Federal Register of Legislation - Australian Government

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Corporations Law

Act No. of as amended, taking into account amendments up to Act No. 91 of 2000
Registered 24 Nov 2009
Start Date 24 Nov 2000
End Date 27 Apr 2001
Date of repeal 15 Jul 2001
Repealed by Corporations (Repeals, Consequentials and Transitionals) Act 2001
Table of contents.

Corporations Law

As set out in section 82 of the Corporations Act 1989

Volume 2

 

Chapter 2HShares

  

  


Contents

Part 2H.3—Partly-paid shares                                                                                     390

254M.... Liability on partly-paid shares....................................................... 390

254N..... Calls may be limited to when company is externally‑administered 390

254P...... No liability companies—calls on shares......................................... 390

254Q..... No liability companies—forfeiture and sale of shares for failure to meet call         391

254R..... No liability companies—redemption of forfeited shares............... 393

Part 2H.4—Capitalisation of profits                                                                         395

254S...... Capitalisation of profits................................................................. 395

Part 2H.5—Dividends                                                                                                       396

254T..... Dividends to be paid out of profits................................................ 396

254U..... Other provisions about paying dividends (replaceable rule—see section 135)       396

254V..... When does the company incur a debt?........................................... 396

254W.... Dividend rights............................................................................... 396

Part 2H.6—Notice requirements                                                                                398

254X..... Notice to ASIC of share issue........................................................ 398

254Y..... Notice to ASIC of share cancellation.............................................. 398

Chapter 2J—Transactions affecting share capital                                           400

Part 2J.1—Share capital reductions and share buy‑backs                          400

256A..... Purpose........................................................................................... 400

Division 1—Reductions in share capital not otherwise authorised by law           401

256B..... Company may make reduction not otherwise authorised.............. 401

256C..... Shareholder approval...................................................................... 402

256D..... Consequences of failing to comply with section 256B.................. 403

256E...... Signposts to other relevant provisions........................................... 403

Division 2—Share buy-backs                                                                                405

257A..... The company’s power to buy back its own shares....................... 405

257B..... Buy-back procedure—general........................................................ 405

257C..... Buy-back procedure—shareholder approval if the 10/12 limit exceeded                408

257D..... Buy-back procedure—special shareholder approval for selective buy-back           408

257E...... Buy-back procedure—lodgment of offer documents with ASIC... 409

257F...... Notice of intended buy-back.......................................................... 409

257G..... Buy-back procedure—disclosure of relevant information when offer made           410

257H..... Acceptance of offer and transfer of shares to the company........... 410

257J...... Signposts to other relevant provisions........................................... 411

Division 3—Other share capital reductions                                                 413

258A..... Unlimited companies...................................................................... 413

258B..... Right to occupy or use real property............................................. 413

258C..... Brokerage or commission................................................................ 413

258D..... Cancellation of forfeited shares...................................................... 413

258E...... Other share cancellations................................................................ 413

258F...... Reductions because of lost capital.................................................. 414

Part 2J.2—Self-acquisition and control of shares                                             415

259A..... Directly acquiring own shares........................................................ 415

259B..... Taking security over own shares or shares in holding company.... 415

259C..... Issuing or transferring shares to controlled entity.......................... 416

259D..... Company controlling entity that holds shares in it........................ 417

259E...... When a company controls an entity............................................... 418

259F...... Consequences of failing to comply with section 259A or 259B.... 419

Part 2J.3—Financial assistance                                                                                  420

260A..... Financial assistance by a company for acquiring shares in the company or a holding company            420

260B..... Shareholder approval...................................................................... 420

260C..... Exempted financial assistance......................................................... 422

260D..... Consequences of failing to comply with section 260A.................. 423

Part 2J.4—Interaction with general directors’ duties                                    425

260E...... General duties still apply............................................................... 425

Chapter 2K—Charges                                                                                                      426

Part 2K.1—Preliminary                                                                                                   426

261........ Interpretation and application........................................................ 426

Part 2K.2—Registration                                                                                                 428

262........ Charges required to be registered.................................................... 428

263........ Lodgment of notice of charge and copy of instrument................... 430

264........ Acquisition of property subject to charge...................................... 434

265........ Registration of documents relating to charges................................ 435

265A..... Standard time for the purposes of section 265............................... 438

266........ Certain charges void against liquidator or administrator................. 439

267........ Charges in favour of certain persons void in certain cases............. 442

268........ Assignment and variation of charges.............................................. 444

268A..... Assignment of charges under the State Bank (Corporatisation) Act 1994 of South Australia 445

269........ Satisfaction of, and release of property from, charges................... 447

270........ Lodgment of notices, offences etc.................................................. 447

271........ Company to keep documents relating to charges and register of charges                448

272........ Certificates...................................................................................... 449

273........ Registration under other legislation relating to charges................... 450

274........ Power of Court to rectify Register................................................. 451

275........ Charges of company existing before 1 January 1991..................... 452

275A..... Charges of bodies to which section 1362CJ applies...................... 453

276........ Charges of body corporate registered as a company...................... 454

276AA.. Charges of company transferring jurisdiction................................. 454

276A..... Charges of recognised companies and certain foreign companies... 454

277........ Power to exempt from compliance with certain requirements of Division              455

Part 2K.3—Order of priority                                                                                        456

278........ Interpretation.................................................................................. 456

279........ Priorities of charges........................................................................ 457

280........ General priority rules in relation to registered charges................... 458

281........ General priority rule in relation to unregistered charges................. 459

282........ Special priority rules...................................................................... 459

Chapter 2L—Debentures                                                                                               462

Part 2L.1—Requirement for trust deed and trustee                                       462

260FA... Requirement for trust deed and trustee.......................................... 462

260FB... Trust deed....................................................................................... 462

260FC... Who can be a trustee....................................................................... 463

260FD... Existing trustee continues to act until new trustee takes office...... 464

260FE... Replacement of trustee................................................................... 464

Part 2L.2—Duties of borrower                                                                                    465

260GA.. Duties of borrower......................................................................... 465

260GB.. General duties................................................................................. 465

260GC.. Duty to notify ASIC of name of trustee........................................ 465

260GD.. Duty to replace trustee................................................................... 466

260GE... Duty to inform trustee about charges............................................. 466

260GF... Duty to give trustee and ASIC quarterly reports........................... 466

260GG.. Exceptions...................................................................................... 469

260GH.. How debentures may be described................................................ 469

260GI.... Offences for failure to comply with statutory duties.................... 470

Part 2L.3—Duties of guarantor                                                                                  471

260HA.. Duties of guarantor......................................................................... 471

260HB.. General duties................................................................................. 471

260HC.. Duty to inform trustee about charges............................................. 471

260HD.. Exceptions...................................................................................... 472

260HE... Offences for failure to comply with statutory duties.................... 472

Part 2L.4—Trustee                                                                                                            473

260JA... Trustee’s duties.............................................................................. 473

260JB.... Exemptions and indemnifications of trustee from liability............. 474

260JC.... Indemnity....................................................................................... 475

Part 2L.5—Meetings of debenture holders                                                         476

260KA.. Borrower’s duty to call meeting..................................................... 476

260KB.. Trustee’s power to call meeting..................................................... 477

260KC.. Court may order meeting................................................................ 477

Part 2L.6—Civil liability                                                                                                  479

260L...... Civil liability for contravening this Chapter................................... 479

Part 2L.7—ASIC powers                                                                                                480

260MA. ASIC’s power to exempt and modify............................................ 480

260MB. ASIC may approve body corporate to be trustee.......................... 481

Part 2L.8—Court                                                                                                                 482

260NA.. General Court power to give directions and determine questions.. 482

260NB.. Specific Court powers.................................................................... 482

Part 2L.9—Location of other debenture provisions                                        484

260P...... Signpost to other debenture provisions.......................................... 484

Chapter 2M—Financial reports and audit                                                            485

Part 2M.1—Overview                                                                                                      485

285........ Overview of obligations under this Chapter................................... 485

Part 2M.2—Financial records                                                                                      488

286........ Obligation to keep financial records............................................... 488

287........ Language requirements.................................................................... 488

288........ Physical format............................................................................... 488

289........ Place where records are kept.......................................................... 488

290........ Director access................................................................................ 489

291........ Signposts to other relevant provisions........................................... 490

Part 2M.3—Financial reporting                                                                                  491

Division 1—Annual financial reports and directors’ reports               491

292........ Who has to prepare annual financial reports and directors’ reports 491

293........ Small proprietary company—shareholder direction...................... 491

294........ Small proprietary company—ASIC direction................................ 492

295........ Contents of annual financial report................................................ 492

296........ Compliance with accounting standards and regulations................. 494

297........ True and fair view........................................................................... 494

298........ Annual directors’ report................................................................. 494

299........ Annual directors’ report—general information.............................. 495

300........ Annual directors’ report—specific information............................. 496

300A..... Annual directors’ report—specific information to be provided by listed companies             501

301........ Audit of annual financial report...................................................... 501

Division 2—Half-year financial report and directors’ report               502

302........ Disclosing entity must prepare half-year financial report and directors’ report     502

303........ Contents of half-year financial report............................................ 502

304........ Compliance with accounting standards and regulations................. 503

305........ True and fair view........................................................................... 503

306........ Half-year directors’ report............................................................. 504

Division 3—Audit and auditor’s report                                                           505

307........ Audit............................................................................................... 505

308........ Auditor’s report on annual financial report.................................... 505

309........ Auditor’s report on half-year financial report................................ 506

310........ Auditor’s power to obtain information.......................................... 507

311........ Reporting to ASIC.......................................................................... 507

312........ Assisting auditor............................................................................. 507

313........ Special provisions on audit of debenture issuers and guarantors... 507

Division 4—Annual financial reporting to members                                509

314........ Annual financial reporting to members........................................... 509

315........ Deadline for reporting to members................................................. 510

316........ Member’s choices for annual financial information........................ 511

317........ Consideration of reports at AGM.................................................. 511

318........ Additional reporting by debenture issuers..................................... 511

Division 5—Lodging reports with ASIC                                                        513

319........ Lodgment of annual reports with ASIC [see Note 2]..................... 513

320........ Lodgment of half-year reports with ASIC..................................... 514

321........ ASC power to require lodgment..................................................... 514

322........ Relodgment if financial statements or directors’ reports amended after lodgment  515

Division 6—Special provisions about consolidated financial statements              516

323........ Directors and officers of controlled entity to give information...... 516

323A..... Auditor’s power to obtain information from controlled entity...... 516

323B..... Controlled entity to assist auditor.................................................. 516

323C..... Application of Division to entity that has ceased to be controlled 517

Division 7—Financial years and half-years                                                    518

323D..... Financial years and half-years........................................................ 518

Division 8—Disclosure by listed companies of information filed overseas         519

323DA.. Listed companies to disclose information filed overseas................ 519

Part 2M.4—Appointment and removal of auditors                                          520

Division 1—Companies                                                                                           520

324........ Qualifications of auditors............................................................... 520

325........ Appointment of auditor by proprietary company........................ 524

327........ Appointment of auditors................................................................ 524

328........ Nomination of auditors................................................................... 528

329........ Removal and resignation of auditors............................................... 528

330........ Effect of winding up on office of auditor....................................... 531

331........ Fees and expenses of auditors........................................................ 531

Division 2—Registered schemes                                                                       532

331AA.. Qualifications of auditors............................................................... 532

331AB.. Appointment of auditors................................................................ 533

331AC.. Removal and resignation of auditors............................................... 534

331AD.. Effect of winding up an office of auditor........................................ 536

331AE... Fees and expenses of auditors........................................................ 536

Part 2M.5—Accounting standards                                                                            537

334........ Accounting standards..................................................................... 537

335........ Equity accounting........................................................................... 537

337........ Interpretation of accounting standards........................................... 537

338........ Severing invalid provisions............................................................. 538

339........ Evidence of text of accounting standard [see Note 2]..................... 538

Part 2M.6—Exemptions and modifications                                                          539

340........ ASIC’s power to make specific exemption orders......................... 539

341........ ASIC’s power to make class orders............................................... 539

342........ Criteria for specific exemption orders and class orders.................. 540

343........ Modification by regulations........................................................... 541

Part 2M.7—Sanctions for contraventions of Chapter                                    542

344........ Contravention of Part 2M.2 or 2M.3............................................. 542

Chapter 2N—Annual return and lodgments with ASIC                                543

Part 2N.1—Annual returns                                                                                            543

345........ Deadline for lodging annual return.................................................. 543

346........ Solvency resolution—companies................................................... 544

347........ Lodging annual return with ASIC................................................... 544

348........ Contents of annual return—companies [see Notes 2 and 5].......... 544

349........ Contents of annual return—registered schemes [see Note 3]......... 546

Part 2N.2—Lodgments with ASIC                                                                            548

350........ Forms for documents to be lodged with ASIC............................... 548

351........ Signing documents lodged with ASIC............................................. 548

352........ Documents lodged with ASIC electronically.................................. 548

Chapter 5—External administration                                                                        550

Part 5.1—Arrangements and reconstructions                                                     550

410........ Interpretation.................................................................................. 550

411........ Administration of compromises etc............................................... 550

412........ Information as to compromise with creditors................................ 557

413........ Provisions for facilitating reconstruction and amalgamation of Part 5.1 bodies      559

414........ Acquisition of shares of shareholders dissenting from scheme or contract approved by majority         560

415........ Notification of appointment of scheme manager and power of Court to require report         564

415A..... Enforcement of orders made in other jurisdictions......................... 564

Part 5.2—Receivers, and other controllers, of property of corporations 566

416........ Interpretation.................................................................................. 566

417........ Application of Part......................................................................... 566

418........ Persons not to act as receivers........................................................ 566

418A..... Court may declare whether controller is validly acting.................. 567

419........ Liability of controller...................................................................... 568

419A..... Liability of controller under pre-existing agreement about property used by corporation     568

420........ Powers of receiver.......................................................................... 570

420A..... Controller’s duty of care in exercising power of sale..................... 572

420B..... Court may authorise managing controller to dispose of property despite prior charge          572

420C..... Receiver’s power to carry on corporation’s business during winding up               573

421........ Controller’s duties in relation to bank accounts and financial records 574

421A..... Managing controller to report within 2 months about corporation’s affairs           575

422........ Reports by receiver........................................................................ 576

423........ Supervision of controller................................................................ 577

424........ Controller may apply to Court...................................................... 578

425........ Court’s power to fix receiver’s remuneration................................. 578

426........ Controller has qualified privilege in certain cases........................... 579

427........ Notification of matters relating to controller.................................. 579

428........ Statement that receiver appointed or other controller acting.......... 581

429........ Officers to report to controller about corporation’s affairs........... 581

430........ Controller may require reports....................................................... 583

431........ Controller may inspect books........................................................ 584

432........ Lodging controller’s accounts......................................................... 584

433........ Payment of certain debts, out of property subject to floating charge, in priority to claims under charge              586

434........ Enforcing controller’s duty to make returns................................... 588

434A..... Court may remove controller for misconduct................................. 589

434B..... Court may remove redundant controller......................................... 589

434C..... Effect of sections 434A and 434B.................................................. 590

Part 5.3A—Administration of a company’s affairs with a view to executing a deed of company arrangement                                                                                                                                    591

Division 1—Preliminary                                                                                          591

435A..... Object of Part................................................................................. 591

435B..... Interpretation.................................................................................. 591

435C..... When administration begins and ends............................................. 591

Division 2—Appointment of administrator and first meeting of creditors           593

436A..... Company may appoint administrator if board thinks it is or will become insolvent              593

436B..... Liquidator may appoint administrator........................................... 593

436C..... Chargee may appoint administrator............................................... 593

436D..... Company already under administration......................................... 594

436E...... Purpose and timing of first meeting of creditors............................ 594

436F...... Functions of committee of creditors............................................... 594

436G..... Membership of committee............................................................. 595

Division 3—Administrator assumes control of company’s affairs    596

437A..... Role of administrator...................................................................... 596

437B..... Administrator acts as company’s agent......................................... 596

437C..... Powers of other officers suspended............................................... 596

437D..... Only administrator can deal with company’s property................. 597

437E...... Order for compensation where officer involved in void transaction 598

437F...... Effect of administration on company’s members........................... 598

Division 4—Administrator investigates company’s affairs                   599

438A..... Administrator to investigate affairs and consider possible courses of action          599

438B..... Directors to help administrator...................................................... 599

438C..... Administrator’s rights to company’s books.................................. 600

438D..... Reports by administrator............................................................... 600

Division 5—Meeting of creditors decides company’s future              602

439A..... Administrator to convene meeting and inform creditors................ 602

439B..... Conduct of meeting......................................................................... 603

439C..... What creditors may decide............................................................. 603

Division 6—Protection of company’s property during administration 604

440A..... Winding up company..................................................................... 604

440B..... Charge unenforceable...................................................................... 604

440C..... Owner or lessor cannot recover property used by company......... 604

440D..... Stay of proceedings........................................................................ 605

440E...... Administrator not liable in damages for refusing consent............... 605

440F...... Suspension of enforcement process............................................... 605

440G..... Duties of court officer in relation to property of company........... 605

440H..... Lis pendens taken to exist............................................................... 607

440J...... Administration not to trigger liability of director or relative under guarantee of company’s liability     607

Division 7—Rights of chargee, owner or lessor                                        609

441A..... Where chargee acts before or during decision period...................... 609

441B..... Where enforcement of charge begins before administration............ 610

441C..... Charge on perishable property....................................................... 610

441D..... Court may limit powers of chargee etc. in relation to charged property 611

441E...... Giving a notice under a charge........................................................ 612

441F...... Where recovery of property begins before administration............. 612

441G..... Recovering perishable property..................................................... 612

441H..... Court may limit powers of receiver etc. in relation to property used by company                612

441J...... Giving a notice under an agreement about property....................... 613

441K..... Effect of Division........................................................................... 613

Division 8—Powers of administrator                                                                614

442A..... Additional powers of administrator............................................... 614

442B..... Dealing with property subject to a floating charge that has crystallised 614

442C..... When administrator may dispose of encumbered property........... 614

442D..... Administrator’s powers subject to powers of chargee, receiver etc. 615

442E...... Administrator has qualified privilege.............................................. 615

442F...... Protection of persons dealing with administrator........................... 615

Division 9—Administrator’s liability and indemnity for debts of administration              617

Subdivision A—Liability                                                                                        617

443A..... General debts.................................................................................. 617

443B..... Payments for property used or occupied by, or in the possession of, the company             617

443BA.. Certain taxation liabilities............................................................... 619

443C..... Administrator not otherwise liable for company’s debts............... 619

Subdivision B—Indemnity                                                                                     619

443D..... Right of indemnity.......................................................................... 619

