PART 6—MISCELLANEOUS

 

Division 1Amendments of the Corporations Law

174.

Dictionary

175.

Address of registered office etc.

176.

Return of allotment

177.

Insertion of new section:

 

335A.

Company’s address for service for the purposes of section 335

178.

Exemption of certain companies

179.

Insertion of new section:

 

1345A.

Minister may delegate prescribed functions and powers under this Law

 

Division 2—Amendments of the Australian Securities Commission Act 1989

180.

Functions and powers

181.

Liability for damages

PART 7—COMMENCEMENT AND APPLICATION OF CHANGES TO THE CORPORATIONS LAW RESULTING FROM THIS ACT

182.

Effect of this Part

183.

General penalty provisions

184.

Changes to section 597

185.

Insertion of new Division:

 

Division 5Changes resulting from the Corporate Law Reform Act 1992

 

1372.

Commencement of subsection 6(4)

 

1373.

Application of changes to section 187

 

1374.

Application of change to paragraph 230(1)(d)

 

1375.

Application of certain changes to section 232

 

1376.

Application of sections 243H and 243ZE

 

1377.

Application of subsection 307(2)

 

1378.

Application of change to section 318

 

1379.

Application of certain changes to Part 5.2

 

1380.

Continued application of old Part 5.3 and related provisions

 

1381.

Certain provisions continue to apply in relation to official management

 

1382.

Application of new provisions relating to winding up

 

1383.

Continued application of old Parts 5.4, 5.5 and 5.6

 

1384.

Continued application of old sections 589, 590 and 592

 

1385.

Continued effect of authorisations under subsections 597(1) and 598(1)

 

1386.

Continued application of old section 597

 

1387.

Application of change to paragraph 1091(1A)(b)

 

1388.

Application of change to section 1301

 

1389.

Application of Part 9.4B to contravention committed before that Part commenced


TABLE OF PROVISIONScontinued

SCHEDULE 1

AMENDMENTS OF THE CORPORATIONS LAW CONSEQUENT ON PART 4 OF THIS ACT

SCHEDULE 2

AMENDMENTS OF ACTS CONSEQUENT ON PART 4 OF THIS ACT


 

Corporate Law Reform Act 1992

No. 210 of 1992

An Act to change the Corporations Law and to amend some other Acts

[Assented to 24 December 1992]

The Parliament of Australia enacts:

PART 1—PRELIMINARY

Short title

1. This Act may be cited as the Corporate Law Reform Act 1992.

Commencement

2.(1) Part 1 commences on the day on which this Act receives the Royal Assent.

(2)     Subsections 26(2) and 28(1) commence on 1 February 1994.

(3)     Subject to subsection (4), the remaining provisions of this Act commence on a day or days to be fixed by Proclamation.

(4)     If a provision referred to in subsection (3) does not commence under that subsection within the period of 6 months beginning on the


day on which this Act receives the Royal Assent, it commences on the first day after the end of that period.

Meaning of “Corporations Law” and “Principal Act”

3.  In this Act:

“Corporations Law” means the Corporations Law set out in section 82 of the Corporations Act 19891;

“Principal Act” means the Act referred to in the heading:

(a)     if the expression occurs in a Division of a Part—to that Division; or

(b)    otherwise—to the Part in which the expression occurs.

PART 2—DUTIES OF OFFICERS OF CORPORATIONS

Division 1Amendments of the Corporations Law

Dictionary

4.  Section 9 of the Corporations Law is amended by inserting the following definitions:

‘civil penalty disqualification’ has the meaning given by subsection 91(4A);

‘civil penalty order’ means a declaration or order made under section 1317EA of the Corporations Law of this jurisdiction;

‘civil penalty provision’ has the meaning given by section 1317DA;

‘find’, in the case of a reference to a court finding a person guilty of an offence, has a meaning affected by section 73A;

‘guilty’, in the case of a reference to a court finding a person guilty of an offence, has a meaning affected by section 73A;”.

5.  After section 73 of the Corporations Law the following section is inserted:

When a court is taken to find a person guilty of an offence

“73A. An Australian court finds a person guilty of an offence if, and only if:

(a)     the court convicts the person of the offence; or

(b)    the person is charged before the court with the offence and is found in the court to have committed the offence, but the court does not proceed to convict the person of the offence.”.

Being or becoming subject to a section 229 prohibition, a section 230 or 599 order, a section 600 notice or a civil penalty disqualification

6.  Section 91 of the Corporations Law is amended by inserting after subsection (4) the following subsection:

“(4A) A person is or becomes subject to a civil penalty disqualification if, and only if, an order relating to the person is in


force, or is made, as the case may be, under paragraph 1317EA(3)(a), and a reference to a civil penalty disqualification is a reference to an order so in force or made.”.

Effect of such a prohibition, order, notice or disqualification

7.  Section 91A of the Corporations Law is amended by omitting from subsection (1) “599 and 600” and substituting “588Z, 599, 600, 1317EA and 1317EF”.

Vacation of office of director

8.  Section 224 of the Corporations Law is amended:

(a)    by adding at the end of paragraphs (1)(a), (b), (c), (d) and (e) or ;

(b)  by adding at the end of subsection (1) the following word and paragraph:

“; or (h) becomes subject to a civil penalty disqualification.”;

(c)   by inserting after subsection (6) the following subsection:

“(6A) A person whose office is vacated because of paragraph (1)(h) cannot, without the leave of the Court granted under section 1317EF, be re-appointed as a director until the end of the period specified in the disqualification.”.

Certain persons not to manage corporations

9.  Section 229 of the Corporations Law is amended by inserting after paragraph (3)(c) the following word and paragraph:

“or (d) of an offence of which the person is guilty because of subsection 1317FA(1);”.

Court may order person not to manage corporation

10.  Section 230 of the Corporations Law is amended:

(a)     by adding at the end of paragraphs (1)(a) and (b) “or”;

(b)     by omitting from paragraph (1)(d) all the words after “relevant officer” and substituting “of a body corporate (other than a corporation), the relevant person did an act, or made an omission, that would have constituted a contravention of subsection 232(2) or (4) in relation to the body if the body had been a corporation at that time;”.

Duty and liability of officer of corporation

11.  Section 232 of the Corporations Law is amended:

(a) by omitting subsections (3) and (4) and substituting the following subsection:

“(4) In the exercise of his or her powers and the discharge of his or her duties, an officer of a corporation must exercise the degree of care and diligence that a reasonable person in a like


position in a corporation would exercise in the corporation’s circumstances.”;

(b) by omitting subsections (7), (8), (9) and (10) and substituting the following subsection:

“(6B) Subsections (2), (4), (5) and (6) are civil penalty provisions as defined by section 1317DA, so Part 9.4B provides for civil and criminal consequences of contravening any of them, or of being involved in a contravention of any of them.”.

Register of disqualified company directors and other officers

12.  Section 243 of the Corporations Law is amended:

(a)    by omitting from subsection (1) “Act” and substituting “Law”;

(b)    by inserting in paragraph (1)(a) “or paragraph 1317EA(3)(a)” after “599(2)”.

Public companies

13.  Section 307 of the Corporations Law is amended by adding at the end the following subsection:

“(2) If subsection (1) applies, the report must also contain, or have attached to it, a statement that sets out:

(a)     how many meetings of the company’s directors (including meetings of committees of directors) were held during the financial year, or would have been so held if a quorum had been present; and

(b)    in relation to each person who was a director of the company throughout the financial year—how many of the meetings referred to in paragraph (a) the person attended; and

(c)     in relation to each person who was such a director during some but not all of the financial year:

(i)                 how many of the meetings referred to in paragraph (a) were held while the person was such a director; and

(ii)               how many of the meetings referred to in paragraph (a) the person attended while he or she was such a director.”.

Contravention of Part

14.  Section 318 of the Corporations Law is amended by omitting subsection (2) and substituting the following subsection:

“(2) Subsection (1) 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.”.

References to civil penalty disqualification inserted in certain provisions

15.(1) Each of the following provisions of the Corporations Law:

(a)     subsection 1280(3);

(b)     subsection 1282(4);


(c)     subsection 1287(4);

(d)     paragraph 1292(7)(a);

is amended by omitting “or a section 600 notice” and substituting “, a section 600 notice or a civil penalty disqualification”.

(2) Subsection 1287(4) of the Corporations Law is amended by omitting “or section 600 notice” and substituting “, section 600 notice or civil penalty disqualification”.

Penalty notices

16. Section 1313 of the Corporations Law is amended:

(a)     by inserting in paragraph (4)(b) “not” before “done”;

(b)     by omitting subsection (8) and substituting the following subsection:

“(8) In this section:

‘authority’ includes a person;

‘prescribed offence’ means:

(a)     a subsection 1311(5) offence; or

(b)    an offence against this Law that the regulations prescribe for the purposes of this section;

‘prescribed penalty’, in relation to a prescribed offence in relation to which the Commission may give, or has given, to a person a notice under subsection (1), means:

(a)  if the offence is a subsection 1311(5) offence:

(i) if the regulations prescribe in relation to the offence for the purposes of this paragraph an amount not exceeding one half the amount of the penalty applicable to the offence:

(A)    if the person is a body corporate—a penalty of five times the amount so prescribed; or

(B)     otherwise—a penalty of the amount so prescribed; or

(ii) otherwise:

(A)    if the person is a body corporate—a penalty of 1.25 times the amount of the penalty applicable to the offence; or

(B)     otherwise—a penalty of 0.25 times the amount of the penalty applicable to the offence; or

Note: Section 1311 provides for the penalty applicable to an offence.

(b)  otherwise—a penalty of the amount that the regulations prescribe in relation to the offence;

‘subsection 1311(5) offence’ means an offence the penalty applicable to which is provided for by subsection 1311(5).”.


17. After section 1317C of the Corporations Law the following Part is inserted:

PART 9.4B—CIVIL AND CRIMINAL CONSEQUENCES OF CONTRAVENING CIVIL PENALTY PROVISIONS

Division 1Preliminary

Civil penalty provisions

“1317DA. Each of the following provisions of the Corporations Law of this jurisdiction is a civil penalty provision:

Subsections 232(2), (4), (5) and (6);

Subsections 243ZE(2) and (3);

Subsection 318(1);

Section 588G.

Person involved in contravening a provision taken to have contravened the provision

“1317DB. For the purposes of this Part, a person who is involved in a contravention of a particular provision of this Law or a corresponding law is taken to have contravened that provision.

Contravention committed partly in, and partly out of, the jurisdiction

“1317DC. Where:

(a)    a person does or omits to do an act outside this jurisdiction; and

(b)    if the person had done or omitted to do that act in this jurisdiction, the person would, because of also having done or omitted to do an act in this jurisdiction, have contravened a civil penalty provision;

the person contravenes that provision.

Reciprocity in relation to contraventions

“1317DD. Where:

(a)    a person does or omits to do an act in this jurisdiction; and

(b)    if the person had done or omitted to do that act in another jurisdiction, the person would have contravened a provision of the Corporations Law of another jurisdiction that corresponds to a civil penalty provision;

the person contravenes that civil penalty provision.

Division 2Civil penalty orders

Court may make civil penalty orders

“1317EA.(1) This section applies if the Court is satisfied that a person has contravened a civil penalty provision, whether or not the contravention also constitutes an offence because of section 1317FA.


Note: Section 1317HF provides that a certificate by a court that the court has declared a person to have contravened a civil penalty provision is conclusive evidence of the contravention.

“(2) The Court is to declare that the person has, by a specified act or omission, contravened that provision in relation to a specified corporation, but need not so declare if such a declaration is already in force under Division 4.

“(3) The Court may also make against the person either or both of the following orders in relation to the contravention:

(a)     an order prohibiting the person, for such period as is specified in the order, from managing a corporation;

(b)     an order that the person pay to the Commonwealth a pecuniary penalty of an amount so specified that does not exceed $200,000.

“(4) The Court is not to make an order under paragraph (3)(a) if it is satisfied that, despite the contravention, the person is a fit and proper person to manage a corporation.

“(5) The Court is not to make an order under paragraph (3)(b) unless it is satisfied that the contravention is a serious one.

“(6) The Court is not to make an order under paragraph (3)(b) if it is satisfied that an Australian court has ordered the person to pay damages in the nature of punitive damages because of the act or omission constituting the contravention.

“(7) Section 91A defines what, for the purposes of this section, constitutes managing a corporation.

Who may apply for civil penalty order

“1317EB.(1) An application for a civil penalty order may be made by:

(a)     the Commission; or

(b)     a Commission delegate; or

(c)     some other person authorised in writing by the Minister, under this paragraph, to make the application.

“(2) A delegation for the purposes of paragraph (1)(b), or an authorisation for the purposes of paragraph (1)(c), may relate to applications in relation to specified contraventions, or all contraventions, of civil penalty provisions.

“(3) Nothing in this section affects the operation of the Director of Public Prosecutions Act 1983 or of that Act as applying as a law of this jurisdiction.

Time limit for application

“1317EC. An application for a civil penalty order may be made within 6 years after the contravention.


Application for civil penalty order is a civil proceeding

“1317ED.(1) In hearing and determining an application for a civil penalty order, the Court is to apply the rules of evidence and procedure that it applies in hearing and determining civil matters.

“(2) Subsection (1) has effect subject to the rules.

Person must comply with order not to manage corporation

“1317EF.(1) A person who is subject to a civil penalty disqualification must not manage a corporation except with the leave of the Court.

“(2) Section 91A defines what, for the purposes of this section, constitutes managing a corporation.

“(3) When granting leave under subsection (1), the Court may impose such conditions or restrictions as it thinks appropriate.

“(4) A person must not contravene a condition or restriction imposed under subsection (3).

“(5) A person may only apply for leave under subsection (1) if he or she has given the Commission at least 21 days notice of the application.

“(6) On the application of the Commission, the Court may revoke leave granted under subsection (1).

Enforcement of order to pay pecuniary penalty

“1317EG. Where the Court makes under paragraph 1317EA(3)(b) an order that a person pay a pecuniary penalty:

(a)     the penalty is payable to the Commission on the Commonwealth’s behalf; and

(b)    the Commission or the Commonwealth may enforce the order as if it were a judgment of the Court.

Commission may require a person to give assistance in connection with application for civil penalty order

“1317EH.(1) This section applies where it appears to the Commission that a person may have contravened a civil penalty provision.

“(2) If the Commission, on reasonable grounds, suspects or believes that a person can give information relevant to an application for a civil penalty order in relation to the contravention, whether or not such an application has been made, the Commission may, by writing given to the person, require the person to give all reasonable assistance in connection with such an application.

“(3) Subsection (2) does not apply in relation to:

(a) the person referred to in subsection (1); or

 


(b) a person who is or has been that person’s lawyer.

“(4) Where a person fails to give assistance as required under subsection (2):

(a)     the person contravenes this subsection; and

(b)     the Court may, on the application of the Commission, order the person to comply with the requirement as specified in the order.

“(5) Nothing in paragraph (4)(b) affects any penalty for a contravention of subsection (4).