443E...... Right of indemnity has priority over other debts........................... 620

443F...... Lien to secure indemnity................................................................ 621

Division 10—Execution and effect of deed of company arrangement 622

444A..... Effect of creditors’ resolution......................................................... 622

444B..... Execution of deed............................................................................ 623

444C..... Creditor etc. not to act inconsistently with deed before its execution 623

444D..... Effect of deed on creditors.............................................................. 624

444E...... Protection of company’s property from persons bound by deed. 624

444F...... Court may limit rights of secured creditor or owner or lessor........ 625

444G..... Effect of deed on company, officers and members......................... 626

444H..... Extent of release of company’s debts............................................. 626

Division 11—Variation, termination and avoidance of deed                627

445A..... Variation of deed by creditors........................................................ 627

445B..... Court may cancel variation............................................................. 627

445C..... When deed terminates..................................................................... 627

445D..... When Court may terminate deed.................................................... 627

445E...... Creditors may terminate deed and resolve that company be wound up  628

445F...... Meeting of creditors to consider proposed variation or termination of deed          629

445G..... When Court may void or validate deed.......................................... 630

445H..... Effect of termination or avoidance.................................................. 630

Division 12—Transition to creditors’ voluntary winding up                631

446A..... Administrator becomes liquidator in certain cases......................... 631

446B..... Regulations may provide for transition in other cases................... 632

Division 13—Powers of Court                                                                             634

447A..... General power to make orders........................................................ 634

447B..... Orders to protect creditors during administration.......................... 634

447C..... Court may declare whether administrator validly appointed......... 635

447D..... Administrator may seek directions................................................. 635

447E...... Supervision of administrator of company or deed......................... 635

447F...... Effect of Division........................................................................... 636

Division 14—Qualifications of administrators                                             637

448A..... Appointee must consent................................................................ 637

448B..... Administrator must be registered liquidator................................... 637

448C..... Disqualification of person connected with company..................... 637

448D..... Disqualification of insolvent under administration......................... 638

Division 15—Removal, replacement and remuneration of administrator             639

449A..... Appointment of administrator cannot be revoked......................... 639

449B..... Court may remove administrator.................................................... 639

449C..... Vacancy in office of administrator of company............................. 639

449D..... Vacancy in office of administrator of deed of company arrangement 640

449E...... Remuneration of administrator....................................................... 641

Division 16—Notices about steps taken under Part                                642

450A..... Appointment of administrator....................................................... 642

450B..... Execution of deed of company arrangement................................... 642

450C..... Failure to execute deed of company arrangement........................... 643

450D..... Termination of deed of company arrangement............................... 643

450E...... Notice in public documents etc. of company................................. 643

450F...... Effect of contravention of this Division......................................... 644

Division 17—Miscellaneous                                                                                 645

451A..... Appointment of 2 or more administrators of company................. 645

451B..... Appointment of 2 or more administrators of deed of company arrangement         645

451C..... Effect of things done during administration of company............... 646

451D..... Time for doing act does not run while act prevented by this Part. 646

Part 5.4—Winding up in insolvency                                                                          647

Division 1—When company to be wound up in insolvency                  647

459A..... Order that insolvent company be wound up in insolvency........... 647

459B..... Order made on application under section 234, 462 or 464............. 647

459C..... Presumptions to be made in certain proceedings............................ 647

459D..... Contingent or prospective liability relevant to whether company solvent             648

Division 2—Statutory demand                                                                             649

459E...... Creditor may serve statutory demand on company....................... 649

459F...... When company taken to fail to comply with statutory demand... 650

Division 3—Application to set aside statutory demand                         651

459G..... Company may apply..................................................................... 651

459H..... Determination of application where there is a dispute or offsetting claim              651

459J...... Setting aside demand on other grounds........................................... 652

459K..... Effect of order setting aside demand............................................... 653

459L...... Dismissal of application................................................................. 653

459M.... Order subject to conditions............................................................ 653

459N..... Costs where company successful................................................... 653

Division 4—Application for order to wind up company in insolvency 654

459P...... Who may apply for order under section 459A.............................. 654

459Q..... Application relying on failure to comply with statutory demand. 654

459R..... Period within which application must be determined.................... 655

459S...... Company may not oppose application on certain grounds........... 655

459T..... Application to wind up joint debtors in insolvency...................... 656

Part 5.4A—Winding up by the Court on other grounds                                 657

461........ General grounds on which company may be wound up by Court. 657

462........ Standing to apply for winding up................................................... 658

464........ Application for winding up in connection with investigation under ASC Law       659

Part 5.4B—Winding up in insolvency or by the Court                                   660

Division 1—General                                                                                                  660

465A..... Notice of application...................................................................... 660

465B..... Substitution of applicants.............................................................. 660

465C..... Applicant to be given notice of grounds for opposing application 661

466........ Payment of preliminary costs etc................................................... 661

467........ Court’s powers on hearing application.......................................... 661

467A..... Effect of defect or irregularity on application under Part 5.4 or 5.4A 663

467B..... Court may order winding up of company that is being wound up voluntarily       663

468........ Avoidance of dispositions of property, attachments etc............... 664

469........ Application to be lis pendens......................................................... 665

470........ Certain notices to be lodged............................................................ 665

Division 1A—Effect of winding up order                                                        667

471........ Effect on creditors and contributories............................................ 667

471A..... Powers of other officers suspended during winding up................. 667

471B..... Stay of proceedings and suspension of enforcement process........ 668

471C..... Secured creditor’s rights not affected............................................. 668

Division 2—Court-appointed liquidators                                                       669

472........ Court to appoint official liquidator................................................ 669

473........ General provisions about liquidators.............................................. 669

474........ Custody and vesting of company’s property................................ 671

475........ Report as to company’s affairs to be submitted to liquidator....... 671

476........ Preliminary report by liquidator..................................................... 673

477........ Powers of liquidator....................................................................... 673

478........ Application of property; list of contributories.............................. 676

479........ Exercise and control of liquidator’s powers................................... 677

480........ Release of liquidator and deregistration of company...................... 677

481........ Orders for release or deregistration................................................. 677

Division 3—General powers of Court                                                              679

482........ Power to stay or terminate winding up.......................................... 679

483........ Delivery of property to liquidator................................................. 679

484........ Appointment of special manager.................................................... 681

485........ Claims of creditors and distribution of property........................... 681

486........ Inspection of books by creditors and contributories...................... 682

486A..... Court may make order to prevent officer or related entity from avoiding liability to company             682

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........................................................... 684

487........ Power to arrest absconding contributory....................................... 685

488........ Delegation to liquidator of certain powers of Court....................... 685

489........ Powers of Court cumulative........................................................... 685

Part 5.5—Voluntary winding up                                                                                  686

Division 1—Resolution for winding up                                                            686

490........ When company cannot wind up voluntarily.................................. 686

491........ Circumstances in which company may be wound up voluntarily. 686

493........ Effect of voluntary winding up...................................................... 686

494........ Declaration of solvency.................................................................. 687

Division 2—Members’ voluntary winding up                                              689

495........ Liquidators...................................................................................... 689

496........ Duty of liquidator where company turns out to be insolvent........ 689

Division 3—Creditors’ voluntary winding up                                              691

497........ Meeting of creditors....................................................................... 691

498........ Power to adjourn meeting............................................................... 693

499........ Liquidators...................................................................................... 693

500........ Execution and civil proceedings...................................................... 694

Division 4—Voluntary winding up generally                                                695

501........ Distribution of property of company............................................ 695

502........ Appointment of liquidator............................................................. 695

503........ Removal of liquidator..................................................................... 695

504........ Review of liquidator’s remuneration.............................................. 695

505........ Acts of liquidator valid etc............................................................. 695

506........ Powers and duties of liquidator...................................................... 696

507........ Power of liquidator to accept shares etc. as consideration for sale of property of company 697

508........ Annual meeting of creditors............................................................ 698

509........ Final meeting and deregistration..................................................... 699

510........ Arrangement: when binding on creditors........................................ 700

511........ Application to Court to have questions determined or powers exercised               701

512........ Costs............................................................................................... 701

Part 5.6—Winding up generally                                                                                  702

Division 1—Preliminary                                                                                          702

513........ Application of Part......................................................................... 702

Division 1A—When winding up taken to begin                                          703

513A..... Winding up ordered by the Court................................................... 703

513B..... Voluntary winding up..................................................................... 703

513C..... Section 513C day in relation to an administration under Part 5.3A 704

513D..... Validity of proceedings in earlier winding up................................. 704

Division 2—Contributories                                                                                   706

514........ Where Division applies.................................................................. 706

515........ General liability of contributory..................................................... 706

516........ Company limited by shares............................................................ 706

517........ Company limited by guarantee....................................................... 706

519........ Exceptions for former unlimited company..................................... 706

520........ Past member: later debts................................................................. 707

521........ Person ceasing to be a member a year or more before winding up. 707

522........ Present members to contribute first............................................... 707

523........ Past member of former unlimited company................................... 707

524........ Past member of former limited company....................................... 707

526........ Liability on certain contracts.......................................................... 708

527........ Nature of contributory’s liability................................................... 708

528........ Death of contributory..................................................................... 708

529........ Bankruptcy of contributory........................................................... 708

Division 3—Liquidators                                                                                          709

530A..... Officers to help liquidator.............................................................. 709

530B..... Liquidator’s rights to company’s books........................................ 710

530C..... Warrant to search for, and seize, company’s property or books... 711

531........ Books to be kept by liquidator....................................................... 712

532........ Disqualification of liquidator.......................................................... 712

533........ Reports by liquidator..................................................................... 714

534........ Prosecution by liquidator of delinquent officers and members...... 715

535........ When liquidator has qualified privilege........................................... 715

536........ Supervision of liquidators............................................................... 716

537........ Notice of appointment and address of liquidator........................... 716

538........ Regulations relating to money etc. received by liquidator.............. 717

539........ Liquidator’s accounts..................................................................... 718

540........ Liquidator to remedy defaults........................................................ 719

Division 4—General                                                                                                  720

541........ Notification that company is in liquidation.................................... 720

542........ Books of company......................................................................... 720

543........ Investment of surplus funds on general account............................ 721

544........ Unclaimed money to be paid to Commission................................. 721

545........ Expenses of winding up where property insufficient.................... 722

546........ Resolutions passed at adjourned meetings of creditors and contributories             723

547........ Meetings to ascertain wishes of creditors or contributories........... 723

Division 5—Committees of inspection                                                            724

548........ Convening of meetings by liquidator for appointment of committee of inspection                724

549........ Proceedings of committee of inspection......................................... 725

550........ Vacancies on committee of inspection............................................ 725

551........ Member of committee not to accept extra benefit.......................... 726

552........ Powers of Court where no committee of inspection...................... 726

Division 6—Proof and ranking of claims                                                        727

Subdivision A—Admission to proof of debts and claims                                  727

553........ Debts or claims that are provable in winding up............................ 727

553A..... Member cannot prove debt unless contributions paid................... 728

553AA.. Selling shareholder cannot prove debt unless documents given...... 728

553B..... Insolvent companies—penalties and fines not generally provable. 728

553C..... Insolvent companies—mutual credit and set-off............................ 728

553D..... Debts or claims may be proved formally or informally................. 729

553E...... Application of Bankruptcy Act to winding up of insolvent company 729

Subdivision B—Computation of debts and claims                                             730

554........ General rule—compute amount as at relevant date........................ 730

554A..... Determination of value of debts and claims of uncertain value...... 730

554B..... Discounting of debts payable after relevant date........................... 731

554C..... Conversion into Australian currency of foreign currency debts or claims               731

Subdivision C—Special provisions relating to secured creditors of insolvent companies                732

554D..... Application of Subdivision............................................................. 732

554E...... Proof of debt by secured creditor................................................... 732

554F...... Redemption of security by liquidator............................................ 733

554G..... Amendment of valuation................................................................ 734

554H..... Repayment of excess...................................................................... 734

554J...... Subsequent realisation of security.................................................. 735

Subdivision D—Priorities                                                                                     735

555........ Debts and claims proved to rank equally except as otherwise provided 735

556........ Priority payments.......................................................................... 735

558........ Debts due to employees................................................................. 739

559........ Debts of a class to rank equally...................................................... 740

560........ Advances for company to make priority payments in respect of employees        740

561........ Priority of employees’ claims over floating charges....................... 741

562........ Application of proceeds of contracts of insurance......................... 741

562A..... Application of proceeds of contracts of reinsurance...................... 742

563........ Provisions relating to injury compensation.................................... 744

563AA.. Seller under a buy-back agreement.................................................. 744

563A..... Member’s debts to be postponed until other debts and claims satisfied                744

563AAA.................................................................... Redemption of debentures  745

Subdivision E—Miscellaneous                                                                              745

563B..... Interest on debts and claims from relevant date to date of payment 745

563C..... Debt subordination......................................................................... 746

564........ Power of Court to make orders in favour of certain creditors........ 746

Division 7—Effect on certain transactions                                                    747

565........ Undue preference............................................................................ 747

566........ Effect of floating charge.................................................................. 747

567........ Liquidator’s right to recover in respect of certain transactions...... 748

Division 7A—Disclaimer of onerous property                                            751

568........ Disclaimer by liquidator; application to Court by party to contract 751

568A..... Liquidator must give notice of disclaimer....................................... 752

568B..... Application to set aside disclaimer before it takes effect............... 753

568C..... When disclaimer takes effect.......................................................... 754

568D..... Effect of disclaimer......................................................................... 755

568E...... Application to set aside disclaimer after it has taken effect........... 755

568F...... Court may dispose of disclaimed property.................................... 756

Division 7B—Effect on enforcement process against company’s property         757

569........ Executions, attachments etc. before winding up............................. 757

570........ Duties of sheriff after receiving notice of application.................... 758

Division 9—Co-operation between Australian and foreign courts in external administration matters                                                                                                                    762

580........ Interpretation.................................................................................. 762

581........ Courts to act in aid of each other.................................................... 762

Part 5.7—Winding up bodies other than companies                                        764

582........ Application of Part......................................................................... 764

583........ Winding up Part 5.7 bodies............................................................ 764

585........ Insolvency of Part 5.7 body........................................................... 765

586........ Contributories in winding up of Part 5.7 body.............................. 766

587........ Power of Court to stay or restrain proceedings............................. 766

588........ Outstanding property of defunct registrable body......................... 767

Part 5.7A—Reciprocity with other jurisdictions                                                768

Division 1—Application of Part 5.3A to matters arising under corresponding laws       768

588AA.. Application in this jurisdiction....................................................... 768

588AB.. Enforcement of orders.................................................................... 768

Division 2—Winding up recognised companies                                         770

588A..... Enforcement of winding up orders made in other jurisdictions...... 770

588B..... Functions and powers in this jurisdiction of liquidators from other jurisdictions   770

588C..... Outstanding property of defunct recognised company.................. 770

Part 5.7B—Recovering property or compensation for the benefit of creditors of insolvent company       772

Division 1—Preliminary                                                                                          772

588D..... Secured debt may become unsecured.............................................. 772

588E...... Presumptions to be made in recovery proceedings........................ 772

588F...... Certain taxation liabilities taken to be debts................................... 774

Division 2—Voidable transactions                                                                     776

588FA... Unfair preferences.......................................................................... 776

588FB... Uncommercial transactions............................................................. 777

588FC... Insolvent transactions..................................................................... 777

588FD... Unfair loans to a company............................................................. 778

588FE... Voidable transactions...................................................................... 778

588FF... Courts may make orders about voidable transactions.................... 779

588FG... Transaction not voidable as against certain persons....................... 781

588FGA Directors to indemnify Commissioner of Taxation if certain payments set aside   782

588FGB Defences in proceedings under section 588FGA............................ 784

588FH... Liquidator may recover from related entity benefit resulting from insolvent transaction       785

588FI.... Creditor who gives up benefit of unfair preference may prove for preferred debt  785

588FJ.... Floating charge created within 6 months before relation-back day. 786

Division 3—Director’s duty to prevent insolvent trading                    788

588G..... Director’s duty to prevent insolvent trading by company............ 788

588H..... Defences......................................................................................... 790

Division 4—Director liable to compensate company                               792

Subdivision A—Proceedings against director                                                   792

588J...... On application for civil penalty order, Court may order compensation 792

588K..... Criminal court may order compensation........................................ 792

588L...... Enforcement of order under section 588J or 588K......................... 793

588M.... Recovery of compensation for loss resulting from insolvent trading 793

588N..... Avoiding double recovery............................................................... 794

588P...... Effect of sections 588J, 588K and 588M....................................... 794

588Q..... Certificates evidencing contravention............................................. 794

Subdivision B—Proceedings by creditor                                                            795

588R..... Creditor may sue for compensation with liquidator’s consent...... 795

588S...... Creditor may give liquidator notice of intention to sue for compensation              795

588T..... When creditor may sue for compensation without liquidator’s consent 796

588U..... Events preventing creditor from suing............................................ 796

Division 5—Liability of holding company for insolvent trading by subsidiary    798

588V..... When holding company liable......................................................... 798

588W.... Recovery of compensation for loss resulting from insolvent trading 798

588X..... Defences......................................................................................... 799

Division 6—Application of compensation under Division 4 or 5       801

588Y..... Application of amount paid as compensation................................ 801

Division 7—Person managing a corporation while disqualified may become liable for corporation’s debts                                                                                                                    802

588Z..... Court may make order imposing liability....................................... 802

Part 5.8—Offences                                                                                                             803

589........ Interpretation and application........................................................ 803

590........ Offences by officers of certain companies..................................... 806

592........ Incurring of certain debts; fraudulent conduct................................ 808

593........ Powers of Court............................................................................. 809

594........ Certain rights not affected.............................................................. 811

595........ Inducement to be appointed liquidator etc. of company................ 811

596........ Frauds by officers........................................................................... 811

Part 5.8A—Employee entitlements                                                                           813

596AA.. Object and coverage of Part............................................................ 813

596AB.. Entering into agreements or transactions to avoid employee entitlements              814

596AC.. Person who contravenes section 596AB liable to compensate for loss.. 815

596AD.. Avoiding double recovery............................................................... 816

596AE... Effect of section 596AC................................................................. 816

596AF... Employee may sue for compensation with liquidator’s consent... 816

596AG.. Employee may give liquidator notice of intention to sue for compensation           816

596AH.. When employee may sue for compensation without liquidator’s consent              817

596AI.... Events preventing employee from suing........................................ 818

Part 5.9—Miscellaneous                                                                                                 819

Division 1—Examining a person about a corporation                             819

596A..... Mandatory examination.................................................................. 819

596B..... Discretionary examination.............................................................. 819

596C..... Affidavit in support of application under section 596B................ 820

596D..... Content of summons...................................................................... 820