“(6) Nothing in this section limits, or is limited by:

(a)     section 1317; or

(b)     section 49 of the ASC Law.

Division 3Criminal proceedings

When contravention of civil penalty provision is an offence

“1317FA.(1) A person is guilty of an offence if the person contravenes a civil penalty provision:

(a)     knowingly, intentionally or recklessly; and

(b)     either:

(i) dishonestly and intending to gain, whether directly or indirectly, an advantage for that or any other person; or

(ii) intending to deceive or defraud someone.

“(2) A person who contravenes a civil penalty provision is not guilty of an offence except as provided by subsection (1).

Application for civil penalty order precludes later criminal proceedings

“1317FB. Criminal proceedings for an offence constituted by a contravention of a civil penalty provision cannot be begun if a person has already applied for a civil penalty order in relation to the same contravention, even if the application has been finally determined or otherwise disposed of.

Division 4Effect of criminal proceedings on application for civil penalty order

When Division applies

“1317GA. This Division applies if criminal proceedings are begun against a person for an offence constituted by a contravention of a civil penalty provision.


Effect during criminal proceedings

“1317GB.(1) An application may be made for a civil penalty order against the person in relation to the same contravention.

“(2) However, an application is stayed, because of this subsection, until:

(a)     the criminal proceedings; and

(b)    all appeals and applications for review (including appeals and applications for review under this Division) arising out of the criminal proceedings;

have been finally determined or otherwise disposed of.

Final outcome precluding application for civil penalty order

“1317GC. When the criminal proceedings, appeals and applications for review are finally determined or otherwise disposed of:

(a)     an application for a civil penalty order in relation to the same contravention cannot be made (except under this Division); and

(b)    such an application that was stayed because of subsection 1317GB(2) is, because of this section, dismissed;

if the result of the criminal proceedings, appeals and applications for review is:

(c)  a court finding the person guilty of the offence; or

Note: Section 73A defines when a court is taken to find a person guilty of an offence.

(d)  the person being acquitted of the offence, unless there is in force a declaration that the person committed the contravention; or

Note: This kind of declaration is made under section 1317GF, 1317GG or 1317GH.

(e)  a declaration by a court that the evidence in a committal proceeding for the offence could not satisfy the Court, on an application for a civil penalty order, that the person committed the contravention; or

Note: This kind of declaration is made under section 1317GE.

(f) a declaration by the Court that the person committed the contravention; or

Note: This kind of declaration is made under section 1317GF or 1317GH.

(g) an order by a court prohibiting an application for a civil penalty order in relation to the contravention from being made or from proceeding; or

Note: This kind of order is made under section 1317GJ.

(h) the Court, on an appeal or review, affirming, varying or substituting a declaration that the person committed the contravention.

Note: Section 1317GK applies in this case.


Final outcome not precluding application for civil penalty order

“1317GD. If the result of the criminal proceedings, appeals and applications for review being finally determined or otherwise disposed of is:

(a)  a declaration by a court (other than the Court) that the person committed the contravention; or

Note: This kind of declaration is made under section 1317GF, 1317GG or 1317GH.

(b)  none of the results referred to in section 1317GC;

then:

(c)  if an application for a civil penalty order in relation to the contravention was stayed because of subsection 1317GB(2)—the application may proceed; or

(d)  otherwise—such an application may be made and may proceed; as if the criminal proceedings had never begun.

After unsuccessful committal proceeding, court may preclude application for civil penalty order

“1317GE.(1) If:

(a)     a proceeding in a court for the commitment of the person for trial for the offence is finally determined or otherwise disposed of without the person being committed for trial for the offence; and

(b)     the court is satisfied that the evidence in the proceeding could not satisfy the Court, on an application for a civil penalty order in relation to the contravention, that the person committed the contravention;

the court may declare that it is so satisfied.

“(2) A declaration under subsection (1) is subject to appeal or review in the same way as any other order or decision made in the proceeding.

Application for civil penalty order based on alternative verdict at jury trial

“1317GF.(1) This section applies if the person is tried on indictment for the offence and the jury is satisfied beyond reasonable doubt that the person committed the contravention, but is not satisfied beyond reasonable doubt that the person did so as mentioned in subsection 1317FA(1).

“(2) The jury may find the person not guilty of the offence, but guilty of the contravention.

“(3) If the jury does so, the court is to declare that the person has, by a specified act or omission, contravened the civil penalty provision in relation to a specified corporation.


“(4) If the court is the Court, it may then proceed to make orders under subsection 1317EA(3) on the application of the prosecutor or someone else who has power under section 1317EB to apply for a civil penalty order in relation to the contravention.

“(5) Subsection (4) has effect despite section 1317EC.

“(6) A declaration under subsection (3) is subject to appeal or review as if it were a conviction by the court for an offence constituted by the contravention.

Application for civil penalty order based on alternative finding by court of summary jurisdiction

“1317GG.(1) This section applies if, on the hearing of a proceeding for the summary conviction of the person for the offence, the court is satisfied beyond reasonable doubt that the person committed the contravention but is not satisfied beyond reasonable doubt that the person did so as mentioned in subsection 1317FA(1).

“(2) The court may find the person not guilty of the offence, but guilty of the contravention.

“(3) If the court does so, it is to declare that the person has, by a specified act or omission, contravened the civil penalty provision in relation to a specified corporation.

“(4) A declaration under subsection (3) is subject to appeal or review as if it were a conviction by the court for an offence constituted by the contravention.

Application for civil penalty order based on alternative finding by appeal court

“1317GH.(1) This section applies if:

(a)     a court finds the person guilty of the offence; and

(b)    on appeal or review, a court makes an order determining the criminal proceedings for the offence in a way that does not involve convicting the person of that or any other offence; and

(c)     the court is satisfied beyond reasonable doubt that the person committed the contravention.

“(2) The court may declare that the person has, by a specified act or omission, contravened the civil penalty provision in relation to a specified corporation.

“(3) If the court is the Court, it may then proceed to make orders under subsection 1317EA(3) on the application of the prosecutor or someone else who has power under section 1317EB to apply for a civil penalty order in relation to the contravention.

“(4) Subsection      has effect despite section 1317EC.


“(5) A declaration under subsection (2) is subject to appeal or review in the same way as any other order or decision that was made on the appeal or review or might have been made.

After setting aside declaration, court may preclude application for civil penalty order

“1317GJ. If a court sets aside a declaration made under section 1317GF, 1317GG or 1317GH, the court may, by order, prohibit an application for a civil penalty order in relation to the contravention from being made or from proceeding.

On unsuccessful appeal against declaration, Court may make civil penalty orders

“1317GK.(1) This section applies if, on an appeal from, or review of, a declaration made under section 1317GF, 1317GG or 1317GH by a court other than the Court, the Court determines the appeal or review by:

(a)     affirming or varying the declaration; or

(b)     substituting another declaration for the first-mentioned declaration.

“(2) The Court may then proceed to make orders under subsection 1317EA(3) on the application of the prosecutor or someone else who has power under section 1317EB to apply for a civil penalty order in relation to the contravention.

“(3) Subsection (2) has effect despite section 1317EC.

Appeals under this Division

“1317GL. For the purposes of an appeal or review under subsection 1317GE(2), 1317GF(6), 1317GG(4) or 1317GH(5), a law about appeals or review has effect with such modifications as the circumstances require.

Division 5Compensation for loss suffered by corporation

On application for civil penalty order, Court may order compensation

“1317HA.(1) Where, on an application for a civil penalty order against a person in relation to a contravention, the Court is satisfied that:

(a)     the person committed the contravention; and

(b)    the corporation in relation to which the contravention was committed has suffered loss or damage as a result of the act or omission constituting the contravention;

the Court may (whether or not it makes an order under subsection 1317EA(3)) order the person to pay to the corporation compensation of such amount as the order specifies.