596E...... Notice of examination..................................................................... 820

596F...... Court may give directions about examination................................. 821

597........ Conduct of examination.................................................................. 821

597A..... When Court is to require affidavit about corporation’s examinable affairs             824

597B..... Costs of unnecessary examination or affidavit............................... 825

Division 2—Orders against a person in relation to a corporation    826

598........ Order against person concerned with corporation.......................... 826

Division 3—Provisions applying to various kinds of external administration    828

600A..... Powers of Court where outcome of voting at creditors’ meeting determined by related entity              828

600B..... Review by Court of resolution of creditors passed on casting vote of person presiding at meeting       829

600C..... Court’s powers where proposed resolution of creditors lost as casting vote of person presiding at meeting        830

600D..... Interim order on application under section 600A, 600B or 600C.. 831

600E...... Order under section 600A or 600B does not affect act already done pursuant to resolution 831

600F...... Limitation on right of suppliers of essential services to insist on payment as condition of supply       831

Division 4—Transitional                                                                                         833

601........ Winding up started before commencement of this Chapter........... 833

Chapter 5A—Deregistration of companies                                                          834

601AA.. Deregistration—voluntary.............................................................. 834

601AB.. Deregistration—ASIC initiated...................................................... 835

601AC.. Deregistration—following amalgamation or winding up................ 836

601AD.. Effect of deregistration................................................................... 836

601AE... What ASIC does with the property............................................... 837

601AF... ASIC’s power to fulfil outstanding obligations of deregistered company               838

601AG.. Claims against insurers of deregistered company........................... 838

601AH.. Reinstatement................................................................................. 839

Chapter 5B—Bodies corporate registered as companies, and registrable bodies                840

Part 5B.1—Registering a body corporate as a company                             840

Division 1—Registration                                                                                        840

601BA.. Bodies corporate may be registered as certain types of companies 840

601BB... Bodies registered as proprietary companies................................... 840

601BC... Applying for registration under this Part....................................... 841

601BD.. ASIC gives body ACN, registers as company and issues certificate 844

601BE... Registered office............................................................................. 845

601BF... Name............................................................................................... 845

601BG.. Constitution.................................................................................... 845

601BH.. Modifications of constitution......................................................... 845

601BJ.... ASIC may direct company to apply for Court approval for modifications of constitution   846

601BK.. Establishing registers and minute books......................................... 846

601BL... Registration of registered bodies..................................................... 846

Division 2—Operation of the Corporations Law                                       848

601BM. Effect of registration under this Part.............................................. 848

601BN.. Liability of members on winding up............................................... 848

601BP... Bearer shares................................................................................... 848

601BQ.. References in pre-registration contracts and other documents to par value in existing contracts and documents   849

601BR... First AGM..................................................................................... 850

601BS... Modification by regulations........................................................... 850

Part 5B.2—Registrable bodies                                                                                    851

Division 1—Registrable Australian bodies                                                   851

601CA.. When a registrable Australian body may carry on business in this jurisdiction      851

601CB... Application for registration............................................................ 851

601CC... Cessation of business etc................................................................ 852

Division 2—Foreign companies                                                                          855

601CD.. When a foreign company may carry on business in this jurisdiction 855

601CE... Application for registration............................................................ 855

601CF... Appointment of local agent............................................................ 856

601CG.. Local agent: how appointed............................................................ 857

601CH.. Local agent: how removed.............................................................. 857

601CJ.... Liability of local agent.................................................................... 858

601CK.. Balance-sheets and other documents.............................................. 858

601CL... Cessation of business etc................................................................ 860

601CM. Register of members of foreign company....................................... 863

601CN.. Register kept under section 601CM............................................... 864

601CP... Notifying Commission about register kept under section 601CM 864

601CQ.. Effect of right to acquire shares compulsorily................................ 865

601CR... Index of members and inspection of registers................................. 865

601CS... Certificate as to shareholding.......................................................... 865

Division 3—Bodies registered under this Part                                          866

601CT... Registered office............................................................................. 866

601CU.. Certificate of registration................................................................ 867

601CV... Notice of certain changes................................................................ 867

601CW.. Body’s name etc. must be displayed at office and place of business 868

601CX.. Service of documents on registered body....................................... 868

601CY... Power to hold land.......................................................................... 870

Division 4—Register of debenture holders for non‑companies        871

601CZA Certain documents are debentures.................................................. 871

601CZB Register of debenture holders to be maintained by non‑companies 871

601CZC Location of register......................................................................... 871

601CZD Application of sections 173 to 177................................................ 872

Part 5B.3—Names of registrable Australian bodies and foreign companies            873

601DA.. Reserving a name............................................................................ 873

601DB.. Acceptable abbreviations................................................................ 873

601DC.. When a name is available................................................................ 874

601DD.. Registered Australian bodies and registered foreign companies can carry on business with some names only      875

601DE... Using a name and ARBN................................................................ 875

601DF... Exception to requirement to have ARBN on receipts.................... 876

601DG.. Regulations may exempt from requirement to set out information on documents  876

601DH.. Notice of name change must be given to ASIC............................... 876

601DJ... ASIC’s power to direct a registered name be changed.................... 877

Chapter 5C—Managed investment schemes                                                     878

Part 5C.1¾Registration of managed investment schemes                        878

601EA... Applying for registration................................................................ 878

601EB... Registration of managed investment scheme.................................. 878

601EC... All documents etc. lodged with ASIC to bear ARSN..................... 879

601ED... When a managed investment scheme must be registered................ 879

601EE... Unregistered schemes may be wound up....................................... 881

Part 5C.2—The responsible entity                                                                            882

Division 1¾Responsibilities and powers                                                      882

601FA... Responsible entity to be public company and hold dealers licence 882

601FB... Responsible entity to operate scheme............................................ 882

601FC... Duties of responsible entity........................................................... 883

601FD... Duties of officers of responsible entity.......................................... 884

601FE... Duties of employees of responsible entity.................................... 885

601FF... Surveillance checks by ASIC.......................................................... 886

601FG... Acquisition of interest in scheme by responsible entity................ 886

601FH... Liquidator etc. of responsible entity entitled to exercise indemnity rights              887

Division 2—Changing the responsible entity                                              888

601FJ.... Changes only take effect when ASIC alters record of registration. 888

601FK... Requirements of section 601FA must be met................................ 888

601FL... Retirement of responsible entity.................................................... 888

601FM.. Removal of responsible entity by members................................... 889

601FN... ASIC or scheme member may apply to Court for appointment of temporary responsible entity         890

601FP... Appointment of temporary responsible entity by Court.............. 890

601FQ... Temporary responsible entity to take steps for appointment of new responsible entity      890

Division 3¾Consequences of change of responsible entity               892

601FR... Former responsible entity to hand over books and provide reasonable assistance 892

601FS.... Rights, obligations and liabilities of former responsible entity...... 892

601FT... Effect of change of responsible entity on documents etc. to which former responsible entity is party 893

Part 5C.3—The constitution                                                                                          894

601GA.. Contents of the constitution........................................................... 894

601GB.. Constitution must be legally enforceable........................................ 895

601GC.. Changing the constitution............................................................... 895

Part 5C.4—The compliance plan                                                                                896

601HA.. Contents of the compliance plan.................................................... 896

601HB.. Compliance plan may incorporate provisions from another scheme’s plan            897

601HC.. Directors must sign lodged copy of compliance plan..................... 897

601HD.. ASIC may require further information about compliance plan...... 897

601HE... Changing the compliance plan........................................................ 897

601HF... ASIC may require consolidation of compliance plan to be lodged [see Note 2]      898

601HG.. Audit of compliance plan............................................................... 898

601HH.. Removal and resignation of auditors............................................... 900

601HI.... Action on change of auditor of compliance plan............................ 901

Part 5C.5—The compliance committee                                                                  902

601JA... When is a compliance committee required?.................................... 902

601JB.... Membership of compliance committee.......................................... 903

601JC.... Functions of compliance committee............................................... 904

601JD... Duties of members.......................................................................... 904

601JE.... Compliance committee members have qualified privilege in certain cases               905

601JF.... When can responsible entity indemnify compliance committee members?             905

601JG... When can responsible entity pay insurance premiums for compliance committee members?                906

601JH... Proceedings of compliance committee............................................ 907

601JJ..... Disclosure of interests.................................................................... 907

Part 5C.6—Members’ rights to withdraw from a scheme                            908

601KA.. Members’ rights to withdraw......................................................... 908

601KB.. Non-liquid schemes—offers........................................................... 909

601KC.. Non-liquid schemes—only one withdrawal offer to be open at any time               910

601KD.. Non-liquid schemes¾how payments are to be made.................... 910

601KE... Non-liquid schemes¾responsible entity may cancel withdrawal offer  910

Part 5C.7—Related party transactions                                                                  912

601LA... Chapter 2E applies with modifications.......................................... 912

601LB... Replacement section 207................................................................ 912

207........ Purpose........................................................................................... 912

601LC... Replacement section 208................................................................ 912

208........ Need for member approval for financial benefit............................. 913

601LD... Omission of sections 213, 214 and 224.......................................... 914

601LE... Modification of section 225........................................................... 914

Part 5C.8—Effect of contraventions (civil liability and voidable contracts)              915

601MA. Civil liability of responsible entity to members............................. 915

601MB. Voidable contracts where subscription offers and invitations contravene this Law                915

Part 5C.9—Winding up                                                                                                    917

601NA.. Winding up required by scheme’s constitution.............................. 917

601NB.. Winding up at direction of members............................................... 917

601NC.. Winding up if scheme’s purpose accomplished or cannot be accomplished           917

601ND.. Winding up ordered by Court......................................................... 918

601NE... The winding up of the scheme........................................................ 919

601NF... Other orders about winding up....................................................... 919

601NG.. Unclaimed money to be paid to ASIC............................................ 920

Part 5C.10—Deregistration                                                                                          921

601PA... Deregistration¾voluntary.............................................................. 921

601PB... Deregistration by ASIC.................................................................. 921

601PC... Reinstatement................................................................................. 923

Part 5C.11—Exemptions and modifications                                                         924

601QA.. ASIC’s power to make exemption and modification orders........... 924

601QB.. Modification by regulations........................................................... 925


Part 2H.3Partly-paid shares

  

254M  Liability on partly-paid shares

General rule about shareholder’s liability for calls

             (1)  If shares in a company are partly-paid, the shareholder is liable to pay calls on the shares in accordance with the terms on which the shares are on issue. This subsection does not apply to a no liability company

Note:          The shareholder may also be liable as a contributory under sections 514-529 if the company is wound up.

No liability companies

             (2)  The acceptance by a person of a share in a no liability company, whether by issue or transfer, does not constitute a contract by the person to pay:

                     (a)  calls in respect of the share; or

                     (b)  any contribution to the debts and liabilities of the company.

254N  Calls may be limited to when company is externally‑administered

             (1)  A limited company may provide by special resolution that the whole or a part of its unpaid share capital may be called up only if the company becomes an externally-administered body corporate.

             (2)  The company must lodge with ASIC a copy of the special resolution within 14 days after it is passed.

254P  No liability companies—calls on shares

Making calls

             (1)  A call on a share in a no liability company is not effective unless it is made payable at least 14 days after the call is made.

Notice of call

             (2)  At least 7 days before a call on shares in a no liability company becomes payable, the company must give the holders of the shares notice of:

                     (a)  the amount of the call;

                     (b)  the day when it is payable; and

                     (c)  the place for payment.

The notice must be sent by post. If the notice is not given, the call is not payable.

             (3)  A call does not have any effect on a forfeited share that is held by or in trust for the company under subsection 254Q(6). However, when the share is re-issued or sold by the company, the share may be credited as paid up to the amount determined by the company in accordance with its constitution or by resolution.

254Q  No liability companies—forfeiture and sale of shares for failure to meet call

Forfeiture and sale of shares

             (1)  A share in a no liability company is immediately forfeited if:

                     (a)  a call is made on the share; and

                     (b)  the call is unpaid at the end of 14 days after it became payable.

Note:          The holder of the share may redeem it under section 254R.

             (2)  The forfeited share must then be offered for sale by public auction within 6 weeks after the call became payable.

Advertisement of sale

             (3)  At least 14 days, and not more than 21 days, before the day of the sale, the sale must be advertised in a daily newspaper circulating generally throughout Australia. The specific number of shares to be offered need not be specified in the advertisement and it is sufficient to give notice of the sale by advertising to the effect that all shares on which a call remains unpaid will be sold.

Postponement of sale

             (4)  An intended sale of forfeited shares that has been duly advertised may be postponed for not more than 21 days from the advertised date of sale. The date to which the sale is postponed must be advertised in a daily newspaper circulating generally in Australia.

             (5)  There may be more than 1 postponement but the sale cannot be postponed to a date more than 90 days from the first date fixed for the intended sale.

Shares may be offered as credited to a particular amount

             (6)  The share may be sold credited as paid up to the sum of:

                     (a)  the amount paid upon the share at the time of forfeiture; and

                     (b)  the amount of the call; and

                     (c)  the amount of any other calls becoming payable on or before the day of the sale;

if the company in accordance with its constitution or by ordinary resolution so determines.

Reserve price

             (7)  The directors may fix a reserve price for the share that does not exceed the sum of:

                     (a)  the amount of the call due and unpaid on the share at the time of forfeiture; and

                     (b)  the amount of any other calls that become payable on or before the date of the sale.

Withdrawal from sale

             (8)  The share may be withdrawn from sale if no bid at least equal to the reserve price is made at the sale.

Disposal of shares withdrawn from sale

             (9)  If:

                     (a)  no bid for the share is received at the sale; or

                     (b)  the share is withdrawn from sale;

the share must be held by the directors in trust for the company. It must be then disposed of in the manner determined by the company in accordance with its constitution or by resolution. Unless otherwise specifically provided by resolution, the share must first be offered to shareholders for a period of 14 days before being disposed of in any other manner.

Suspension of voting rights attached to share held in trust

           (10)  At any meeting of the company, no person is entitled to any vote in respect of the shares held by the directors in trust under subsection (9).

Application of proceeds of sale

           (11)  The proceeds of the sale under subsection (2) or the disposal under subsection (9) must be applied to pay:

                     (a)  first, the expenses of the sale; and

                     (b)  then, any expenses necessarily incurred in respect of the forfeiture; and

                     (c)  then, the calls on the share that are due and unpaid.

The balance (if any) must be paid to the member whose share has been sold. If there is a share certificate that relates to the share, the balance does not have to be paid until the member delivers the certificate to the company.

Validity of sale

           (12)  If a sale is not held in time because of error or inadvertence, a late sale is not invalid if it is held as soon as practicable after the discovery of the error or inadvertence.

Failure to comply an offence

           (13)  If there is failure to comply with subsection (2) or (3), the company and any officer of the company who is involved in the contravention are each guilty of an offence.

254R  No liability companies—redemption of forfeited shares

             (1)  Despite section 254Q, if a person’s share has been forfeited, the person may redeem the share, at any time up to or on the last business day before the proposed sale, by paying the company:

                     (a)  all calls due on the share; and

                     (b)  if the company so requires:

                              (i)  a portion, calculated on a pro rata basis, of all expenses incurred by the company in respect of the forfeiture; and

                             (ii)  a portion, calculated on a pro rata basis, of all costs and expenses of any proceeding that has been taken in respect of the forfeiture.

On payment, the person is entitled to the share as if the forfeiture had not occurred.

             (2)  On the last business day before the proposed sale, the registered office of the company must be open during the hours for which it is by this Law required to be open and accessible to the public.

 


 

Part 2H.4Capitalisation of profits

  

254S  Capitalisation of profits

                   A company may capitalise profits. The capitalisation need not be accompanied by the issue of shares.


 

Part 2H.5Dividends

  

254T  Dividends to be paid out of profits

                   A dividend may only be paid out of profits of the company.

Note:          For a director’s duty to prevent insolvent trading on payment of dividends, see section 588G.

254U  Other provisions about paying dividends (replaceable rule—see section 135)

             (1)  The directors may determine that a dividend is payable and fix:

                     (a)  the amount; and

                     (b)  the time for payment; and

                     (c)  the method of payment.

The methods of payment may include the payment of cash, the issue of shares, the grant of options and the transfer of assets.

             (2)  Interest is not payable on a dividend.

254V  When does the company incur a debt?

             (1)  A company does not incur a debt merely by fixing the amount or time for payment of a dividend. The debt arises only when the time fixed for payment arrives and the decision to pay the dividend may be revoked at any time before then.

             (2)  However, if the company has a constitution and it provides for the declaration of dividends, the company incurs a debt when the dividend is declared.

254W  Dividend rights

Shares in public companies

             (1)  Each share in a class of shares in a public company has the same dividend rights unless:

                     (a)  the company has a constitution and it provides for the shares to have different dividend rights; or

                     (b)  different dividend rights are provided for by special resolution of the company.

Shares in proprietary companies (replaceable rule—see section 135)

             (2)  Subject to the terms on which shares in a proprietary company are on issue, the directors may pay dividends as they see fit.

No liability companies

             (3)  A person is not entitled to a dividend on a share in a no liability company if a call:

                     (a)  has been made on the share; and

                     (b)  is due and unpaid.

             (4)  Dividends are payable to the shareholders in a no liability company in proportion to the number of shares held by them, irrespective of the amount paid up, or credited as paid up, on the shares. This subsection has effect subject to any provisions in the company’s constitution relating to shares that are not ordinary shares.

 


 

Part 2H.6Notice requirements

  

254X  Notice to ASIC of share issue

             (1)  Within 1 month after issuing shares, a company must lodge with ASIC a notice in the prescribed form that sets out:

                     (a)  the number of shares that were issued; and

                     (b)  if the company has different classes of shares—the class to which each of those shares belongs; and

                     (c)  the amount (if any) paid, or agreed to be considered as paid, on each of those shares; and

                     (d)  the amount unpaid (if any) on each of those shares; and

                     (e)  if the company is a public company and the shares were issued for non-cash consideration—the prescribed particulars about the issue of the shares, unless the shares were issued under a written contract and a copy of the contract is lodged with the notice.

Note:          The company must lodge information when rights attached to the shares change, or when the shares are divided or converted into new classes (see section 246F).

             (2)  If the shares were issued for non-cash consideration under a contract, the company must also lodge with ASIC a certificate stating that all stamp duty payable on the contract under any applicable law relating to stamp duty has been paid. This certificate must be lodged with the subsection (1) notice or at a later time permitted by the regulations or by ASIC.

             (3)  The company does not have to lodge a subsection (1) notice about the issue of shares to a person on the registration of the company or on the company changing its type from a company limited by guarantee to a company limited by shares.

Note:          Information about shares issued in these situations will come to ASIC under subsections 117(2), 163(3) and 601BC(2).

254Y  Notice to ASIC of share cancellation

                   Within 1 month after shares are cancelled, the company must lodge with ASIC a notice in the prescribed form that sets out:

                     (a)  the number of shares cancelled; and

                     (b)  any amount paid by the company (in cash or otherwise) on the cancellation of the shares; and

                     (c)  if the shares are cancelled following a share buy-back—the amount paid by the company (in cash or otherwise) on the buy-back; and

                     (d)  if the company has different classes of shares—the class to which each cancelled share belonged.

Note:          Provisions under which shares are cancelled include section 254J (redeemable preference shares), section 256B (capital reductions),
subsection 257H(3) (shares a company has bought back), section 258D (forfeited shares), and subsections 258E(2) and (3) (shares returned to a company).

 


 

Chapter 2JTransactions affecting share capital

Part 2J.1Share capital reductions and share buy‑backs

  

256A  Purpose

                   This Part states the rules to be followed by a company for reductions in share capital and for share buy-backs. The rules are designed to protect the interests of shareholders and creditors by:

                     (a)  addressing the risk of these transactions leading to the company’s insolvency

                     (b)  seeking to ensure fairness between the company’s shareholders

                     (c)  requiring the company to disclose all material information.


 

Division 1Reductions in share capital not otherwise authorised by law

256B  Company may make reduction not otherwise authorised

             (1)  A company may reduce its share capital in a way that is not otherwise authorised by law if the reduction:

                     (a)  is fair and reasonable to the company’s shareholders as a whole; and

                     (b)  does not materially prejudice the company’s ability to pay its creditors; and

                     (c)  is approved by shareholders under section 256C.

A cancellation of a share for no consideration is a reduction of share capital, but paragraph (b) does not apply to this kind of reduction.

Note 1:       One of the ways in which a company might reduce its share capital is cancelling uncalled capital.

Note 2:       Sections 258A-258F deal with some of the other situations in which reductions of share capital are authorised. Subsection 254K(2) authorises capital reductions involved in the redemption of redeemable preference shares and subsection 257A(2) authorises reductions involved in share buy-backs.

Note 3:       For a director’s duty to prevent insolvent trading on reductions of share capital, see section 588G.

             (2)  The reduction is either an equal reduction or a selective reduction. The reduction is an equal reduction if:

                     (a)  it relates only to ordinary shares; and

                     (b)  it applies to each holder of ordinary shares in proportion to the number of ordinary shares they hold; and

                     (c)  the terms of the reduction are the same for each holder of ordinary shares.

Otherwise, the reduction is a selective reduction.

             (3)  In applying subsection (2), ignore differences in the terms of the reduction that are:

                     (a)  attributable to the fact that shares have different accrued dividend entitlements; or

                     (b)  attributable to the fact that shares have different amounts unpaid on them; or

                     (c)  introduced solely to ensure that each shareholder is left with a whole number of shares.

256C  Shareholder approval

Ordinary resolution required for equal reduction

             (1)  If the reduction is an equal reduction, it must be approved by a resolution passed at a general meeting of the company.

Special shareholder approval for selective reduction

             (2)  If the reduction is a selective reduction, it must be approved by either:

                     (a)  a special resolution passed at a general meeting of the company, with no votes being cast in favour of the resolution by any person who is to receive consideration as part of the reduction or whose liability to pay amounts unpaid on shares is to be reduced, or by their associates; or

                     (b)  a resolution agreed to, at a general meeting, by all ordinary shareholders.

If the reduction involves the cancellation of shares, the reduction must also be approved by a special resolution passed at a meeting of the shareholders whose shares are to be cancelled.

             (3)  The company must lodge with ASIC a copy of any resolution under subsection (2) within 14 days after it is passed. The company must not make the reduction until 14 days after lodgment.

Information to accompany the notice of meeting

             (4)  The company must include with the notice of the meeting a statement setting out all information known to the company that is material to the decision on how to vote on the resolution. However, the company does not have to disclose information if it would be unreasonable to require the company to do so because the company had previously disclosed the information to its shareholders.

Documents to be lodged with ASIC

             (5)  Before the notice of the meeting is sent to shareholders, the company must lodge with ASIC a copy of:

                     (a)  the notice of the meeting; and

                     (b)  any document relating to the reduction that will accompany the notice of the meeting sent to shareholders.

256D  Consequences of failing to comply with section 256B

             (1)  The company must not make the reduction unless it complies with subsection 256B(1).

             (2)  If the company contravenes subsection (1):

                     (a)  the contravention does not affect the validity of the reduction or of any contract or transaction connected with it; and

                     (b)  the company is not guilty of an offence.

             (3)  Any person who is involved in a company’s contravention of subsection (1) contravenes this subsection.

Note 1:       Subsection (3) is a civil penalty provision (see section 1317E).

Note 2:       Section 79 defines involved.

             (4)  A person commits an offence if they are involved in a company’s contravention of section 256B and the involvement is dishonest.

256E  Signposts to other relevant provisions

                   The following table lists other provisions of this Law that are relevant to reductions in share capital.

 

Other provisions relevant to reductions in share capital

 

 

1

section 588G

section 1317H

liability of directors on insolvency

Under the combined operation of these sections the directors may have to compensate the company if the company is, or becomes, insolvent when the company reduces its share capital.

2

section 1324

injunctions to restrain contravention

Under this section the Court may grant an injunction against conduct that constitutes or would constitute a contravention of this Law.

4

sections

1001A-1001D

continuous disclosure provisions

Under these sections a disclosing entity is required to disclose information about its securities that is material and not generally available.

5

Chapter 2E

benefits to related parties to be disclosed

Under this Chapter a financial benefit to a director or other related party that could adversely affect the interests of a public company’s members as a whole, must be approved at a general meeting before it can be given.

6

section 125

provisions in constitution

This section deals with the way in which a company’s constitution may restrict the exercise of the company’s powers and the consequences of a failure to observe these restrictions.

7

sections 246B-246G

variation of class rights

These sections deal with the variation of rights attached to a class of shares. This variation may be governed by the provisions of the company’s constitution.


 

Division 2Share buy-backs

257A  The company’s power to buy back its own shares

                   A company may buy back its own shares if:

                     (a)  the buy-back does not materially prejudice the company’s ability to pay its creditors; and

                     (b)  the company follows the procedures laid down in this Division.

Note 1:       If a company has a constitution, it may include provisions in the constitution that preclude the company buying back its own shares or impose restrictions on the exercise of the company’s power to buy back its own shares.

Note 2:       A company may buy-back redeemable preference shares and may do so on terms other than the terms on which they could be redeemed. For the redemption of redeemable preference shares, see sections 254J-254L.

 

257B  Buy-back procedure—general

             (1)  The following table specifies the steps required for, and the sections that apply to, the different types of buy-back.

 

Procedures

[and sections applied]

minimum holding

employee share scheme

on-market

equal access scheme

selective buy-back

 

 

within 10/12 limit

over 10/12 limit

within 10/12 limit

over 10/12 limit

within 10/12 limit

over 10/12 limit

 

ordinary resolution
[257C]

yes

yes

yes

special/unanimous resolution [257D]

yes

lodge offer documents with ASC [257E]

yes

yes

yes

14 days notice [257F]

yes

yes

yes

yes

yes

yes

yes

disclose relevant information when offer made [257G]

yes

yes

yes

cancel shares [257H]

yes

yes

yes

yes

yes

yes

yes

yes

notify cancellation to ASC [254Y]

yes

yes

yes

yes

yes

yes

yes

yes

 

Note:          Subsections (2) and (3) of this section explain what an equal access scheme is. The 10/12 limit is the 10% in 12 months limit laid down in subsections (4) and (5). Subsections (6) and (7) of this section explain what an on-market buy-back is. See section 9 for definitions of minimum holding buy-back, employee share scheme buy-back and selective buy‑back.

Equal access scheme

             (2)  An equal access scheme is a scheme that satisfies all the following conditions:

                     (a)  the offers under the scheme relate only to ordinary shares

                     (b)  the offers are to be made to every person who holds ordinary shares to buy back the same percentage of their ordinary shares

                     (c)  all of those persons have a reasonable opportunity to accept the offers made to them

                     (d)  buy-back agreements are not entered into until a specified time for acceptances of offers has closed

                     (e)  the terms of all the offers are the same.

             (3)  In applying subsection (2), ignore:

                     (a)  differences in consideration attributable to the fact that the offers relate to shares having different accrued dividend entitlements

                     (b)  differences in consideration attributable to the fact that the offers relate to shares on which different amounts remain unpaid

                     (c)  differences in the offers introduced solely to ensure that each shareholder is left with a whole number of shares.

10/12 limit

             (4)  The 10/12 limit for a company proposing to make a buy-back is 10% of the smallest number, at any time during the last
12 months, of votes attaching to voting shares of the company.

Exceeding the 10/12 limit

             (5)  A proposed buy-back would exceed the 10/12 limit if the number of votes attaching to:

                     (a)  all the voting shares in the company that have been bought back during the last 12 months; and

                     (b)  the voting shares that will be bought back if the proposed buy-back is made;

would exceed the 10/12 limit.

On-market buy-backs

             (6)  A buy-back is an on-market buy-back if it results from an offer made by a listed corporation at an official meeting of a securities exchange in Australia in the ordinary course of trading on a stock market of that exchange.

             (7)  A buy-back by a company (whether listed or not) is also an on‑market buy-back if it results from an offer made in the ordinary course of trading on a stock market of a body corporate that:

                     (a)  operates a securities market outside Australia; and

                     (b)  ASIC declares in writing to be an approved overseas securities exchange for the purposes of this subsection.

A buy-back by a listed company is an on-market buy-back under this subsection only if an offer to buy-back those shares is also made on a stock market of a securities exchange in Australia at the same time.

             (8)  A declaration under paragraph (7)(b) may be subject to conditions. Notice of the making of the declaration must be published in the Gazette.

257C  Buy-back procedure—shareholder approval if the 10/12 limit exceeded

Ordinary resolution required

             (1)  If section 257B applies this section to a buy-back, the terms of the buy-back agreement must be approved before it is entered into by a resolution passed at a general meeting of the company, or the agreement must be conditional on such an approval.

Information to accompany the notice of meeting

             (2)  The company must include with the notice of the meeting a statement setting out all information known to the company that is material to the decision how to vote on the resolution. However, the company does not have to disclose information if it would be unreasonable to require the company to do so because the company had previously disclosed the information to its shareholders.

Documents to be lodged with the ASIC

             (3)  Before the notice of the meeting is sent to shareholders, the company must lodge with ASIC a copy of:

                     (a)  the notice of the meeting; and

                     (b)  any document relating to the buy-back that will accompany the notice of the meeting sent to shareholders.

257D  Buy-back procedure—special shareholder approval for selective buy-back

Selective buy-back requires special or unanimous resolution

             (1)  If section 257B applies this section to a buy-back, the terms of the buy-back agreement must be approved before it is entered into by either:

                     (a)  a special resolution passed at a general meeting of the company, with no votes being cast in favour of the resolution by any person whose shares are proposed to be bought back or by their associates; or

                     (b)  a resolution agreed to, at a general meeting, by all ordinary shareholders;

or the agreement must be conditional on such an approval.

Information to accompany the notice of meeting

             (2)  The company must include with the notice of the meeting a statement setting out all information known to the company that is material to the decision how to vote on the resolution. However, the company does not have to disclose information if it would be unreasonable to require the company to do so because the company had previously disclosed the information to its shareholders.

Documents to be lodged with the ASIC

             (3)  Before the notice of the meeting is sent to shareholders, the company must lodge with ASIC a copy of:

                     (a)  the notice of the meeting; and

                     (b)  any document relating to the buy-back that will accompany the notice of the meeting sent to shareholders.

             (4)  ASIC may exempt a company from the operation of this section. The exemption:

                     (a)  must be in writing; and

                     (b)  must be granted before the buy-back agreement is entered into; and

                     (c)  may be granted subject to conditions.

257E  Buy-back procedure—lodgment of offer documents with ASIC

                   If section 257B applies this section to a buy-back, the company must lodge with ASIC, before the buy-back agreement is entered into, a copy of:

                     (a)  a document setting out the terms of the offer; and

                     (b)  any document that is to accompany the offer.

257F  Notice of intended buy-back

             (1)  If section 257B applies this section to a buy-back, the company must satisfy the lodgment requirement in subsection (2) at least 14 days before:

                     (a)  if the buy-back agreement is conditional on the passing of a resolution under subsection 257C(1) or 257D(1)—the resolution is passed; or

                     (b)  if it is not—the agreement is entered into.

             (2)  The company satisfies the lodgment requirement when it lodges with ASIC:

                     (a)  documents under subsection 257C(3) or 257D(3) or section 257E; or

                     (b)  a notice that the company intends to carry out the buy-back.

Note 1:       A company that has to lodge documents under section 257C, 257D or 257E needs to lodge a notice under paragraph (2)(b) of this section only if it wants for some reason to enter into the agreement or pass the resolution less than 14 days after lodging the section 257C, 257D or 257E documents.

Note 2:       The company may specify a buy-back under paragraph (2)(b) in any way. It may, for instance, choose to lodge a notice covering buy‑backs to be carried out:

·       under a particular scheme; or

·       as part of particular on-market buy-back activity.

257G  Buy-back procedure—disclosure of relevant information when offer made

                   If section 257B applies this section to a buy-back, the company must include with the offer to buy back shares a statement setting out all information known to the company that is material to the decision whether to accept the offer.

257H  Acceptance of offer and transfer of shares to the company

Effect of acceptance of the buy-back offer on share rights

             (1)  Once a company has entered into an agreement to buy back shares, all rights attaching to the shares are suspended. The suspension is lifted if the agreement is terminated.

Shares transferred to the company and cancelled

             (2)  A company must not deal in shares it buys back. An agreement entered into in contravention of this subsection is void.

             (3)  Immediately after the registration of the transfer to the company of the shares bought back, the shares are cancelled.

Note:          ASIC must be notified of the cancellation under section 254Y.

257J  Signposts to other relevant provisions

                   The following table sets out other provisions of this Law that are relevant to buy-backs.

 

Other provisions relevant to buy-backs

 

 

 

provision

comment

1

section 588G section 1317H

liability of directors on insolvency

The directors may have to compensate the company if the company is, or becomes, insolvent when the company enters into the buy-back agreement.

2

section 1324

injunctions to restrain contravention

The Court may grant an injunction against conduct that constitutes, or would constitute, a contravention of this Law.

4

subsection 609(4) section 611 (item 19 of the table)

application of takeover provisions

These sections deal with the application of Chapter 6 to buy-backs.

5

section 259A

consequences of failure to follow procedures—the company and the officers

If a company fails to follow the procedure in this Division, the company contravenes this section and the officers who are involved in the contravention are liable to a civil penalty under Part 9.4B and may commit an offence.

6

section 256D

consequences of failure to follow procedures if reduction in share capital involved—the company and the officers

If the buy-back involves a reduction in share capital and the company fails to follow the procedures in this Division, the company contravenes this section and the officers who are involved in the contravention are liable to a civil penalty under Part 9.4B and may commit an offence.

7

section 256D

consequences of failure to follow procedures if reduction in share capital involved—the transaction

This section provides that a failure to follow the procedures for share capital reductions does not affect the validity of the buy-back transaction itself.

8

sections 1001A-1001D

continuous disclosure provisions

A disclosing entity is required to disclose information about its securities that is material and not generally available.

9

Chapter 2E

benefits to related parties to be disclosed

Under this Chapter, a financial benefit to a director or other related party may need to be approved at a general meeting before it is given.

10

section 125

provisions in constitution

This section deals with the way in which a company’s constitution may restrict the exercise of the company’s powers and the consequences of a failure to observe these restrictions.

11

sections 246B-246G

variation of class rights

These sections deal with the variation of rights attached to a class of shares. This variation may be governed by the provisions of a company’s constitution.

 


 

Division 3Other share capital reductions

258A  Unlimited companies

                   An unlimited company may reduce its share capital in any way.

258B  Right to occupy or use real property

             (1)  If a company has a constitution, under it the company may grant to a shareholder, as a shareholder, a right to occupy or use real property that the company owns or holds under lease, whether the right is a lease or licence or a contractual right.

Note:          Before the introduction of strata or unit titles systems, rights to occupy real property were sometimes based on a holding of shares in a company.

             (2)  A company may transfer to a person an interest in land in exchange for, or in satisfaction of, a right to occupy or use the land of the kind referred to in subsection (1).

Example:    A person has a right to occupy an apartment in a block of units because they hold shares in a company. As part of converting the block of units to strata title, the person surrenders the shares in return for a transfer of strata title over the apartment. The capital reduction involved in the transfer is authorised under this subsection.

258C  Brokerage or commission

                   A company may pay brokerage or commission to a person in respect of that person or another person agreeing to take up shares in the company.

258D  Cancellation of forfeited shares

                   A company may, by resolution passed at a general meeting, cancel shares that have been forfeited under the terms on which the shares are on issue.

 

258E  Other share cancellations

             (1)  Any reduction in share capital involved in:

                     (a)  the redemption of redeemable preference shares out of the proceeds of a new issue of shares made for the purpose of the redemption (see section 254K); or

                     (b)  a company’s buying-back of its own shares under sections 257A to 257J if the shares are paid for out of share capital.

is authorised by this section.

             (2)  A company may cancel shares returned to it under section 651C, 724(2), 737 or 738 and any reduction in the company’s share capital that is involved is authorised by this subsection.

             (3)  Any reduction in a company’s share capital because of an order under section 1325A is authorised by this subsection.

258F  Reductions because of lost capital

                   A company may reduce its share capital by cancelling any paid-up share capital that is lost or is not represented by available assets. This power does not apply if the company also cancels shares.


 

Part 2J.2Self-acquisition and control of shares

  

259A  Directly acquiring own shares

                   A company must not acquire shares (or units of shares) in itself except:

                     (a)  in buying back shares under section 257A; or

                     (b)  in acquiring an interest (other than a legal interest) in fully-paid shares in the company if no consideration is given for the acquisition by the company or an entity it controls; or

                     (c)  under a court order; or

                     (d)  in circumstances covered by subsection 259B(2) or (3).

259B  Taking security over own shares or shares in holding company

             (1)  A company must not take security over shares (or units of shares) in itself or in a company that controls it, except as permitted by subsection (2) or (3).

             (2)  A company may take security over shares in itself under an employee share scheme that has been approved by:

                     (a)  a resolution passed at a general meeting of the company; and

                     (b)  if the company is a subsidiary of a listed domestic corporation—a resolution passed at a general meeting of the listed domestic corporation; and

                     (c)  if paragraph (b) does not apply but the company has a holding company that is a domestic corporation and that is not itself a subsidiary of a domestic corporation—a resolution passed at a general meeting of that holding company.