“(2) A corporation may intervene in an application for a civil penalty order against a person in relation to a contravention, unless the application was made under Division 4.

“(3) A corporation that so intervenes is entitled to be heard:

(a)     only if the Court is satisfied that the person committed the contravention in relation to that corporation; and

(b)    only on the question whether the Court should order the person to pay compensation to the corporation because of the contravention.

Criminal court may order compensation

“1317HB.(1) If:

(a)     a court finds a person guilty of an offence constituted by a contravention of a civil penalty provision in relation to a corporation; and

(b)    the court is satisfied that the corporation has suffered loss or damage as a result of the act or omission constituting the contravention;

the court may (whether or not it imposes a penalty) order the person to pay to the corporation compensation of such amount as the order specifies.

Note: Section 73A defines when a court is taken to find a person guilty of an offence.

“(2) If:

(a)     a court declares under Division 4 that a person has, by an act or omission, contravened a civil penalty provision in relation to a corporation; and

(b)    the court is satisfied that the corporation has suffered loss or damage as a result of that act or omission;

the court may (whether or not it makes an order under subsection 1317EA(3)) order the person to pay to the corporation compensation of such amount as the order specifies.

Enforcement of order under section 1317HA or 1317HB

“1317HC. An order to pay compensation that a court makes under section 1317HA or 1317HB may be enforced as if it were a judgment of the court.

Recovery of profits, and compensation for loss, resulting from contravention

“1317HD.(1) Where a person contravenes a civil penalty provision in relation to a corporation, the corporation may, by proceedings in a court of competent jurisdiction, recover from the person, as a debt due to the corporation:

(a) if that or another person has made a profit because of the act


or omission constituting the contravention—an amount equal to the amount of that profit; and

(b)  if the corporation has suffered loss or damage as a result of that act or omission—an amount equal to the amount of that loss or damage;

whether or not:

(c)     the first-mentioned person has been convicted of an offence in relation to the contravention; or

(d)     a civil penalty order has been made against the first-mentioned person in relation to the contravention.

“(2) Proceedings under this section may only be begun within 6 years after the contravention.

Effect of sections 1317HA, 1317HB and 1317HD

“1317HE. Sections 1317HA, 1317HB and 1317HD:

(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 corporation; 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

“1317HF. 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 a specified act or omission, contravened a specified civil penalty provision in relation to a specified corporation; or

(ii) that a specified person was convicted by that court of an offence constituted by a specified contravention of a civil penalty provision in relation to a specified corporation; 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.


Division 6Miscellaneous

Relief from liability for contravention of civil penalty provision

“1317JA.(1) In this section:

‘eligible proceedings’ means proceedings for a contravention of a civil penalty provision (including proceedings under section 588M, 588W or 1317HD of the Corporations Law of this jurisdiction) but does not include proceedings for an offence (except so far as the proceedings relate to the question whether the court should make an order under section 588K or 1317HB of that Law).

“(2) Where, in eligible proceedings against a person, it appears to the court that the person has, or may have, contravened a civil penalty provision but that:

(a)     the person has acted honestly; and

(b)    having regard to all the circumstances of the case (including, where applicable, those connected with the person’s appointment as an officer of a corporation or of a Part 5.7 body), the person ought fairly to be excused for the contravention;

the court may relieve the person either wholly or partly from a liability to which the person would otherwise be subject, or that might otherwise be imposed on the person, because of the contravention.

“(3) In determining under subsection (2) whether a person ought fairly to be excused for a contravention of section 588G, 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 or Part 5.7 body; and

(b)     when that action was taken; and

(c)     the results of that action.

“(4) Where a person thinks that eligible proceedings will or may be begun against him or her, he or she may apply to the Court for relief.

“(5) On an application under subsection (4), the Court may grant relief under subsection (2) as if the eligible proceedings had been begun in the Court.

“(6) For the purposes of subsection (2) as applying for the purposes of a case tried by a judge with a jury:

(a)    a reference in that subsection to the court is a reference to the judge; and

(b)    the relief that may be granted includes withdrawing the case in whole or in part from the jury and directing judgment to be entered for the defendant on such terms as to costs as the judge thinks appropriate.

“(7) Nothing in this section limits, or is limited by, section 1318.


Effect of contravening civil penalty provisions of Corporations Law of 2 or more jurisdictions

“1317JB.(1) This section applies where an act or omission constitutes:

(a)     a contravention (in this section called the ‘local contravention’) of a civil penalty provision; and

(b)     a contravention (in this section called the ‘other contravention’) of a provision of the Corporations Law of another jurisdiction that corresponds to that civil penalty provision.

“(2) A person who has been punished for an offence constituted by the other contravention is not liable to be punished for an offence constituted by the local contravention.

“(3) If a civil penalty order within the meaning of that Law has been made in relation to the other contravention, no civil penalty order within the meaning of this Law can be made in relation to the local contravention.

“(4) Criminal proceedings for an offence constituted by the local contravention cannot be begun if a person has already applied for a civil penalty order, within the meaning of that Law, in relation to the other contravention, even if the application has been finally determined or otherwise disposed of.

“(5) Sections 1317GB, 1317GC and 1317GD apply in relation to the local contravention as if:

(a)     criminal proceedings of a particular kind for an offence constituted by the other contravention were proceedings of the corresponding kind for an offence constituted by the local contravention; and

(b)     a court within the meaning of that Law were a court within the meaning of this Law; and

(c)     anything done under a provision of Division 4 of Part 9.4B of that Law had been done under the corresponding provision of this Law.

“(6) Nothing in this section limits, or is limited by, anything in section 1310A, 1310B or 1317FB.

“(7) The effect that sections 1317GB, 1317GC and 1317GD have because of subsection (5) of this section is additional to, and does not prejudice, the effect those sections otherwise have.

Part does not limit power to award punitive damages

“1317JC. Nothing in this Part limits a court’s power to order someone to pay damages in the nature of punitive damages because of an act or omission constituting a contravention of a civil penalty provision.”.


Schedule 3

18. Schedule 3 to the Corporations Law is amended:

(a)  by omitting:

Subsection 232(4):

Penalty: $5,000.

Subsection 232(5):

Penalty: $20,000 or imprisonment for 5 years, or both.

Subsection 232(6):

Penalty: $20,000 or imprisonment for 5 years, or both.”;

(b)  by inserting before “Section 1323:”:

Subsection 1317EF(1) or (4):

Penalty: $5,000 or imprisonment for 1 year, or both.

Subsection 1317FA(1):

Penalty: $200,000 or imprisonment for 5 years, or both.”.

Division 2Amendment of the Australian Securities Commission Act 19892

Recovery of expenses of investigation

19.  Section 91 of the Principal Act is amended by inserting in paragraph (1)(b) “, or a declaration or other order is made,” after “awarded”.

Division 3Amendment of the Bankruptcy Act 19663

Debts provable in bankruptcy

20.  Section 82 of the Principal Act is amended by inserting after subsection (3) the following subsection:

“(3AA) An amount payable under an order made under paragraph 1317EA(3)(b) of the Corporations Law of a State or Territory is not provable in bankruptcy.”.

PART 3—FINANCIAL BENEFITS TO RELATED PARTIES OF PUBLIC COMPANIES

How to read references to provisions of this Law

21.  Section 8 of the Corporations Law is amended by inserting in paragraph (5)(c) “Part 3.2A (except subsection 243L(2)),” before “Part 3.5”.