Special exemptions for financial institutions

             (3)  A company’s taking security over shares (or units of shares) in itself or in a company that controls it is exempted from subsection (1) if:

                     (a)  the company’s ordinary business includes providing finance; and

                     (b)  the security is taken in the ordinary course of that business and on ordinary commercial terms.

             (4)  If a company acquires shares (or units of shares) in itself because it exercises rights under a security permitted by subsection (2) or (3), then, within the following 12 months, the company must cease to hold those shares (or units of shares). ASIC may extend this period of 12 months if the company applies for the extension before the end of the period.

             (5)  Any voting rights attached to the shares (or units of shares) cannot be exercised while the company continues to hold them.

             (6)  If, at the end of the 12 months (or extended period), the company still holds any of the shares (or units of shares), the company commits an offence for each day while that situation continues.

259C  Issuing or transferring shares to controlled entity

             (1)  The issue or transfer of shares (or units of shares) of a company to an entity it controls is void unless:

                     (a)  the issue or transfer is to the entity as a personal representative; or

                     (b)  the issue or transfer is to the entity as trustee and neither the company nor any entity it controls has a beneficial interest in the trust, other than a beneficial interest that satisfies these conditions:

                              (i)  the interest arises from a security given for the purposes of a transaction entered into in the ordinary course of business in connection with providing finance; and

                             (ii)  that transaction was not entered into with an associate of the company or an entity it controls; or

                     (c)  the issue to the entity is made as a result of an offer to all the members of the company who hold shares of the class being issued and is made on a basis that does not discriminate unfairly, either directly or indirectly, in favour of the entity; or

                     (d)  the transfer to the entity is by a wholly-owned subsidiary of a body corporate and the entity is also a wholly-owned subsidiary of that body corporate.

             (2)  ASIC may exempt a company from the operation of this section. The exemption:

                     (a)  must be in writing; and

                     (b)  may be granted subject to conditions.

             (3)  If paragraph (1)(c) or (d) applies to an issue or transfer of shares (or units of shares), section 259D applies.

259D  Company controlling entity that holds shares in it

             (1)  If any of the following occur:

                     (a)  a company obtains control of an entity that holds shares (or units of shares) in the company

                     (b)  a company’s control over an entity that holds shares (or units of shares) in the company increases

                     (c)  a company issues shares (or units of shares) to an entity it controls in the situation covered by paragraph 259C(1)(c)

                     (d)  shares (or units of shares) in the company are transferred to an entity it controls in the situation covered by paragraph 259C(1)(d);

then, within 12 months after it occurs either:

                     (e)  the entity must cease to hold the shares (or units); or

                      (f)  the company must cease to control the entity.

ASIC may extend this period of 12 months if the company applies for the extension before the end of the period.

             (2)  If this section applies to shares (or units of shares), it also applies to bonus shares issued in respect of those shares (or units of shares). Within the same period that applies to the shares themselves under subsection (1), either:

                     (a)  the entity must cease to hold the bonus shares; or

                     (b)  the company must cease to control the entity.

             (3)  Any voting rights attached to the shares (or units of shares) cannot be exercised while the company continues to control the entity.

             (4)  If, at the end of the 12 months (or extended period), the company still controls the entity and the entity still holds the shares (or units of shares), the company commits an offence for each day while that situation continues.

             (5)  This section does not apply to shares (or units of shares) if:

                     (a)  they are held by the entity as a personal representative; or

                     (b)  they are held by the entity as trustee and neither the company nor any entity it controls has a beneficial interest in the trust, other than a beneficial interest that satisfies these conditions:

                              (i)  the interest arises from a security given for the purposes of a transaction entered into in the ordinary course of business in connection with providing finance; and

                             (ii)  that transaction was not entered into with an associate of the company or an entity it controls.

             (6)  A contravention of this section does not affect the validity of any transaction.

259E  When a company controls an entity

             (1)  For the purposes of this Part, a company controls an entity if the company has the capacity to determine the outcome of decisions about the entity’s financial and operating policies.

             (2)  In determining whether a company has this capacity:

                     (a)  the practical influence the company can exert (rather than the rights it can enforce) is the issue to be addressed; and

                     (b)  any practice or pattern of behaviour affecting the entity’s financial or operating policies is to be taken into account (even if it involves a breach of an agreement or a breach of trust).

             (3)  Merely because the company and an unrelated entity jointly have the capacity to determine the outcome of decisions about another entity’s financial and operating policies, the company does not control the other entity.

             (4)  A company is not to be taken to control an entity merely because of a capacity that it is under a legal obligation to exercise for the benefit of someone other than its shareholders.

Note:          This situation could arise, for example, if the company holds shares as a trustee or is performing duties as a liquidator.

259F  Consequences of failing to comply with section 259A or 259B

             (1)  If a company contravenes section 259A or subsection 259B(1):

                     (a)  the contravention does not affect the validity of the acquisition or security or of any contract or transaction connected with it; and

                     (b)  the company is not guilty of an offence.

             (2)  Any person who is involved in a company’s contravention of section 259A or subsection 259B(1) contravenes this subsection.

Note 1:       Subsection (2) is a civil penalty provision (see section 1317E).

Note 2:       Section 79 defines involved.

             (3)  A person commits an offence if they are involved in a company’s contravention of section 259A or subsection 259B(1) and the involvement is dishonest.


 

Part 2J.3Financial assistance

  

260A  Financial assistance by a company for acquiring shares in the company or a holding company

             (1)  A company may financially assist a person to acquire shares (or units of shares) in the company or a holding company of the company only if:

                     (a)  giving the assistance does not materially prejudice:

                              (i)  the interests of the company or its shareholders; or

                             (ii)  the company’s ability to pay its creditors; or

                     (b)  the assistance is approved by shareholders under section 260B (that section also requires advance notice to ASIC); or

                     (c)  the assistance is exempted under section 260C.

             (2)  Without limiting subsection (1), financial assistance may:

                     (a)  be given before or after the acquisition of shares (or units of shares); and

                     (b)  take the form of paying a dividend.

             (3)  Subsection (1) extends to the acquisition of shares (or units of shares) by:

                     (a)  issue; or

                     (b)  transfer; or

                     (c)  any other means.

260B  Shareholder approval

Approval by company’s own shareholders

             (1)  Shareholder approval for financial assistance by a company must be given by:

                     (a)  a special resolution passed at a general meeting of the company, with no votes being cast in favour of the resolution by the person acquiring the shares (or units of shares) or by their associates; or

                     (b)  a resolution agreed to, at a general meeting, by all ordinary shareholders.

Approval by shareholders of listed holding corporation

             (2)  If the company will be a subsidiary of a listed domestic corporation immediately after the acquisition referred to in section 260A occurs, the financial assistance must also be approved by a special resolution passed at a general meeting of that corporation.

Approval by shareholders in ultimate Australian holding company

             (3)  If, immediately after the acquisition, the company will have a holding company that:

                     (a)  is a domestic corporation but not listed; and

                     (b)  is not itself a subsidiary of a domestic corporation;

the financial assistance must also be approved by a special resolution passed at a general meeting of the body corporate that will be the holding company.

Information to accompany the notice of meeting

             (4)  A company or other body that calls a meeting for the purpose of subsection (1), (2) or (3) must include with the notice of the meeting a statement setting out all the information known to the company or body that is material to the decision on how to vote on the resolution. However, the company or body does not have to disclose information if it would be unreasonable to require the company or body to do so because the company or body had previously disclosed the information to its members.

Documents to be lodged with the ASIC before notice of meeting is sent out

             (5)  Before the notice of a meeting for the purpose of subsection (1), (2) or (3) is sent to members of a company or other body, the company or body must lodge with ASIC a copy of:

                     (a)  the notice of the meeting; and

                     (b)  any document relating to the financial assistance that will accompany the notice of the meeting sent to the members.

             (6)  The company must lodge with ASIC, at least 14 days before giving the financial assistance, a notice in the prescribed form stating that the assistance has been approved under this section.

Lodgment of special resolutions

             (7)  A special resolution passed for the purpose of subsection (1), (2) or (3) must be lodged with ASIC by the company, listed domestic corporation or holding company within 14 days after it is passed.

260C  Exempted financial assistance

General exemptions based on ordinary course of commercial dealing

             (1)  Financial assistance is exempted from section 260A if it is given in the ordinary course of commercial dealing and consists of:

                     (a)  acquiring or creating a lien on partly-paid shares in the company for amounts payable to the company on the shares; or

                     (b)  entering into an agreement with a person under which the person may make payments to the company on shares by instalments.

Special exemptions for financial institutions

             (2)  Financial assistance is exempted from section 260A if:

                     (a)  the company’s ordinary business includes providing finance; and

                     (b)  the financial assistance is given in the ordinary course of that business and on ordinary commercial terms.

Special exemptions for subsidiaries of debenture issuerss

             (3)  Financial assistance is exempted from section 260A if:

                     (a)  the company is a subsidiary of a borrower in relation to debentures; and

                     (b)  the financial assistance is a guarantee or other security given by the company for the repayment by the borrower of money that it is or will be liable to repay; and

                     (c)  the borrower is a borrower in relation to the debentures because it is or will be liable to repay the money; and

                     (d)  the guarantee or security is given by the company in the ordinary course of commercial dealing.

Special exemption for approved employee share schemes

             (4)  Financial assistance is exempted from section 260A if it is given under an employee share scheme that has been approved by:

                     (a)  a resolution passed at a general meeting of the company; and

                     (b)  if the company is a subsidiary of a listed domestic corporation—a resolution passed at a general meeting of the listed domestic corporation; and

                     (c)  if paragraph (b) does not apply but the company has a holding company that is a domestic corporation and that is not itself a subsidiary of a domestic corporation—a resolution passed at a general meeting of that holding company.

Other exemptions

             (5)  The following types of financial assistance are exempted from section 260A:

                     (a)  a reduction of share capital in accordance with Division 1 of Part 2J.1

                     (b)  a share buy-back in accordance with Division 2 of Part 2J.1

                     (c)  assistance given under a court order

                     (d)  a discharge on ordinary commercial terms of a liability that the company incurred as a result of a transaction entered into on ordinary commercial terms.

260D  Consequences of failing to comply with section 260A

             (1)  If a company provides financial assistance in contravention of section 260A:

                     (a)  the contravention does not affect the validity of the financial assistance or of any contract or transaction connected with it; and

                     (b)  the company is not guilty of an offence.

             (2)  Any person who is involved in a company’s contravention of section 260A contravenes this subsection.

Note 1:       Subsection (2) is a civil penalty provision (see section 1317E).

Note 2:       Section 79 defines involved.

             (3)  A person commits an offence if they are involved in a company’s contravention of section 260A and the involvement is dishonest.


 

Part 2J.4Interaction with general directors’ duties

  

260E  General duties still apply

                   A director is not relieved from any of their duties under this Law (including sections 180, 181, 182, 183 and 184), or their fiduciary duties, in connection with a transaction merely because the transaction is authorised by a provision of this Chapter or is approved by a resolution of members under a provision of this Chapter.


 

Chapter 2KCharges

Part 2K.1Preliminary

  

261  Interpretation and application

             (1)  In this Chapter, unless the contrary intention appears:

document of title means a document:

                     (a)  used in the ordinary course of business as proof of possession or control, or of the right to possession or control, of property other than land; or

                     (b)  authorising or purporting to authorise, whether by endorsement or delivery, the possessor of the document to transfer or receive property other than land;

and includes:

                     (c)  a bill of lading;

                     (d)  a warehousekeeper’s certificate;

                     (e)  a wharfinger’s certificate;

                      (f)  a warrant or order for the delivery of goods; and

                     (g)  a document that is, or evidences title to, a marketable security.

present liability, in relation to a charge, means a liability that has arisen, being a liability the extent or amount of which is fixed or capable of being ascertained, whether or not the liability is immediately due to be met.

property, in relation to a company, means property:

                     (a)  in the case of a registrable Australian body—within this jurisdiction; or

                     (b)  in the case of a foreign company—within Australia; or

                     (c)  otherwise—within or outside Australia;

held by the company, whether or not as trustee.

prospective liability, in relation to a charge, means any liability that may arise in the future, or any other liability, but does not include a present liability.

Register means the Australian Register of Company Charges referred to in section 265.

registrable charge means a charge in relation to which, by virtue of section 262, the provisions of this Chapter mentioned in subsection 262(1) apply.

             (2)  A charge referred to in subsection 263(3) or section 264 shall, until the charge is registered, be treated for the purposes of this Chapter as if it were not a registrable charge but, when the charge is so registered, it has the priority accorded to a registered charge as from the time of registration.

             (3)  The registration of a charge referred to in subsection 263(3) or section 264 does not prejudice any priority that would have been accorded to the charge under any other law (whether an Australian law or not) if the charge had not been registered.

             (4)  For the purposes of this Chapter, a notice or other document shall be taken to be lodged when it is received at an office of the Commission (in this jurisdiction or elsewhere) by an officer authorised to receive it.


 

Part 2K.2Registration

262  Charges required to be registered

             (1)  Subject to this section, the provisions of this Chapter relating to the giving of notice in relation to, the registration of, and the priorities of, charges apply in relation to the following charges (whether legal or equitable) on property of a company and do not apply in relation to any other charges:

                     (a)  a floating charge on the whole or a part of the property, business or undertaking of the company;

                     (b)  a charge on uncalled share capital;

                     (c)  a charge on a call on shares made but not paid;

                     (d)  a charge on a personal chattel, including a personal chattel that is unascertained or is to be acquired in the future, but not including a ship registered in an official register kept under an Australian law relating to title to ships;

                     (e)  a charge on goodwill, on a patent or licence under a patent, on a trade mark or service mark or a licence to use a trade mark or service mark, on a copyright or a licence under a copyright or on a registered design or a licence to use a registered design;

                      (f)  a charge on a book debt;

                     (g)  a charge on a marketable security, not being:

                              (i)  a charge created in whole or in part by the deposit of a document of title to the marketable security; or

                             (ii)  a mortgage under which the marketable security is registered in the name of the chargee or a person nominated by the chargee;

                     (h)  a lien or charge on a crop, a lien or charge on wool or a stock mortgage;

                      (j)  a charge on a negotiable instrument other than a marketable security.

             (2)  The provisions of this Chapter mentioned in subsection (1) do not apply in relation to:

                     (a)  a charge, or a lien over property, arising by operation of law;

                     (b)  a pledge of a personal chattel or of a marketable security;

                     (c)  a charge created in relation to a negotiable instrument or a document of title to goods, being a charge by way of pledge, deposit, letter of hypothecation or trust receipt;

                     (d)  a transfer of goods in the ordinary course of the practice of any profession or the carrying on of any trade or business; or

                     (e)  a dealing, in the ordinary course of the practice of any profession or the carrying on of any trade or business, in respect of goods outside Australia.

             (3)  The reference in paragraph (1)(d) to a charge on a personal chattel is a reference to a charge on any article capable of complete transfer by delivery, whether at the time of the creation of the charge or at some later time, and includes a reference to a charge on a fixture or a growing crop that is charged separately from the land to which it is affixed or on which it is growing, but does not include a reference to a charge on:

                     (a)  a document evidencing title to land;

                     (b)  a chattel interest in land;

                     (c)  a marketable security;

                     (d)  a document evidencing a thing in action; or

                     (e)  stock or produce on a farm or land that by virtue of a covenant or agreement ought not to be removed from the farm or land where the stock or produce is at the time of the creation of the charge.

             (4)  The reference in paragraph (1)(f) to a charge on a book debt is a reference to a charge on a debt due or to become due to the company at some future time on account of or in connection with a profession, trade or business carried on by the company, whether entered in a book or not, and includes a reference to a charge on a future debt of the same nature although not incurred or owing at the time of the creation of the charge, but does not include a reference to a charge on a marketable security, on a negotiable instrument or on a debt owing in respect of a mortgage, charge or lease of land.

             (5)  The reference in paragraph (1)(h) to a lien or charge on a crop, a lien or charge on wool or a stock mortgage includes a reference to a security (however described) that is registrable under a prescribed law of a State or Territory.

             (6)  For the purposes of this section, a company shall be deemed to have deposited a document of title to property with another person (in this subsection referred to as the chargee) in a case where the document of title is not in the possession of the company if:

                     (a)  the person who holds the document of title acknowledges in writing that the person holds the document of title on behalf of the chargee; or

                     (b)  a government, an authority or a body corporate that proposes to issue a document of title in relation to the property agrees, in writing, to deliver the document of title, when issued, to the chargee.

             (7)  For the purposes of this section, a charge shall be taken to be a charge on property of a kind to which a particular paragraph of subsection (1) applies even though the instrument of charge also charges other property of the company including other property that is of a kind to which none of the paragraphs of that subsection applies.

             (8)  The provisions of this Chapter mentioned in subsection (1) do not apply in relation to a charge on land.

             (9)  The provisions of this Chapter mentioned in subsection (1) do not apply in relation to a charge on fixtures given by a charge on the land to which they are affixed.

           (10)  The provisions of this Chapter mentioned in subsection (1) do not apply in relation to a charge created by a company in its capacity as legal personal representative of a deceased person or as trustee of the estate of a deceased person.

           (11)  A charge on property of a company is not invalid merely because of the failure to lodge with the Commission, or give to the company or another person, a notice or other document that is required by this Part to be so lodged or given.

263  Lodgment of notice of charge and copy of instrument

             (1)  Where a company creates a charge, the company shall ensure that there is lodged, within 45 days after the creation of the charge:

                     (a)  a notice in the prescribed form setting out the following particulars:

                              (i)  the name of the company and the date of the creation of the charge;

                             (ii)  whether the charge is a fixed charge, a floating charge or both a fixed and floating charge;

                            (iii)  if the charge is a floating charge—whether there is any provision in the resolution or instrument creating or evidencing the charge that prohibits or restricts the creation of subsequent charges;

                            (iv)  a short description of the liability (whether present or prospective) secured by the charge;

                             (v)  a short description of the property charged;

                            (vi)  whether the charge is created or evidenced by a resolution, by an instrument or by a deposit or other conduct;

                           (vii)  if the charge is constituted by the issue of a debenture or debentures—the name of the trustee (if any) for debenture holders;

                           (viii)  if the charge is not constituted by the issue of a debenture or debentures or there is no trustee for debenture holders—the name of the chargee;

                            (ix)  such other information as is prescribed;

                     (b)  if, pursuant to a resolution or resolutions passed by the company, the company issues a series of debentures constituting a charge to the benefit of which all the holders of debentures in the series are entitled in equal priority, and the charge is evidenced only by the resolution or resolutions and the debentures—a copy of the resolution or of each of the resolutions verified by a statement in writing to be a true copy, and a copy of the first debenture issued in the series and a statement in writing verifying the execution of that first debenture; and

                     (c)  if, in a case to which paragraph (b) does not apply, the charge was created or evidenced by an instrument or instruments:

                              (i)  the instrument or each of the instruments; or

                             (ii)  a copy of the instrument or of each of the instruments verified by a statement in writing to be a true copy, and a statement in writing verifying the execution of the instrument or of each of the instruments.

             (2)  In a case to which paragraph (1)(b) applies:

                     (a)  the charge shall, for the purposes of subsection (1), be deemed to be created when the first debenture in the series of debentures is issued; and

                     (b)  if, after the issue of the first debenture in the series, the company passes a further resolution authorising the issue of debentures in the series, the company shall ensure that a copy of that resolution, verified by a statement in writing to be a true copy of that resolution, is lodged within 45 days after the passing of that resolution.

             (3)  A body that applies for registration as a company under Part 5B.1, or for registration under Part 5B.2, shall lodge with the application for registration the documents specified in subsection (4) in relation to any charge on property of the body that would be registrable under this Part if the body were already registered under Part 5B.1, or Part 5B.2, as the case may be.

             (4)  The documents required to be lodged under subsection (3) in relation to a charge on property of a body are the following documents:

                     (a)  a notice in the prescribed form:

                              (i)  setting out the name of the body;

                             (ii)  if the charge was created by the body—specifying the date of the creation of the charge;

                            (iii)  if the charge was a charge existing on property acquired by the body—setting out the date on which the property was so acquired; and

                            (iv)  otherwise complying with the requirements of paragraph (1)(a);

                     (b)  if the charge was created or evidenced as mentioned in paragraph (1)(b):

                              (i)  in the case of a charge created by the body—a copy of the resolution or of each of the resolutions referred to in that paragraph verified by a statement in writing to be a true copy and a copy of the first debenture issued in the series referred to in that paragraph and a statement in writing verifying the execution of that first debenture; or

                             (ii)  in the case of a charge that existed on property acquired by the body—the copies referred to in subparagraph (i) verified by statements in writing to be true copies;

                     (c)  if the charge was created or evidenced by an instrument or instruments (otherwise than as mentioned in paragraph (1)(b)):

                              (i)  in the case of a charge created by the body:

                                        (A)  the instrument or each of the instruments; or

                                        (B)  a copy of the instrument or of each of the instruments verified by a statement in writing to be a true copy, and a statement in writing verifying the execution of the instrument or of each of the instruments; or

                             (ii)  in the case of a charge that existed on property acquired by the body—a copy of the instrument or of each of the instruments verified by a statement in writing to be a true copy;

                     (d)  if the charge was created or evidenced as mentioned in paragraph (1)(b) and, after the issue of the first debenture in the series, the body passed a further resolution or resolutions authorising the issue of debentures in the series—a copy of that resolution or of each of those resolutions verified by a statement in writing to be a true copy.

             (5)  A notice in relation to a charge, being a charge in relation to which paragraph (1)(b) or (c) or (4)(b) or (c) applies, shall not be taken to have been lodged under subsection (1) or (3) unless the notice is accompanied by the documents specified in that paragraph.

             (6)  Where a notice with respect to an instrument creating a charge has been lodged under subsection (1) or (3), being a charge in respect of an issue of several debentures the holders of which are entitled under the instrument in equal priority to the benefit of the charge, sections 279 to 282 (inclusive) have effect as if any charges constituted by those debentures were registered at the time when the charge to which the notice relates was registered.

             (7)  Where a payment or discount has been made or allowed, either directly or indirectly, by a company or registrable body to a person in consideration of the person’s subscribing or agreeing to subscribe, whether absolutely or conditionally, for debentures, or procuring or agreeing to procure subscriptions, whether absolute or conditional, for debentures, the notice required to be lodged under subsection (1) or (3) shall include particulars as to the amount or rate per centum of the payment or discount.

             (8)  Where a company or registrable body issues debentures as security for a debt of the company or registrable body, the company or registrable body shall not thereby be regarded, for the purposes of subsection (7), as having allowed a discount in respect of the debentures.

264  Acquisition of property subject to charge

             (1)  Where a company acquires property that is subject to a charge, being a charge that would have been registrable when it was created if it had been created by a company, the company shall, within 45 days after the acquisition of the property:

                     (a)  ensure that there is lodged:

                              (i)  a notice in the prescribed form in relation to the charge, setting out the name of the company and the date on which the property was so acquired and otherwise complying with the requirements of paragraph 263(1)(a);

                             (ii)  if the charge was created or evidenced as mentioned in paragraph 263(1)(a)—a copy of the resolution or of each of the resolutions referred to in that paragraph verified by a statement in writing to be a true copy and a copy of the first debenture issued in the series referred to in that paragraph verified by a statement in writing to be a true copy; and

                            (iii)  if the charge was created or evidenced by an instrument or instruments (otherwise than as mentioned in paragraph 263(1)(b)):

                                        (A)  the instrument or each of the instruments; or

                                        (B)  a copy of the instrument or of each of the instruments verified by a statement in writing to be a true copy; and

                     (b)  give to the chargee notice that it has acquired the property and the date on which it was so acquired.

             (2)  A notice in relation to a charge, being a charge in relation to which subparagraph (1)(a)(ii) or (iii) applies, shall not be taken to have been lodged under subsection (1) unless it is accompanied by the documents specified in that subparagraph.

265  Registration of documents relating to charges

             (1)  The Commission shall keep a register to be known as the Australian Register of Company Charges.

             (2)  Where a notice in respect of a charge on property of a company that is required by section 263 or 264 to be lodged is lodged (whether during or after the period within which the notice was required to be lodged) and the notice contains all the particulars required by the relevant section to be included in the notice, the Commission shall as soon as practicable cause to be entered in the Register the time and date when the notice was lodged and the following particulars in relation to the charge:

                     (a)  if the charge is a charge created by the company, the date of its creation or, if the charge was a charge existing on property acquired by the company, the date on which the property was so acquired;

                     (b)  a short description of the liability (whether present or prospective) secured by the charge;

                     (c)  a short description of the property charged;

                     (d)  the name of the trustee for debenture holders or, if there is no such trustee, the name of the chargee.

             (3)  Subject to subsection (9), where particulars in respect of a charge are entered in the Register in accordance with subsection (2), the charge shall be deemed to be registered, and to have been registered from and including the time and date entered in the Register under that subsection.

             (4)  Where:

                     (a)  a notice in respect of a charge on property of a company is lodged under section 263 or 264 (whether during or after the period within which the notice was required to be lodged); and

                     (b)  the notice is not accompanied by a certificate to the effect that all documents accompanying the notice have been duly stamped as required by any applicable law relating to stamp duty;

the Commission must cause to be entered in the Register the time and date when the notice was lodged and the particulars referred to in paragraphs (2)(a), (b), (c) and (d), but must cause the word “provisional” to be entered in the Register in relation to the entry specifying that time and date.

             (5)  Where:

                     (a)  in accordance with subsection (4), the word “provisional” is entered in the Register in relation to an entry specifying the time and date on which a notice in respect of a charge was lodged; and

                     (b)  within a period of 30 days or such longer period as is prescribed after the notice was lodged, or within such further period as the Commission, if it considers it to be appropriate in a particular case, allows, a certificate to the effect set out in paragraph (4)(b) has been produced to the Commission;

the Commission shall delete the word “provisional” that was so entered in relation to the entry relating to that charge, but if such a certificate is not produced within the period, or the further period, referred to in paragraph (b), the Commission shall delete from the Register all the particulars that were entered in relation to the charge.

             (6)  Where a document that purports to be a notice in respect of a charge on property of a company for the purposes of section 263 or 264 is lodged (whether during or after the period within which the notice was required to be lodged) and the document contains the name of the company concerned and the particulars referred to in subparagraph 263(1)(a)(vii) or (viii), as the case requires, but does not contain some or all of the other particulars that are required to be included in the notice or is otherwise defective:

                     (a)  the Commission shall cause to be entered in the Register the time and date when the document was lodged and such of the particulars referred to in paragraphs (2)(a), (b), (c) and (d) as are ascertainable from the document, but shall cause the word “provisional” to be entered in the Register in relation to the entry specifying that time and date; and

                     (b)  the Commission shall, by notice in writing to the person who lodged the document, direct the person to ensure that there is lodged, on or before the day specified in the notice, a notice in relation to the charge that complies with the requirements of section 263 or 264, as the case may be, but the giving by the Commission of a direction to the person under this paragraph does not affect any liability that the company may have incurred or may incur by reason of a contravention of section 263 or 264.

             (7)  Where the Commission gives a direction to a person under paragraph (6)(b) in relation to a charge:

                     (a)  if the direction is complied with on or before the day specified in the notice containing the direction, the Commission shall:

                              (i)  delete from the Register the word “provisional” that was inserted pursuant to paragraph (6)(a); and

                             (ii)  cause to be entered in the Register in relation to the charge any particulars referred to in subsection (2) that have not previously been entered;

                     (b)  if the direction is not complied with on or before that day—the Commission shall delete from the Register all the particulars that were entered in relation to the charge; and

                     (c)  if the direction is complied with after that day—the Commission shall cause to be entered in the Register in relation to the charge the time at which and day on which the direction was complied with and the particulars referred to in paragraphs (2)(a), (b), (c) and (d).

             (8)  The Commission may enter in the Register in relation to a charge, in addition to the particulars expressly required by this section to be entered, such other particulars as the Commission thinks fit.

             (9)  If the word “provisional” is entered in the Register in relation to an entry specifying a time and day in relation to a charge, the charge shall be deemed not to have been registered but:

                     (a)  where the word “provisional” is deleted from the Register pursuant to subsection (5) or paragraph (7)(a)—the charge shall be deemed to be registered and to have been registered from and including the time and day specified in the Register pursuant to subsection (4) or paragraph (6)(a), as the case may be; or

                     (b)  where the particulars in relation to the charge are deleted from the Register pursuant to paragraph (7)(b) and those particulars and a time and day are subsequently entered in the Register in relation to the charge pursuant to paragraph (7)(c)—the charge shall be deemed to be registered from and including that last-mentioned time and day.

           (10)  Where, pursuant to subsection 263(3), a registrable body lodges notices relating to 2 or more charges on the same property of the registrable body, the time and day that shall be entered in the Register in relation to each of those charges are the time and day when the first notice was lodged.

           (11)  Where, in accordance with subsection (10), the time and day that are entered in the Register are the same in relation to 2 or more charges on property of a registrable body, those charges shall, as between themselves, have the respective priorities that they would have had if they had not been registered under this Part.

           (12)  Where, pursuant to section 264, a company lodges notices relating to 2 or more charges on the same property acquired by the company (being charges that are not already registered under this Part), the time and day that shall be entered in the Register in relation to each of those charges are the time and day when the first notice was lodged.

           (13)  Where, in accordance with subsection (12), the time and day that are entered in the Register are the same in relation to 2 or more charges on property acquired by a company, those charges shall, as between themselves, have the respective priorities that they would have had if they had not been registered under this Part.

           (14)  Where a notice is lodged under section 268 (whether during or after the period within which it was required to be lodged), the Commission shall as soon as practicable cause to be entered in the Register the time and day when the notice was so lodged and the particulars set out in the notice.

265A  Standard time for the purposes of section 265

             (1)  The Commission may, by Gazette notice, declare a specified standard time to be the standard time for the purposes of section 265 of the Corporations Law.

             (2)  Where a notice is in force under subsection (1) of this section and each corresponding law, a reference in subsection 265(2) or (4), paragraph 265(6)(a) or (7)(c), or subsection 265(10), (12) or (14), to entering the time when a particular event happened is a reference to entering that time as expressed in terms of the standard time specified in the notice.

266  Certain charges void against liquidator or administrator

             (1)  Where:

                     (a)  an order is made, or a resolution is passed, for the winding up of a company; or

                     (b)  an administrator of a company is appointed under section 436A, 436B or 436C; or

                    (ba)  a company executes a deed of company arrangement;

a registrable charge on property of the company is void as a security on that property as against the liquidator, the administrator of the company, or the deed’s administrator, as the case may be, unless:

                     (c)  a notice in respect of the charge was lodged under section 263 or 264, as the case requires:

                              (i)  within the relevant period; or

                             (ii)  at least 6 months before the critical day;

                     (d)  in relation to a charge other than a charge to which subsection 263(3) applies—the period within which a notice in respect of the charge (other than a notice under section 268) is required to be lodged, being the period specified in the relevant section or that period as extended by the Court under subsection (4), has not ended at the start of the critical day and the notice is lodged before the end of that period;

                     (e)  in relation to a charge to which subsection 263(3) applies—the period of 45 days after the chargee becomes aware that the registrable body has been registered as a company under Part 5B.1, or registered under Part 5B.2, has not ended at the start of the critical day and the notice is lodged before the end of that period; or

                      (f)  in relation to a charge to which section 264 applies—the period of 45 days after the chargee becomes aware that the property charged has been acquired by a company has not ended at the start of the critical day and the notice is lodged before the end of that period.

             (2)  The reference in paragraph (1)(c) to the relevant period shall be construed as a reference to:

                     (a)  in relation to a charge to which subsection 263(1) applies—the period of 45 days specified in that subsection, or that period as extended by the Court under subsection (4) of this section;

                     (b)  in relation to a charge to which subsection 263(3) applies—the period of 45 days after the chargee becomes aware that the registrable body has been registered as a company under Part 5B.1 or registered under Part 5B.2; or

                     (c)  in relation to a charge to which section 264 applies—the period of 45 days after the chargee becomes aware that the property has been acquired by a company.

             (3)  Where, after there has been a variation in the terms of a registrable charge on property of a company having the effect of increasing the amount of the debt or increasing the liabilities (whether present or prospective) secured by the charge:

                     (a)  an order is made, or a resolution is passed, for the winding up of the company; or

                     (b)  an administrator of a company is appointed under section 436A, 436B or 436C; or

                    (ba)  a company executes a deed of company arrangement;

the registrable charge is void as a security on that property to the extent that it secures the amount of the increase in that debt or liability unless:

                     (c)  a notice in respect of the variation was lodged under section 268:

                              (i)  within the period of 45 days specified in subsection 268(2) or that period as extended by the Court under subsection (4) of this section; or

                             (ii)  not later than 6 months before the critical day; or

                     (d)  the period of 45 days specified in subsection 268(2), or that period as extended by the Court under subsection (4) of this section, has not ended at the start of the critical day and the notice is lodged before the end of that period.

             (4)  The Court, if it is satisfied that the failure to lodge a notice in respect of a charge, or in respect of a variation in the terms of a charge, as required by any provision of this Part:

                     (a)  was accidental or due to inadvertence or some other sufficient cause; or

                     (b)  is not of a nature to prejudice the position of creditors or shareholders;

or that on other grounds it is just and equitable to grant relief, may, on the application of the company or any person interested and on such terms and conditions as seem to the Court just and expedient, by order, extend the period for such further period as is specified in the order.

             (5)  Where:

                     (a)  a registrable charge (in this subsection referred to as the later charge) is created before the end of 45 days after the creation of an unregistered registrable charge (in this subsection referred to as the earlier charge);

                     (b)  the later charge relates to all or any of the property to which the earlier charge related; and

                     (c)  the later charge is given as a security for the same liability as is secured by the earlier charge or any part of that liability;

the later charge, to the extent to which it is a security for the same liability or part thereof, and so far as it relates to the property comprised in the earlier charge, is void as a security on that property as against a liquidator or administrator of the company, or an administrator of a deed of company arrangement executed by the company, even if a notice in respect of the later charge was lodged under section 263 within a period mentioned in paragraph (1)(c) or (d) of this section, unless it is proved to the satisfaction of the Court that the later charge was given in good faith for the purpose of correcting some material error in the earlier charge or under other proper circumstances and not for the purposes of avoiding or evading the provisions of this Part.

             (6)  Nothing in subsection (1) or (3) operates to affect the title of a person to property purchased for value from a chargee or from a receiver appointed by a chargee in the exercise of powers conferred by the charge or implied by law if that person purchased the property in good faith and without notice of:

                     (a)  the filing of an application for an order for the winding up of the company; or

                     (b)  the passing of a resolution for the voluntary winding up of the company; or

                     (c)  an administrator of the company being appointed under section 436A, 436B or 436C; or

                     (d)  the company executing a deed of company arrangement.

             (7)  The onus of proving that a person purchased property in good faith and without notice of any of the matters referred to in paragraphs (6)(a), (b), (c) and (d) is on the person asserting that the property was so purchased.

             (8)  In this section:

critical day, in relation to a company, means:

                     (a)  if the company is being wound up—the day when the winding up began; or

                     (b)  if the company is under administration—the section 513C day in relation to the administration; or

                     (c)  if the company has executed a deed of company arrangement—the section 513C day in relation to the administration that ended when the deed was executed.

267  Charges in favour of certain persons void in certain cases

             (1)  Where:

                     (a)  a company creates a charge on property of the company in favour of a person who is, or in favour of persons at least one of whom is, a relevant person in relation to the charge; and

                     (b)  within 6 months after the creation of the charge, the chargee purports to take a step in the enforcement of the charge without the Court having, under subsection (3), given leave for the charge to be enforced;

the charge, and any powers purported to be conferred by an instrument creating or evidencing the charge, are, and shall be deemed always to have been, void.

             (2)  Without limiting the generality of subsection (1), a person who:

                     (a)  appoints a receiver of property of a company under powers conferred by an instrument creating or evidencing a charge created by the company; or

                     (b)  whether directly or by an agent, enters into possession or assumes control of property of a company for the purposes of enforcing a charge created by the company;

shall be taken, for the purposes of subsection (1), to take a step in the enforcement of the charge.

             (3)  On application by the chargee under a charge, the Court may, if it is satisfied that:

                     (a)  immediately after the creation of the charge, the company that created the charge was solvent; and

                     (b)  in all the circumstances of the case, it is just and equitable for the Court to do so;

give leave for the charge to be enforced.

             (4)  Nothing in subsection (1) affects a debt, liability or obligation of a company that would, if that subsection had not been enacted, have been secured by a charge created by the company.

             (5)  Nothing in subsection (1) operates to affect the title of a person to property (other than the charge concerned or an interest in the charge concerned) purchased for value from a chargee under a charge, from an agent of a chargee under a charge, or from a receiver appointed by a chargee under a charge in the exercise of powers conferred by the charge or implied by law, if that person purchased the property in good faith and without notice that the charge was created in favour of a person who is, or in favour of persons at least one of whom is, as the case may be, a relevant person in relation to the charge.