 


Dictionary

22.  Section 9 of the Corporations Law is amended:

(a)  by omitting the definitions of “control”, “parent entity” and “public company” and substituting the following definitions:

‘control’, in relation to an entity, has:

(a)     in Part 3.2A—the meaning given by section 243E; and

(b)     in Parts 3.6 and 3.7—the meaning given by section 294B;

‘parent entity’:

(a)     in Part 3.2A—has the meaning given by subsection 243D(1); and

(b)     in Parts 3.6 and 3.7—has the meaning given by section 294A;

‘public company’ means a company other than a proprietary company and:

(a)    in the definition of ‘public corporation’ (in this section) and in paragraph 228(1)(b) and subsection 879(1), includes a body corporate that is a public company for the purposes of the Corporations Law of another jurisdiction; and

(b)    in section 232A, Part 3.2A and section 1376, includes a body corporate (other than a prescribed body corporate) that:

(i) is incorporated, or taken to be incorporated, in this jurisdiction, but not under the Corporations Law of this jurisdiction; and

(ii) is included in the official list of a securities exchange; and

(c)  in Part 3.2A and section 1376, does not include a company in respect of which a licence under section 383 is in force;”;

(b)  by inserting the following definitions:

‘child entity’ has in Part 3.2A the meaning given by subsection 243D(2);

‘financial benefit’ has in Part 3.2A a meaning affected by section 243G;

‘related party’ has in Part 3.2A the meaning given by section 243F;

‘sibling entity’ has in Part 3.2A the meaning given by subsection 243D(3);”.

Effect of certain contraventions of this Law

23.  Section 103 of the Corporations Law is amended by inserting “232A, 232B, 243H, 243ZE,” after “126,”.


Directors to disclose certain interests

24. Section 231 of the Corporations Law is amended:

(a)     by inserting in subsection (1) “proprietary” before “company” (first occurring);

(b)     by inserting in subsection (6) “proprietary” before “company” (first occurring).

25. After section 232 of the Corporations Law the following sections are inserted:

Voting by interested director of public company

“232A.(1) A director of a public company who has a material personal interest in a matter that is being considered at a meeting of the board, or of directors, of the company:

(a)     must not vote on the matter (or in relation to a proposed resolution under subsection (3) in relation to the matter, whether in relation to that or a different director); and

(b)    must not be present while the matter (or a proposed resolution of that kind) is being considered at the meeting.

Note: In this section, ‘public company’ has an extended meaning: see paragraph (b) of the definition of ‘public company’ in section 9.

“(2) Subsection (1) does not apply to an interest that the director has:

(a)     as a member of the company; and

(b)     in common with the other members of the company.

“(3) Subsection (1) does not apply if the board has at any time passed a resolution that:

(a)     specifies the director, the interest and the matter; and

(b)    states that the directors voting for the resolution are satisfied that the interest should not disqualify the director from considering or voting on the matter.

“(4) A quorum is not present during the consideration of a matter at a meeting of the board, or of directors, of a public company unless at least 2 directors are present who are entitled to vote on any motion that may be moved at the meeting in relation to that matter.

“(5) A general meeting of a public company may deal with a matter in so far as the board cannot deal with it because of subsection (4).

“(6) If:

(a)     someone proposes a resolution of a public company’s board in connection with a general meeting of the company dealing with a matter; and

(b)    subsection (4) would prevent the proposed resolution from being considered;

 


subsections (1) and (4) do not apply in relation to a motion that relates to the proposed resolution.

“(7) If, because of subsection (6), subsection (4) does not apply in relation to a motion that is considered or voted on at a meeting, the directors present must ensure that the minutes record that fact.

“(8) A public company’s constitution may restrict a director’s entitlement to vote, or to be present, at a meeting even if this section would not.

Commission may exempt directors from section 232A in appropriate cases

“232B.(1) The Commission may by writing declare that, for the purposes of all or specified meetings of the board, or of directors, of a company, subsections 232A(1) and (4) do not apply in relation to a specified matter, but may only do so if satisfied that:

(a)     the matter could not otherwise be dealt with at those meetings because of subsection 232A(4); and

(b)     because it is urgent or for some other compelling reason, the matter should be dealt with at those meetings and not by a general meeting, even though directors have a material personal interest in the matter.

“(2) A declaration may be expressed to apply generally or as otherwise specified, and may be subject to:

(a)     a specified condition to be complied with, in relation to the matter, by the company or a director; or

(b)     2 or more such conditions.

“(3) A declaration has effect accordingly.

“(4) A company or a director must not contravene a condition.

“(5) The Commission may by writing vary or revoke a declaration.”.

Loans to directors

26.(1) Section 234 of the Corporations Law is amended:

(a)     by omitting from subsection (1) “a company shall not” and substituting “a public company must not”;

(b)     by inserting before paragraph (3)(a) the following paragraph:

“(aa) to anything done by a public company to which sections 243H and 243ZE apply because of section 1376;”.

(2) Section 234 of the Corporations Law is repealed.

27. After Part 3.2 of the Corporations Law the following Part is inserted:


PART 3.2AFINANCIAL BENEFITS TO RELATED PARTIES OF PUBLIC COMPANIES

Division 1Object and outline of Part

Object

“243A. The object of this Part is to protect:

(a)     a public company’s resources (in particular, those available to pay the company’s creditors); and

(b)    the interests of its members as members;

by requiring that, in general, financial benefits to related parties that could diminish or endanger those resources, or that could adversely affect those interests, be disclosed, and approved by a general meeting, before they are given.

Outline

“243B.(1) Division 2 explains expressions used in this Part.

“(2) Division 3 sets out the prohibitions that give effect to the object of this Part.

“(3) Division 4 creates general exceptions for financial benefits that are consistent with the object of this Part.

“(4) Division 5 enables a public company in general meeting to permit a financial benefit not covered by the general exceptions.

“(5) Division 6 enforces the prohibitions (section 243ZE), creates some other offences (sections 243ZF and 243ZH) and describes how this Part interacts with other laws (section 243ZI).

Division 2The meaning of expressions

Entities

“243C.(1) Each of the following is an entity:

(a)     a body corporate;

(b)     a partnership;

(c)     an unincorporated body;

(d)     an individual;

(e)     a trustee of a trust that has only one trustee.

“(2) If a trust has 2 or more trustees, those trustees together constitute an entity.

“(3) Subject to subsections (1) and (2), if an accounting standard:

(a)     deals with disclosure in companies’ financial statements of information about related parties (for example, about transactions between companies and related parties); and

(b)    is in force at a particular time (even if the standard does not

 


apply to a financial year of a company in which that time occurs); and

(c) defines the expression ‘entity’;

the question of what is or was an entity at that time is to be determined in accordance with the definition in the standard.

Parent entities, child entities and sibling entities

“243D.(1) An entity is a parent entity of another entity if:

(a)     both are bodies corporate and the first entity is a holding company of the other; or

(b)     the first entity has control over the other.

“(2) An entity is a child entity of another entity if the other is its parent entity, or is one of its parent entities.

“(3) An entity is a sibling entity of another entity if they have a parent entity in common and neither is a parent entity of the other.

Control

“243E. If an accounting standard:

(a)     deals with disclosure in companies’ financial statements of information about related parties (for example, about transactions between companies and related parties); and

(b)    is in force at a particular time (even if the standard does not apply to a financial year of a company in which that time occurs); and

(c)     provides for determining whether an entity has control over another entity;

the question of whether an entity has or had control over another entity at that time is to be determined in accordance with the provision in the standard.