             (6)  The onus of proving that a person purchased property in good faith and without notice that a charge was created as mentioned in subsection (5) is on the person asserting that the property was so purchased.

             (7)  In this section:

chargee, in relation to a charge, means:

                     (a)  in any case—the holder, or all or any of the holders, of the charge; or

                     (b)  in the case of a charge that is an agreement to give or execute a charge in favour of a person or persons, whether upon demand or otherwise—that person, or all or any of those persons.

officer, in relation to a company, includes, in the case of a registered foreign company, a local agent of the foreign company.

receiver includes a receiver and manager.

relevant person, in relation to a charge created by a company, means:

                     (a)  a person who is at the time when the charge is created, or who has been at any time during the period of 6 months ending at that time, an officer of the company; or

                     (b)  a person associated, in relation to the creation of the charge, with a person of a kind referred to in paragraph (a).

268  Assignment and variation of charges

             (1)  Where, after a registrable charge on property of a company has been created, a person other than the original chargee becomes the holder of the charge, the person who becomes the holder of the charge shall, within 45 days after he, she or it becomes the holder of the charge:

                     (a)  lodge a notice stating that he, she or it has become the holder of the charge; and

                     (b)  give the company a copy of the notice.

             (2)  Where, after a registrable charge on property of a company has been created, there is a variation in the terms of the charge having the effect of:

                     (a)  increasing the amount of the debt or increasing the liabilities (whether present or prospective) secured by the charge; or

                     (b)  prohibiting or restricting the creation of subsequent charges on the property;

the company shall, within 45 days after the variation occurs, ensure that there is lodged a notice setting out particulars of the variation and accompanied by the instrument (if any) effecting the variation or a certified copy of that instrument.

             (3)  Where a charge created by a company secures a debt of an unspecified amount or secures a debt of a specified amount and further advances, a payment or advance made by the chargee to the company in accordance with the terms of the charge shall not be taken, for the purposes of subsection (2), to be a variation in the terms of the charge having the effect of increasing the amount of the charge or the liabilities (whether present or prospective) secured by the charge.

             (4)  A reference in this section to the chargee in relation to a charge shall, if the charge is constituted by a debenture and debentures and there is a trustee for debenture holders, be construed as a reference to the trustee for debenture holders.

             (5)  Nothing in section 263 requires the lodgment of a notice under that section in relation to a charge merely because of the fact that the terms of the charge are varied only in a manner mentioned in this section.

268A  Assignment of charges under the State Bank (Corporatisation) Act 1994 of South Australia

             (1)  Application of section

                   This section applies if:

                     (a)  after one or more registrable charges on property of a company have been created, a person other than the original chargee becomes the holder of the charges; and

                     (b)  the person is the State Bank of South Australia or Bank of South Australia Limited; and

                     (c)  the person becomes the holder of the charges as a result of the operation of:

                              (i)  section 7 or 23 of the State Bank (Corporatisation) Act 1994 of South Australia; or

                             (ii)  a corresponding provision of a law of another State or of a Territory.

             (2)  Lodgment of notice with Commission

                   The person may lodge a notice stating that it has become the holder of the charges.

             (3)  Notice to be in a form approved by Commission

                   The notice must be in a form approved by the Commission.

             (4)  Time within which notice must be lodged

                   The notice must be lodged within:

                     (a)  6 months after the commencement of the State Bank (Corporatisation) Act 1994 of South Australia (the initial period); or

                     (b)  such longer period as the Commission allows.

             (5)  When Commission may allow longer period for lodgment of notice

                   The Commission may only allow a longer period under paragraph (4)(b) if:

                     (a)  the person applies in writing to the Commission within the initial period; and

                     (b)  the Commission is satisfied that, having regard to the nature of the charges involved, it would not be practicable for the person to lodge a notice in relation to those charges within the initial period.

             (6)  Effect of notice

                   A person who lodges a notice under subsection (2) in respect of one or more charges on property of a company is taken, for the purposes of this Law and the Corporations (Fees) Regulations:

                     (a) to have lodged a separate notice in accordance with subsection 268(1) in respect of each of those charges; and

                     (b)  to have given a copy of each of those notices to the company in accordance with that subsection.

             (7)  Debentures

                   If:

                     (a)  a charge is constituted by a debenture or debentures; and

                     (b)  there is a trustee for debenture holders;

a reference in this section to the chargee in relation to a charge is a reference to that trustee.

269  Satisfaction of, and release of property from, charges

             (1)  Where, with respect to a charge registered under this Part:

                     (a)  the debt or other liability the payment or discharge of which was secured by the charge has been paid or discharged in whole or in part; or

                     (b)  the property charged or part of that property is released from the charge;

the person who was the holder of the charge at the time when the debt or other liability was so paid or discharged or the property or part of the property was released shall, within 14 days after receipt of a request in writing made by the company on whose property the charge exists, give to the company a memorandum in the prescribed form acknowledging that the debt or other liability has been paid or discharged in whole or in part or that the property or that part of it is no longer subject to the charge, as the case may be.

             (2)  The company may lodge the memorandum and, upon the memorandum being lodged, the Commission shall enter in the Register particulars of the matters stated in the memorandum.

             (3)  The reference in subsection (1) to the person who was the holder of a charge at the time when the debt or other liability was so paid or discharged or the property or part of the property was released shall, if the charge was constituted by a debenture or debentures and there was a trustee for debenture holders, be construed as a reference to the person who was, at that time, the trustee for debenture holders.

270  Lodgment of notices, offences etc.

             (1)  Where a notice in respect of a charge on property of a company is required to be lodged under section 263 or 264 or subsection 268(2), the notice may be lodged by the company or by any interested person.

             (2)  Where default is made in complying with section 263 or 264 or subsection 268(2) in relation to a registrable charge on property of a company, the company and any officer of the company who is in default each contravene this subsection.

             (3)  Where a person who becomes the holder of a registrable charge fails to comply with subsection 268(1), the person and, if the person is a body corporate, any officer of the body corporate who is in default, each contravene this subsection.

             (4)  Where a document required by this Part other than subsection 268(1) to be lodged is lodged by a person other than the company concerned, that person:

                     (a)  shall, within 7 days after the lodgment of the document, give to the company a copy of the document; and

                     (b)  is entitled to recover from the company the amount of any fees properly paid by the person on lodgment of the document.

271  Company to keep documents relating to charges and register of charges

             (1)  A company shall keep, at the place where the register referred to in subsection (2) is kept, a copy of every document relating to a charge on property of the company that is lodged under this Part or was lodged with a person under a corresponding previous law, and a copy of every document given to the company under this Part or a corresponding previous law.

             (2)  A company shall keep a register and shall, upon the creation of a charge (whether registrable or not) on property of the company, or upon the acquisition of property subject to a charge (whether registrable or not), as soon as practicable enter in the register particulars of the charge, giving in each case:

                     (a)  if the charge is a charge created by the company, the date of its creation or, if the charge was a charge existing on property acquired by the company, the date on which the property was so acquired;

                     (b)  a short description of the liability (whether present or prospective) secured by the charge;

                     (c)  a short description of the property charged;

                     (d)  the name of the trustee for debenture holders or, if there is no such trustee, the name of the chargee; and

                     (e)  the name of the person whom the company believes to be the holder of the charge.

             (3)  A register kept by a company pursuant to subsection (2) shall be open for inspection:

                     (a)  by any creditor or member of the company—without charge; and

                     (b)  by any other person—on payment for each inspection of such amount, not exceeding the prescribed amount, as the company requires or, where the company does not require the payment of an amount, without charge.

             (4)  A person may request a company to furnish the person with a copy of the register or any part of the register and, where such a request is made, the company shall send the copy to that person:

                     (a)  if the company requires payment of an amount not exceeding the prescribed amount—within 21 days after payment of the amount is received by the company or within such longer period as the Commission approves; or

                     (b)  in a case to which paragraph (a) does not apply—within 21 days after the request is made or within such longer period as the Commission approves.

             (5)  If default is made in complying with any provision of this section, the company and any officer of the company who is in default are each guilty of an offence.

272  Certificates

             (1)  Where particulars of a charge are entered in the Register in accordance with this Part, the Commission shall, on request by any person, issue to that person a certificate under the common seal of the Commission setting out those particulars and stating the time and day when a notice in respect of the charge containing those particulars was lodged with the Commission and, if the word “provisional” appears in the Register in relation to the reference to that time and day, stating that fact.

             (2)  A certificate issued under subsection (1) is prima facie evidence of the matters stated in the certificate.

             (3)  Where particulars of a charge are entered in the Register in accordance with this Part, and the word “provisional” does not appear in the register in relation to the reference to the time and day when a notice in respect of the charge was lodged, the Commission shall, on request by any person, issue to that person a certificate under the common seal of the Commission stating that particulars of the charge are entered in the Register in accordance with this Part.

             (4)  A certificate issued under subsection 272(3) of the Corporations Law of this or another jurisdiction is conclusive evidence that the requirements of Part 2K.2 of that Law as to registration (other than the requirements relating to the period after the creation of the charge within which notice in respect of the charge is required to be lodged) have been complied with.

273  Registration under other legislation relating to charges

             (1)  Where, whether before or after the prescribed time, a notice in relation to a charge is required to be lodged under this Part:

                     (a)  the charge need not be registered under a specified law of this jurisdiction; and

                     (b)  no provision of a specified law of this jurisdiction relating to priorities applies to or in relation to the charge; and

                     (c)  a failure to register the charge under a specified law of this jurisdiction does not affect the validity, or limit the effect, of the charge.

             (2)  Where:

                     (a)  a transfer, assignment, or giving of security, by a company is registrable under a specified law of this jurisdiction;

                     (b)  notice in relation to the transfer, assignment or giving of security is required to be lodged under this Part; and

                     (c)  the transfer, assignment or giving of security is registered under this Part;

then:

                     (d)  the transfer, assignment or giving of security is, subject to paragraph (1)(b), as valid and effectual; and

                     (e)  by force of this subsection, the specified provisions (if any) of a law of this jurisdiction have effect, with the prescribed modifications (if any), in relation to the transfer, assignment or giving of security;

as if it had been duly registered under that specified law.

             (3)  Where:

                     (a)  a crop lien, wool lien, or stock mortgage, given by a company is registrable under a specified law of this jurisdiction;

                     (b)  notice in relation to the crop lien, wool lien, or stock mortgage, is required to be lodged under this Part; and

                     (c)  the crop lien, wool lien, or stock mortgage, is registered under this Part;

then:

                     (d)  the crop lien, wool lien or stock mortgage is, subject to paragraph (1)(b), as valid and effectual; and

                     (e)  by force of this subsection, the specified provisions (if any) of a law of this jurisdiction have effect, with the prescribed modifications (if any), in relation to the crop lien, wool lien, or stock mortgage;

as if it had been duly registered under that specified law.

             (4)  Subject to this Chapter, the regulations may provide that specified provisions of a law of this jurisdiction:

                     (a)  do not apply; or

                     (b)  apply, because of the regulations and with the prescribed modifications (if any);

in relation to specified charges in relation to which notices must be lodged under this Part.

             (5)  Nothing in this section applies in relation to a charge given by a company jointly with another person who is not, or other persons at least one of whom is not, a company.

             (6)  In this section:

specified means specified in an application order.

274  Power of Court to rectify Register

                   Where the Court is satisfied:

                     (a)  that a particular with respect to a registrable charge on property of a company has been omitted from, or mis-stated in, the Register or a memorandum referred to in section 269; and

                     (b)  that the omission or mis-statement:

                              (i)  was accidental or due to inadvertence or to some other sufficient cause; or

                             (ii)  is not of a nature to prejudice the position of creditors or shareholders;

                            or that on other grounds it is just and equitable to grant relief;

the Court may, on the application of the company or any person interested and on such terms and conditions as seem to the Court just and expedient, order that the omission or mis-statement be rectified.

275  Charges of company existing before 1 January 1991

             (1)  This section applies where a body corporate is taken to be registered as a company according to section 1362CB.

             (2)  On and after 1 January 1991, this Chapter (other than this section) applies in relation to the company, with such modifications as the circumstances require, as if:

                     (a)  the company had always been a company as defined in section 9;

                     (b)  this Law had always been in operation;

                     (c)  an act or thing done by or in relation to the company under, or for the purposes of, a previous law of this jurisdiction corresponding to a provision of this Chapter had been done under, or for the purposes of, that provision; and

                     (d)  a reference in this Chapter to the Register included a reference to a register of company charges kept under a previous law of this jurisdiction corresponding to section 265.

             (3)  Nothing in subsection (2) makes a person guilty of a contravention of this Law in respect of an act or thing done, or an omission made, when the company was not a company as defined in section 9.

             (4)  Subsection (5) applies to each charge on property of the company that, immediately before 1 January 1991, was registered under a previous law of this jurisdiction corresponding to this Part.

             (5)  At the beginning of 1 January 1991:

                     (a)  there are taken to be entered in the Register the time and date, and the particulars, entered in relation to that charge in the Register kept under that corresponding previous law; and

                     (b)  the time and date, and the particulars, are taken to have been entered in the Register in accordance with subsection 265(2).

275A  Charges of bodies to which section 1362CJ applies

             (1)  This section applies if a registrable body is taken to have been registered according to section 1362CJ.

             (2)  This Chapter (other than this section) applies in relation to the body, with such modifications as the circumstances require, as if:

                     (a)  this Law had always been in operation; and

                     (b)  the body had been a registered body throughout each period before 1 January 1991 throughout which it was registered under a previous law of this jurisdiction relating to foreign companies within the meaning of that law; and

                     (c)  an act or thing done by or in relation to the body under, or for the purposes of, a previous law of this jurisdiction corresponding to a provision of this Chapter had been done under, or for the purposes of, that provision; and

                     (d)  a reference in this Chapter to the Register included a reference to a register of company charges kept under a previous law of this jurisdiction corresponding to section 265.

             (3)  Nothing in subsection (2) makes a person guilty of a contravention of this Law in respect of an act or thing done, or an omission made, before 1 January 1991.

             (4)  Subsection (5) applies to each charge on property of the body that, immediately before 1 January 1991, was registered under a previous law of this jurisdiction corresponding to this Part.

             (5)  The Commission is taken to have entered in the Register at the beginning of 1 January 1991, in accordance with subsection 265(2), the time and date, and the particulars, entered in relation to the charge under the previous law referred to in subsection (4) of this section.

276  Charges of body corporate registered as a company

                   If, immediately before the day on which a body corporate was registered as a company under Part 5B.1, or a previous law of this jurisdiction corresponding to a provision of that Part, a charge on property of the company was registered under a law corresponding to this Part and was not also registered under this Part, the Commission is taken to have entered in the Register at the beginning of that day, in accordance with subsection 265(2), the time and date, and the particulars, entered in relation to the charge under that corresponding law.

276AA  Charges of company transferring jurisdiction

                   If, immediately before the day on which a recognised company was registered as a company under section 1362B or a previous law of this jurisdiction corresponding to that section:

                     (a)  the company was, because of the definition of company in section 9 of the Corporations Law of another jurisdiction, a company for the purposes of that section of that Law; and

                     (b)  a charge on property of the company was registered under Part 2K.2 of that Law and was not also registered under this Part;

the Commission is taken to have entered in the Register at the beginning of that day, in accordance with subsection 265(2) of this Law, the time and date, and the particulars, entered in relation to the charge under Part 2K.2 of that Law.

276A  Charges of recognised companies and certain foreign companies

                   Chapter 2K (except section 276A) of the Corporations Law of another jurisdiction, and the Corporations Regulations of that jurisdiction, so far as they have effect for the purposes of that Chapter, apply in and in relation to this jurisdiction:

                     (a)  in relation to property (within the meaning of that Chapter) of a body corporate that, because of the definition of company in section 9 of that Law, is a company for the purposes of section 9 of that Law; or

                     (b)  in relation to property in Australia or an external Territory of a foreign company that is registered under Division 2 of Part 5B.2 of that Law.

 277  Power to exempt from compliance with certain requirements of Division

             (1)  The Commission may, by instrument in writing, exempt a person, as specified in the instrument and subject to such conditions (if any) as are specified in the instrument, from compliance with such of the requirements of section 263, 264 or 268 relating to:

                     (a)  the particulars to be contained in a notice under the relevant section;

                     (b)  the documents (other than the notice) to be lodged under the relevant section; or

                     (c)  the verification of any document required to be lodged under the relevant section;

as are specified in the instrument.

             (2)  A person who is exempted by the Commission, subject to a condition, from compliance with a requirement of section 263, 264 or 268 shall not contravene the condition.

             (3)  Where a person has contravened or failed to comply with a condition to which an exemption under this section is subject, the Court may, on the application of the Commission, order the person to comply with the condition.


 

Part 2K.3Order of priority

  

278  Interpretation

             (1)  In this Part:

priority time, in relation to a registered charge, means:

                     (a)  except as provided by paragraph (b) or (c)—the time and date appearing in the Register in relation to the charge, being a time and day entered in the Register pursuant to section 265;

                     (b)  where a notice has been lodged under section 264 in relation to a charge on property, being a charge that, at the time when the notice was lodged, was already registered under Part 2K.2—the earlier or earliest time and day appearing in the Register in relation to the charge, being a time and day entered in the Register pursuant to section 264; and

                     (c)  to the extent that the charge has effect as varied by a variation notice of which was required to be lodged under subsection 268(2)—the time and day entered in the Register in relation to the charge pursuant to subsection 265(14).

prior registered charge, in relation to another registered charge, means a charge the priority time of which is earlier than the priority time of the other charge.

subsequent registered charge, in relation to another registered charge, means a charge the priority time of which is later than the priority time of the other registered charge.

registered charge means a charge that is registered under Part‑2K.2.

unregistered charge means a charge that is not registered under Part 2K.2 but does not include a charge that is not a registrable charge.

             (2)  A reference in this Part to a person having notice of a charge includes a reference to a person having constructive notice of the charge.

             (3)  Where, by virtue of the definition of priority time in subsection (1), a registered charge has 2 or more priority times each of which relates to a particular liability secured by the charge, each of those liabilities shall, for the purposes of this Part, be deemed to be secured by a separate registered charge the priority time of which is the priority time of the first-mentioned registered charge that relates to the liability concerned.

279  Priorities of charges

             (1)  Subject to this section, sections 280 to 282, inclusive, have effect with respect to the priorities, in relation to each other, of registrable charges on the property of a company.

             (2)  The application, in relation to particular registrable charges, of the order of priorities of charges set out in sections 280 to 282, inclusive, is subject to:

                     (a)  any consent (express or implied) that varies the priorities in relation to each other of those charges, being a consent given by the holder of one of those charges, being a charge that would otherwise be entitled to priority over the other charge; and

                     (b)  any agreement between those chargees that affects the priorities in relation to each other of the charges in relation to which those persons are the chargees.