Related party of a public company

“243F.(1) Each of the following is a related party of a public company:

(a)     a director of the public company;

(b)     a director of a body corporate that is a parent entity of the public company;

(c)     one of the persons constituting an entity (other than a body corporate) that is a parent entity of the public company;

(d)     a spouse or de facto spouse of such a director or person;

(e)     a parent, son or daughter of such a director, person, spouse or de facto spouse;

(f)      an entity (other than a child entity of the public company) over which:


(i) a person of a kind referred to in paragraph (a), (b), (c),

(d) or (e) has control; or

(ii) 2 or more such persons together have control;

(g) a parent entity or sibling entity of the public company.

“(2) An entity is also a related party of a public company at a particular time if the entity was a related party of the public company because of subsection (1) at any time within the previous 6 months.

“(3) An entity is also a related party of a public company at a particular time if:

(a)     the entity believes at that time, or has at that time reasonable grounds to believe, that it is likely to become an entity of a particular kind at some future time; and

(b)    by becoming an entity of that kind, it would become at that future time a related party of the public company because of subsection (1).

“(4) For the purposes of subsection (3), an entity (other than a body corporate) constituted by 2 or more persons is taken to believe, or to have reasonable grounds to believe, something if at least one of those persons believes, or has such grounds to believe, that thing.

“(5) If, at a particular time, an entity:

(a)     was or is a related party of a public company because of subsection (1), (2) or (3); and

(b)    acted, or proposes to act, in concert with another entity (‘the associate’) in respect of the giving or proposed giving of a financial benefit (‘the primary benefit’) by the public company, or by a child entity of the public company, to the associate; and

(c)     so acted, or proposes so to act, for the reason, or for reasons including the reason, that a financial benefit has been given to a related party of the public company or is expected to be so given;

the associate is a related party of the public company in relation to the giving or proposed giving of the primary benefit.

Giving a financial benefit

“243G.(1) A reference to an entity giving a financial benefit:

(a)     is intended to operate broadly, even though criminal or civil penalties may be involved; and

(b)    includes a reference to giving a financial benefit indirectly (for example, through one or more interposed entities) or by making or giving effect to a relevant agreement (as defined in section 9).

“(2) In deciding whether an entity has given a financial benefit:


(a)     the economic and commercial substance and effect of what the entity has done is to prevail over its legal form; and

(b)     any consideration that has been or may be given for the benefit is to be disregarded, even if it is full or adequate.

“(3) A benefit that does not involve the payment of money can still be a financial benefit: for example, if it confers some financial advantage.

“(4) A few examples of an entity giving a financial benefit to another entity are:

(a)     the first entity lending the other money, guaranteeing a loan to the other, or providing security for a loan to the other;

(b)     the first entity forgiving a debt owed by the other, otherwise releasing, or neglecting to enforce, an obligation of the other, or assuming an obligation of the other;

(c)     the first entity buying or leasing an asset from the other, or selling or leasing an asset to the other;

(d)     the first entity acquiring services from the other, or supplying services to the other;

(e)     the first entity issuing securities, or granting an option, to the other;

(f) the first entity giving money or property to the other.

Division 3The prohibitions

Prohibited financial benefits to related parties of public companies

“243H.(1) A public company must not give a financial benefit to a related party except as permitted by Division 4 or 5.

“(2) A child entity of a public company must not give a financial benefit to a related party of the public company except as permitted by Division 4 or 5.

Definitions:

‘public company’: see the definition in section 9 (note especially paragraph (b) of the definition); ‘give a financial benefit’: see section 243G;

‘related party’: see section 243F;

‘child entity’: see subsection 243D(2).

Division 4General exceptions

Financial benefit under contract made before section 243H begins to apply

“243J.(1) Section 243H does not prevent a public company, or a child entity of a public company, from giving a financial benefit to a related party of the public company as required by a contract made before the day on and after which that section applies to the public company because of section 1376.


“(2) Subsection (1) does not apply if:

(a)     section 234, a corresponding law, or a corresponding previous law, prohibited the making of the contract; or

(b)    immediately before that day, section 234 or a corresponding law prohibited the public company or child entity from giving the benefit to the related party.

Remunerating officers

“243K.(1) A body corporate may pay or provide remuneration to a person in a capacity as an officer of the body if it is reasonable for a body corporate in the body’s circumstances to pay or provide that remuneration to an officer in the person’s circumstances.

“(2) A body corporate may pay or provide remuneration to a person in a capacity as an officer of the body if:

(a)     the body does so as required by a contract between the body and the person; and

(b)    it was reasonable for a body corporate in the body’s circumstances to make that contract with an officer in the person’s circumstances.

“(3) An entity may give a financial benefit to a person in the person’s capacity as an officer of a body corporate if subsection (1) or (2) would permit the body itself to give the benefit to the person in that capacity.

“(4) Any of the following paid by a body corporate to an officer of the body as such (however the rate or amount is worked out) is remuneration paid by the body to the officer:

(a)     salary;

(b)     wages;

(c)     bonuses;

(d)     allowances paid for the sole purpose of meeting expenses incurred in connection with performing services as such an officer.

“(5) A benefit that is in the nature of a fringe benefit and is provided by a body corporate to an officer of the body as such is remuneration provided by the body to the officer.

“(6) A contribution made by a body corporate to a fund for the purpose of making provision for, or obtaining, superannuation benefits for an officer of the body, or for dependants of such an officer, is remuneration provided by the body to the officer.

“(7) A financial benefit given to a person because of the person ceasing to hold an office or employment as an officer or employee of a body corporate is remuneration paid or provided to the person in a capacity as an officer of the body.

 


“(8) Subsections (4), (5), (6) and (7) have effect for the purposes of subsections (1), (2) and (3), but nothing in them limits the generality of:

(a)     the expression ‘remuneration’ in subsections (1) and (2); or

(b)     anything else in subsections (4), (5), (6) and (7).

Advances, up to prescribed amount, to director or director’s spouse

“243L.(1) A body corporate may advance money to:

(a)     a director of the body; or

(b)     a spouse or de facto spouse of such a director;

unless the total of the following would exceed $2,000 or such greater amount as is prescribed:

(c)     the amount of the advance;

(d)     each amount (if any) that is still owing and was advanced to the director, spouse or de facto spouse by the body, or by a parent entity, child entity or sibling entity of the body.

“(2) For the purposes of subsection (1), an amount already advanced is to be disregarded if, because of this Division (other than this section) or Division 5, section 243H did not prohibit the advance.

Financial benefit given to or by closely-held subsidiary

“243M.(1) A body corporate may give a financial benefit to a closely-held subsidiary of the body.

“(2) A closely-held subsidiary of a body corporate may give a financial benefit to the body, or to a child entity of the body.

“(3) For the purposes of this section, a body corporate is a closely-held subsidiary of another body corporate if, and only if, no member of the first-mentioned body is a person other than:

(a)     the other body; or

(b)     a nominee of the other body; or

(c)     a body corporate that is a closely-held subsidiary of the other body because of any other application or applications of this subsection; or

(d)     a nominee of such a body.

“(4) For the purposes of subsection (3), disregard shares that are not voting shares.

Financial benefit on arm’s length terms

“243N.(1) A public company, or a child entity of a public company, may give a financial benefit to a related party of the public company if it does so on terms and conditions no more favourable to the related party than those on which it is reasonable to expect that the company or entity, as the case may be, would give the benefit directly if dealing with the related party at arm’s length in the same circumstances.


“(2) In the case of a loan or other financial accommodation, the matters to consider for the purposes of subsection (1) include, for example:

(a)     the amount of the loan or the extent of the accommodation;

(b)     what interest or charges are payable;

(c)     the credit risk;

(d)     what security is given;

(e)     the timetable for repayments of amounts owing and for payments of interest or charges.

Financial benefits to members as such

“243PA. A public company, or a body corporate that is a child entity of a public company, may give financial benefits to any of its own members, in their capacity as members, on a basis that does not discriminate unfairly, either directly or indirectly, in favour of one or more related parties of the public company.

Financial benefit under court order

“243PB. An entity may give a financial benefit to another entity pursuant to an order of a court.

Division 5Financial benefits approved by general meeting of public company

Subdivision AExceptions from the prohibitions

Financial benefit permitted by resolution of members

“243Q. A public company, or a child entity of a public company, may give a financial benefit to a related party of the public company if:

(a)     a resolution of the public company permits the benefit to be given; and

(b)    the resolution was passed at a general meeting of the public company held within 15 months before the public company, or the child entity, as the case may be, gives the benefit; and

(c)     the conditions prescribed by Subdivision B have been satisfied in relation to the resolution.

Financial benefit under contract permitted by resolution of members

“243R.(1) A public company, or a child entity of a public company, may give a financial benefit to a related party of the public company as required by a contract with the related party if:

(a)     a resolution of the public company permitted the public company, or the child entity, as the case may be, to make the contract; and

(b)     the resolution was passed at a general meeting of the public

 


company held within 15 months before the contract was made; and

(c) the conditions prescribed by Subdivision B have been satisfied in relation to the resolution.

“(2) A reference in this Division to a resolution or proposed resolution permitting a financial benefit to be given by a public company or entity includes a reference to the resolution or proposed resolution permitting the public company or entity to make a contract to give the benefit.

Resolution may specify matters by class or kind

“243S. A resolution under this Division may specify anything either in particular or by reference to class or kind.

Effect of resolution

“243T.(1) A resolution of a public company that permits the company to give a financial benefit to a related party does not affect the application of subsection 243H(2) and this Division to the public company in its capacity as a child entity of another public company.

“(2) A resolution of a public company that permits a child entity of the public company to give a financial benefit to a related party of the public company does not affect:

(a)     if the child entity is also a public company—the application of subsection 243H(1) and this Division to the child entity in its capacity as a public company; or

(b)    in any case—the application of subsection 243H(2) and this Division to the child entity in its capacity as a child entity of another public company.

Example: A Ltd, B Ltd and C Ltd are all public companies. X is a director of A Ltd. A Ltd is a holding company of B Ltd, which is a holding company of C Ltd.

For C Ltd to give to X a financial benefit not covered by an exception in Division 4, all 3 companies must pass resolutions under this Division permitting the benefit.

This is because 3 applications of section 243H prohibit C Ltd from giving the benefit. Subsection 243H(1) prohibits C Ltd as a public company of which X is a related party. Subsection 243H(2) prohibits C Ltd twice: once as a child entity of B Ltd, of which X is a related party, and once as a child entity of A Ltd, of which X is also a related party.

Subdivision BConditions to be satisfied

Company must lodge material that will be put to members

“243U.(1) At least 14 days before the notice convening the relevant meeting is given, the public company must lodge:

(a)     a proposed notice of meeting setting out the text of the proposed resolution; and

(b)     a proposed explanatory statement satisfying section 243V; and


(c)     any other document proposed to accompany the notice convening the meeting; and

(d)     any other document that any of the following proposes to give to members of the public company before or at the meeting:

(i) the company;

(ii) a related party of the company to whom the proposed resolution would permit a financial benefit to be given;

(iii) an associate of the company or of such a related party; and can reasonably be expected to be material to a member in deciding how to vote on the proposed resolution.

“(2) If, when the notice convening the meeting is given, the Commission:

(a)     has approved in writing a period of less than 14 days for the purposes of subsection (1); and

(b)    has not revoked the approval by written notice to the public company;

subsection (1) applies as if the reference to 14 days were a reference to the approved period.

“(3) The Commission may give and revoke approvals for the purposes of subsection (2).

Requirements for explanatory statement to members

“243V.(1) The proposed explanatory statement lodged under section 243U must be in writing and set out:

(a)     the related parties to whom the proposed resolution would permit financial benefits to be given; and

(b)    the nature of the financial benefits; and

(c)     in relation to each director of the company:

(i)                 if the director wanted to make a recommendation to members about the proposed resolution—the recommendation and his or her reasons for it; or

(ii)               if not—why not; or

(iii)             if the director was not available to consider the proposed resolution—why not;

(d)  in relation to each such director:

(i) whether the director had an interest in the outcome of the proposed resolution; and

(ii) if so—what it was; and

(e)  all other information that:

(i) is reasonably required by members in order to decide whether or not it is in the company’s interests to pass the proposed resolution; and

(ii) is known to the company or to any of its directors.

 


“(2) An example of the kind of information referred to in paragraph (1)(d) is information about what, from an economic and commercial point of view, are the true potential costs and detriments of, or resulting from, giving financial benefits as permitted by the proposed resolution, including (without limitation):

(a)     opportunity costs; and

(b)    taxation consequences (such as liability to fringe benefits tax); and

(c)     benefits forgone by whoever would give the benefits.

Note: Section 232 requires an officer of a corporation to act honestly and to exercise care and diligence. These duties extend to preparing an explanatory statement under this section. Section 1309 creates offences where false and misleading material relating to a corporation’s affairs is made available or furnished to members.

Commission may comment on proposed resolution

“243W.(1) Within 14 days after a public company lodges documents under section 243U, the Commission may give to the company written comments on those documents, other than comments about whether the proposed resolution is in the company’s best interests.

“(2) The Commission may consult with the Exchange for the purposes of giving comments to a company that is included in the official list of the Exchange or of a securities exchange that is a subsidiary of the Exchange.

“(3) Subsection (2) does not limit the persons with whom the Commission may consult.

“(4) The Commission must keep a copy of the written comments it gives to a company under subsection (1), and subsections 1274(2) and (5) apply to the copy as if it were a document lodged with the Commission.

“(5) The fact that the Commission has given particular comments, or has declined to give comments, under subsection (1) does not in any way affect the performance or exercise of any of the Commission’s functions and powers.

Requirements for notice of meeting

“243X. The notice convening the meeting:

(a)     must be the same, in all material respects, as the proposed notice lodged under section 243U; and

(b)     must be accompanied by an explanatory statement that is the same, in all material respects, as the proposed explanatory statement lodged under that section; and

(c)     must be accompanied by a document that is, or documents that are, the same, in all material respects, as the document or documents (if any) lodged under paragraph 243U(1)(c); and

(d)     if the Commission has given to the public company, in


accordance with section 243W, comments on the documents lodged under section 243U—must be accompanied by a copy of those comments; and

(e) must not be accompanied by any other documents.

Other material put to members

“243Y. Each document (if any) that:

(a)     did not accompany the notice convening the meeting; and

(b)    was given to members of the public company before or at the meeting by:

(i) the public company; or

(ii) a related party of the public company to whom the proposed resolution would permit a financial benefit to be given; or

(iii) an associate of the public company or of such a related party; and

(c)  can reasonably be expected to have been material to a member in deciding how to vote on the proposed resolution;

must be the same, in all material respects, as a document lodged under paragraph 243U(1)(d).

Proposed resolution cannot be varied

“243ZA. The resolution must be the same as the proposed resolution set out in the proposed notice lodged under section 243U.

Voting on the resolution

“243ZB.(1) If any votes on the resolution are cast in contravention of subsection 243ZF(1), it must be the case that the resolution would still be passed even if those votes were disregarded.

Note: Section 243ZF prohibits voting by or on behalf of related parties to whom a proposed resolution would permit financial benefits to be given.

“(2) If a poll was duly demanded on the question that the resolution be passed, subsections (3) and (4) apply in relation to voting on the poll.

“(3) In relation to each member of the public company who voted on the resolution in person, the public company must record in writing:

(a)     the member’s name; and

(b)    how many votes the member cast for the resolution and how many against.

“(4) In relation to each member of the public company who voted on the resolution by proxy, or by a representative authorised under subsection 249(3), the public company must record in writing:

(a) the member’s name; and

 


(b) in relation to each person who voted as proxy, or as such a representative, for the member:

(i) the person’s name; and

(ii) how many votes the person cast on the resolution as proxy, or as such a representative, for the member; and

(iii) how many of those votes the person cast for the resolution and how many against.

Notice of resolution to be lodged

“243ZC. Within 14 days after the resolution is passed, the public company must lodge a notice setting out the text of the resolution.

Declaration by Court of substantial compliance

“243ZD.(1) The Court may declare that the conditions prescribed by this Subdivision have been satisfied if it finds that they have been substantially satisfied.

“(2) A declaration may be made only on the application of an interested person.

Division 6Enforcement

Consequences of giving financial benefit when not permitted

“243ZE.(1) This section applies if:

(a)     a related party of a public company receives a financial benefit from the public company, or from a child entity of the public company; and

(b)    the public company contravenes subsection 243H(1), or the child entity contravenes subsection 243H(2), by giving the benefit.

“(2) The related party contravenes this subsection.

Note: If the related party is not itself a legal person, see section 243ZG.

“(3) Subject to subsection (4), a person contravenes this subsection if the person:

(a)     is involved (as defined in section 79) in; or

(b)     is, by act or omission, directly or indirectly, recklessly concerned in. or party to;

the contravention of subsection 243H(1) or (2), or the contravention of subsection (2) of this section.

“(4) Neither the public company nor the child entity:

(a)     is guilty of an offence because of the contravention of subsection 243H(1) or (2); or

(b)     is taken to be involved in, or concerned in or party to:

(i) a contravention of subsection (2) of this section by the


related party or by any of the persons constituting the related party; or

(ii) a contravention of subsection (3) of this section by a person.

Note: In the case of a contravention of subsection 243H(2) by a child entity (other than a body corporate) constituted by 2 or more persons, subsection (4) of this section does not prevent any of those persons from contravening this section.

“(5) Subsections (2) and (3) are civil penalty provisions as defined by section 1317DA, so Part 9.4B provides for civil and criminal consequences of contravening, or of being involved in a contravention of, either of them.

“(6) In a proceeding against a person for:

(a)     a contravention of subsection (2); or

(b)    a contravention of subsection (2) because of section 243ZG, 1317DB, 1317DC or 1317DD;

it is a defence if it is proved that the person was unaware of a fact or circumstance essential to the contravention of subsection 243H(1) or (2), as the case requires.

Note: Section 103 prevents a contravention of section 243H or of this section from invalidating a transaction.

Voting by or on behalf of related party interested in proposed resolution under Division 5

“243ZF.(1) At a general meeting, a vote on a proposed resolution under Division 5 must not be cast (in any capacity) by or on behalf of:

(a)     a related party of the public company to whom the resolution would permit a financial benefit to be given; or

(b)    an associate of such a related party.

“(2) Subsection (1) does not prevent the casting of a vote if:

(a)     it is cast by a person as a proxy appointed by writing that specifies how the proxy is to vote on the proposed resolution; and

(b)    it is not cast on behalf of a related party or associate of a kind referred to in subsection (1).

“(3) The regulations may prescribe cases where subsection (1) does not apply.

“(4) The Commission may by writing declare that:

(a)     subsection (1) does not apply to a specified proposed resolution; or

(b)    subsection (1) does not prevent the casting of a vote, on a specified proposed resolution, by a specified entity, or on behalf of a specified entity;

but may only do so if satisfied that the declaration will not cause unfair prejudice to the interests of any member of the public company.

 


“(5) A declaration in force under subsection (4) has effect accordingly.

“(6) If a vote is cast in contravention of subsection (1), the related party or associate, as the case may be, contravenes this subsection, whether or not the proposed resolution is passed.

Note: If the related party is not itself a legal person, see section 243ZG.

“(7) For the purposes of this section, a vote is cast on behalf of an entity if, and only if, it is cast:

(a)     as proxy for the entity; or

(b)     otherwise on behalf of the entity; or

(c)     in respect of a share in respect of which the entity has power to vote as defined in section 30.

“(8) Subject to subsection 243ZB(1), a contravention of this section does not affect the validity of a resolution.

Contraventions by an entity that is not a legal person

“243ZG. If an entity (other than a body corporate) constituted by 2 or more persons contravenes subsection 243ZE(2) or 243ZF(6), then, for the purposes of this Law, each of those persons contravenes that subsection.

Retaining records made under section 243ZB

“243ZH. For 7 years after the day when a resolution under Division 5 is passed, the public company must retain the records it made under section 243ZB in relation to the resolution.

Effect of Part

“243ZI.(1) Sections 243H, 243ZE and 243ZF have effect despite anything else in this Law or in any other law of this jurisdiction, or anything in a body corporate’s constitution.

“(2) Sections 243J to 243R, inclusive, have effect subject to:

(a)     this Law (other than this Part); and

(b)     any other law of this jurisdiction or anywhere else; and

(c)     the constitution of a body corporate that those sections would otherwise permit to give financial benefits.

“(3) Without limiting subsection (2), this Part does not relieve a person of a duty imposed by this Law, by any other law of this jurisdiction or anywhere else, or by a body corporate’s constitution.

“(4) Nothing done under this Part relieves a person of such a duty merely because the thing was done under this Part.

“(5) In this section:

‘law’ includes a rule of common law or equity.”.


Schedule 3

28.(1) Schedule 3 to the Corporations Law is amended by omitting:

Section 234:

Penalty: $5,000 or imprisonment for 1 year, or both.”.

(2) Schedule 3 to the Corporations Law is amended by inserting before “Section 245:” the following:

Section 243ZF:

Penalty: $20,000 or imprisonment for 3 years, or both.

Section 243ZH:

Penalty: $2,500 or imprisonment for 6 months, or both.”.

PART 4—EXTERNAL ADMINISTRATION OF COMPANIES AND PART 5.7 BODIES

Division 1Amendments of the Corporations Law

Dictionary

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.”.

Interpretation

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

Division 1Preliminary

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.

Interpretation

“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 2Appointment 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:

(a)     giving written notice of the meeting to as many of the company’s creditors as reasonably practicable; and

(b)    causing notice of the meeting to be published:

(i)  in a national newspaper; or

(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 3Administrator 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.

“(4) In 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.

Note: Section 73A defines when a court is taken to find a person guilty of an offence.

“(2) An order under subsection (1) may be enforced as if it were a judgment of the court.

“(3) The power of a court under section 1318 to relieve a person from liability as mentioned in that section extends to relieving a person from liability to be ordered under this section to pay compensation.

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 4Administrator 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 5Meeting 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:

(a)     giving written notice of the meeting to as many of the company’s creditors as reasonably practicable; and

(b)    causing notice of the meeting to be published:

(i)  in a national newspaper; or

(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 6Protection 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:

(a)     with the administrator’s written consent; or

(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:


(a)     with the administrator’s written consent; or

(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:

(a)     with the administrator’s written consent; or

(b)    with the leave of the Court and in accordance with such terms (if any) as the Court imposes.

“(2) Subsection (1) does not apply to:

(a)     a criminal proceeding; or

(b)    a prescribed proceeding.

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.