             (3)  The holder of a registered charge, being a floating charge, on property of a company shall be deemed, for the purposes of subsection (2), to have consented to that charge being postponed to a subsequent registered charge, being a fixed charge that is created before the floating charge becomes fixed, on any of that property unless:

                     (a)  the creation of the subsequent registered charge contravened a provision of the instrument or resolution creating or evidencing the floating charge; and

                     (b)  a notice in respect of the floating charge indicating the existence of the provision referred to in paragraph (a) was lodged with the Commission under section 263, 264 or 268 before the creation of the subsequent registered charge.

             (4)  Where a charge relates to property of a kind or kinds to which a particular paragraph or paragraphs of subsection 262(1) applies or apply and also relates to other property, sections 280 to 282, inclusive, apply so as to affect the priority of the charge only in so far as it relates to the first-mentioned property and do not affect the priority of the charge in so far as it relates to the other property.

             (5)  Sections 280 to 282, inclusive, do not apply so as to affect the operation of:

                     (a)  the Copyright Act 1968;

                     (b)  the Designs Act 1906;

                     (c)  the Life Insurance Act 1995;

                     (d)  the Patents Act 1952; or

                     (e)  the Trade Marks Act 1955.

280  General priority rules in relation to registered charges

             (1)  A registered charge on property of a company has priority over:

                     (a)  a subsequent registered charge on the property, unless the subsequent registered charge was created before the creation of the prior registered charge and the chargee in relation to the subsequent registered charge proves that the chargee in relation to the prior registered charge had notice of the subsequent registered charge at the time when the prior registered charge was created;

                     (b)  an unregistered charge on the property created before the creation of the registered charge, unless the chargee in relation to the unregistered charge proves that the chargee in relation to the registered charge had notice of the unregistered charge at the time when the registered charge was created; and

                     (c)  an unregistered charge on the property created after the creation of the registered charge.

             (2)  A registered charge on property of a company is postponed to:

                     (a)  a subsequent registered charge on the property, where the subsequent registered charge was created before the creation of the prior registered charge and the chargee in relation to the subsequent registered charge proves that the chargee in relation to the prior registered charge had notice of the subsequent registered charge at the time when the prior registered charge was created; and

                     (b)  an unregistered charge on the property created before the creation of the registered charge, where the chargee in relation to the unregistered charge proves that the chargee in relation to the registered charge had notice of the unregistered charge at the time when the registered charge was created.

281  General priority rule in relation to unregistered charges

                   An unregistered charge on property of a company has priority over:

                     (a)  a registered charge on the property that was created after the creation of the unregistered charge and does not have priority over the unregistered charge under subsection 280(1); and

                     (b)  another unregistered charge on the property created after the first-mentioned unregistered charge.

282  Special priority rules

             (1)  Except as provided by this section, any priority accorded by this Part to a charge over another charge does not extend to any liability that, at the priority time in relation to the first-mentioned charge, is not a present liability.

             (2)  Where a registered charge on property of a company secures:

                     (a)  a present liability and a prospective liability of an unspecified amount; or

                     (b)  a prospective liability of an unspecified amount;

any priority accorded by this Part to the charge over another charge of which the chargee in relation to the first-mentioned charge does not have actual knowledge extends to the prospective liability, whether the prospective liability became a present liability before or after the registration of the first-mentioned charge.

             (3)  Where a registered charge on property of a company secures:

                     (a)  a present liability and a prospective liability up to a specified maximum amount; or

                     (b)  a prospective liability up to a specified maximum amount;

and the notice lodged under section 263 or 264 in relation to the charge sets out the nature of the prospective liability and the amount so specified, then any priority accorded by this Part to the charge over another charge extends to any prospective liability secured by the first-mentioned charge to the extent of the maximum amount so specified, whether the prospective liability became a present liability before or after the registration of the first-mentioned charge and notwithstanding that the chargee in relation to the first-mentioned charge had actual knowledge of the other charge at the time when the prospective liability became a present liability.

             (4)  Where:

                     (a)  a registered charge on property of a company secures:

                              (i)  a present liability and a prospective liability up to a specified maximum amount; or

                             (ii)  a prospective liability up to a specified maximum amount;

                            but the notice lodged under section 263 or 264 in relation to the charge does not set out the nature of the prospective liability or the maximum amount so specified; or

                     (b)  a registered charge on property of a company secures a prospective liability of an unspecified amount;

the following paragraphs have effect:

                     (c)  any priority accorded by this Part to the charge over another charge of which the chargee in relation to the first-mentioned charge has actual knowledge extends to any prospective liability secured by the first-mentioned charge that had become a present liability at the time when the chargee in relation to the first-mentioned charge first obtained actual knowledge of the other charge;

                     (d)  any priority accorded by this Part to the charge over another charge of which the chargee in relation to the first-mentioned charge has actual knowledge extends to any prospective liability secured by the first-mentioned charge that became a present liability, as the result of the making of an advance, after the time when the chargee in relation to the first-mentioned charge first obtained actual knowledge of the other charge if, at that time, the terms of the first-mentioned charge required the chargee in relation to that charge to make the advance after that time, and so extends to that prospective liability whether the advance was made before or after the registration of the first-mentioned charge and notwithstanding that the chargee in relation to the first-mentioned charge had actual knowledge of the other charge at the time when the advance was made.


 

Chapter 2LDebentures

Part 2L.1Requirement for trust deed and trustee

  

260FA  Requirement for trust deed and trustee

             (1)  Before a body:

                     (a)  makes an offer of debentures in this jurisdiction that needs disclosure to investors under Chapter 6D, or does not need disclosure to investors under Chapter 6D because of subsection 708(14) (disclosure document exclusion for debenture roll overs); or

                     (b)  makes an offer of debentures in this jurisdiction or elsewhere as consideration for the acquisition of securities under an off‑market takeover bid; or

                     (c)  issues debentures in this jurisdiction or elsewhere under a compromise or arrangement under Part 5.1 approved at a meeting held as a result of an order under subsection 411(1) or (1A);

regardless of where any resulting issue, sale or transfer occurs, the body must enter into a trust deed that complies with section 260FB and appoint a trustee that complies with section 260FC.

Note:          For rules about when an offer of debentures will need disclosure to investors under Chapter 6D, see sections 706, 707 and 708.

             (2)  The body may revoke the trust deed after it has repaid all amounts payable under the debentures in accordance with the debentures’ terms and the trust deed.

             (3)  The body must comply with this Chapter.

Note:          Sections 168 and 601CZB require a register of debenture holders to be set up and kept.

260FB  Trust deed

                   The trust deed must provide that the following are held in trust by the trustee for the benefit of the debenture holders:

                     (a)  the right to enforce the borrower’s duty to repay

                     (b)  any charge or security for repayment

                     (c)  the right to enforce any other duties that the borrower and any guarantor have under:

                              (i)  the terms of the debentures; or

                             (ii)  the provisions of the trust deed or this Chapter.

Note:          For information about the duties that the borrower and any guarantor body have under this Chapter, see sections 260GB to 260HE.

260FC  Who can be a trustee

Who can be trustee

             (1)  The trustee must be:

                     (a)  the Public Trustee of any State or Territory; or

                     (b)  a body corporate authorised by a law of any State or Territory to take in its own name a grant of probate of the will, or letters of administration of the estate, of a deceased person; or

                     (c)  a body corporate registered under the Life Insurance Act 1995; or

                     (d)  an Australian ADI; or

                     (e)  a body corporate, all of whose shares are held beneficially by a body corporate or bodies corporate of the kind referred to in paragraph (b), (c) or (d) if that body or those bodies:

                              (i)  are liable for all of the liabilities incurred, or to be incurred, by the trustee as trustee; or

                             (ii)  have subscribed for and beneficially hold shares in the trustee and there is an uncalled liability of at least $500,000 in respect of those shares that can only be called up if the trustee becomes an externally‑administered body corporate (see section 254N); or

                      (f)  a body corporate approved by ASIC (see section 260MB).

Note:          Section 260GD provides that if the borrower becomes aware that the trustee cannot be a trustee, the trustee must be replaced.

Circumstances in which a person cannot be trustee

             (2)  A person may only be appointed or act as trustee (except to the extent provided for by section 260FD) if the appointment or acting will not result in a conflict of interest or duty. This subsection is not intended to affect any rule of law or equity.

260FD  Existing trustee continues to act until new trustee takes office

                   An existing trustee continues to act as the trustee until a new trustee is appointed and has taken office as trustee, despite any rule of law or equity to the contrary.

Note:          This section applies even if the existing trustee resigns.

260FE  Replacement of trustee

Related party of existing trustee may be appointed as a new trustee

             (1)  In addition to any other powers of appointment under the terms of the debentures or provisions of the trust deed, the borrower may appoint a body corporate that is related to the existing trustee as trustee in place of the existing trustee if:

                     (a)  the body corporate can be a trustee under section 260FC; and

                     (b)  the existing trustee consents in writing to the appointment.

The appointment has effect despite any terms of the debentures or provisions of the trust deed.

Appointment by Court

             (2)  The Court may:

                     (a)  appoint a person who may be a trustee under section 260FC as trustee on the application of the borrower, a debenture holder or ASIC if:

                              (i)  a trustee has not been validly appointed; or

                             (ii)  the trustee has ceased to exist; or

                     (b)  terminate the existing trustee’s appointment and appoint a person who may be a trustee under section 260FC as trustee in the existing trustee’s place on the application of the borrower, the existing trustee, a debenture holder or ASIC if:

                              (i)  the existing trustee cannot be trustee under section 260FC; or

                             (ii)  the existing trustee fails, or refuses, to act.


 

Part 2L.2Duties of borrower

  

260GA  Duties of borrower

                   A borrower that is required to enter into a trust deed under section 260FA has the duties imposed by this Part.

260GB  General duties

                   The borrower must:

                     (a)  carry on and conduct its business in a proper and efficient manner; and

                     (b)  provide a copy of the trust deed to:

                              (i)  a debenture holder; or

                             (ii)  the trustee;

                            if they request a copy; and

                     (c)  make all of its financial and other records available for inspection by:

                              (i)  the trustee; or

                             (ii)  an officer or employee of the trustee authorised by the trustee to carry out the inspection; or

                            (iii)  a registered company auditor appointed by the trustee to carry out the inspection;

                            and give them any information, explanations or other assistance that they require about matters relating to those records.

Note:          The borrower also has a duty to call a meeting of debenture holders in certain circumstances (see section 260KA).

260GC  Duty to notify ASIC of name of trustee

                   The borrower must lodge with ASIC a notice of the name of a trustee within 14 days after they are appointed. The notice must be in the prescribed form.

260GD  Duty to replace trustee

                   The borrower must take all reasonable steps to replace the trustee under section 260FE as soon as practicable after the borrower becomes aware that the trustee:

                     (a)  has ceased to exist; or

                     (b)  has not been validly appointed; or

                     (c)  cannot be a trustee under section 260FC; or

                     (d)  has failed or refused to act as trustee.

260GE  Duty to inform trustee about charges

                   If the borrower creates a charge, it must:

                     (a)  give the trustee written details of the charge within 21 days after it is created; and

                     (b)  if the total amount to be advanced on the security of the charge is indeterminate and the advances are not merged in a current account with bankers, trade creditors or anyone else—give the trustee written details of the amount of each advance within 7 days after it is made.

Note:          If the advances are merged in a current account the borrower must give the trustee the details in the quarterly report (see subsection 260GF(4)).

260GF  Duty to give trustee and ASIC quarterly reports

Quarterly reports

             (1)  Within 1 month after the end of each quarter, the borrower must:

                     (a)  give the trustee a quarterly report that sets out the information required by subsections (4), (5) and (6); and

                     (b)  lodge a copy of the report with ASIC (see section 351).

First quarter

             (2)  The first quarter is the period of 3 months ending on a day fixed by the borrower, by written notice to the trustee. The day must be less than 6 months after the first issue of a debenture under the trust deed.

Subsequent quarters

             (3)  Each of the subsequent quarters are periods of 3 months. The trustee may allow a particular quarter to be a period of less than 3 months if the trustee is satisfied that special circumstances justify doing so.

Content of quarterly report

             (4)  The report for a quarter must include details of:

                     (a)  any failure by the borrower and each guarantor to comply with the terms of the debentures or the provisions of the trust deed or this Chapter during the quarter; and

                     (b)  any event that has happened during the quarter that has caused, or could cause, 1 or more of the following:

                              (i)  any amount deposited or lent under the debentures to become immediately payable

                             (ii)  the debentures to become immediately enforceable

                            (iii)  any other right or remedy under the terms of the debenture or provisions of the trust deed to become immediately enforceable; and

                     (c)  any circumstances that have occurred during the quarter that materially prejudice:

                              (i)  the borrower, any of its subsidiaries, or any of the guarantors; or

                             (ii)  any security or charge included in or created by the debentures or the trust deed; and

                     (d)  any substantial change in the nature of the business of the borrower, any of its subsidiaries, or any of the guarantors that has occurred during the quarter; and

                     (e)  any of the following events that happened in the quarter:

                              (i)  the appointment of a guarantor

                             (ii)  the cessation of liability of a guarantor body for the payment of the whole or part of the money for which it was liable under the guarantee

                            (iii)  a change of name of a guarantor (if this happens, the report must also disclose the guarantor’s new name); and

                      (f)  the net amount outstanding on any advances at the end of the quarter if the borrower has created a charge where:

                              (i)  the total amount to be advanced on the security of the charge is indeterminate; and

                             (ii)  the advances are merged in a current account with bankers, trade creditors or anyone else; and

                     (g)  any other matters that may materially prejudice any security or the interests of the debenture holders.

Note:          Paragraph (f)—the borrower has a duty to inform the trustee about charges as they are created (see section 260GE).

             (5)  If the borrower has deposited money with, or lent money to, a related body corporate during the quarter, the report must also include details of:

                     (a)  the total of the money deposited with, or lent to, the related body corporate during the quarter (see subsection (7)); and

                     (b)  the total amount of money owing to the borrower at the end of the quarter in respect of the deposits or loans to the related body corporate.

Disregard any amount that the borrower deposits with an ADI in the normal course of the borrower’s business.

             (6)  If the borrower has assumed a liability of a related body corporate during the quarter, the report must also include details of the extent of the liability assumed during the quarter and the extent of the liability as at the end of the quarter.

             (7)  For the purposes of subsections (5) and (6), the report:

                     (a)  must distinguish between deposits, loans and assumptions of liability that are secured and those that are unsecured; and

                     (b)  may exclude any deposit, loan or assumption of liability on behalf of the related body corporate if it has:

                              (i)  guaranteed the repayment of the debentures of the borrower; and

                             (ii)  secured the guarantee by a charge over all of its property in favour of the trustee.

Formalities

             (8)  The report must:

                     (a)  be made in accordance with a resolution of the directors; and

                     (b)  specify the date on which the report is made.

260GG  Exceptions

                   Sections 260GE and 260GF do not apply in respect of the borrower while:

                     (a)  it is under external administration; or

                     (b)  a receiver, or a receiver and manager, of property of the borrower has been appointed and has not ceased to act under that appointment.

260GH   How debentures may be described

             (1)  The borrower may describe or refer to the debentures in:

                     (a)  any disclosure in relation to the offer of the debentures; or

                     (b)  any other document constituting or relating to the offer of the debentures; or

                     (c)  the debentures themselves;

only in accordance with the following table:

 

How debentures may be described

Item

Description

When description may be used

1

mortgage debenture

only if the circumstances set out in subsection (2) are satisfied

2

debenture

only if the circumstances set out in subsection (2) or (3) are satisfied

3

unsecured note or unsecured deposit note

in any other case

When debentures can be called mortgage debentures or debentures

             (2)  The borrower may describe or refer to the debentures as:

                     (a)  mortgage debentures; or

                     (b)  debentures;

if:

                     (c)  the repayment of all money that has been, or may be, deposited or lent under the debentures is secured by a first mortgage given to the trustee over land vested in the borrower or in any of the guarantors; and

                     (d)  the mortgage has been registered, or is a registrable mortgage that has been lodged for registration, in accordance with the law relating to the registration of mortgages of land in the place where the land is situated; and

                     (e)  the total amount of that money and of all other liabilities (if any) secured by the mortgage of that land ranking equally with the liability to repay that money does not exceed 60% of the value of the borrower’s or guarantor’s interest in that land as shown in the valuation included in the disclosure document for the debentures.

When debentures can be called debentures

             (3)  The borrower may describe or refer to the debentures as debentures if:

                     (a)  the repayment of all money that has been, or may be, deposited or lent under the debentures has been secured by a charge in favour of the trustee over the whole or any part of the tangible property of the borrower or of any of the guarantors; and

                     (b)  the tangible property that constitutes the security for the charge is sufficient and is reasonably likely to be sufficient to meet the liability for the repayment of all such money and all other liabilities that:

                              (i)  have been or may be incurred; and

                             (ii)  rank in priority to, or equally with, that liability.

260GI  Offences for failure to comply with statutory duties

                   The borrower commits an offence if it intentionally or recklessly contravenes section 260GB, 260GC, 260GD, 260GE, 260GF or 260KA.


 

Part 2L.3Duties of guarantor

  

260HA  Duties of guarantor

                   If a borrower is required to enter into a trust deed under section 260FA in relation to debentures, a guarantor in respect of the debentures has the duties imposed by this Part.

260HB  General duties

                   The guarantor must:

                     (a)  carry on and conduct its business in a proper and efficient manner; and

                     (b)  make all of its financial and other records available for inspection by:

                              (i)  the trustee; or

                             (ii)  an officer or employee of the trustee authorised by the trustee to carry out the inspection; or

                            (iii)  a registered company auditor appointed by the trustee to carry out the inspection;

                            and give them any information, explanations or other assistance that they require about matters relating to those records.

260HC  Duty to inform trustee about charges

                   If the guarantor creates a charge, it must:

                     (a)  give the trustee written details of the charge within 21 days after it is created; and

                     (b)  if the total amount to be advanced on the security of the charge is indeterminate, give the trustee written details of:

                              (i)  the amount of each advance made within 7 days after it is made; or

                             (ii)  where the advances are merged in a current account with bankers, trade creditors or anyone else—the net amount outstanding on the advances at the end of every 3 months.

260HD  Exceptions

                   Section 260HC does not apply in respect of the guarantor while:

                     (a)  it is under external administration; or

                     (b)  a receiver, or a receiver and manager, of property of the guarantor has been appointed and has not ceased to act under that appointment.

260HE  Offences for failure to comply with statutory duties

                   The guarantor commits an offence if it intentionally or recklessly contravenes paragraph 260HB(b) or section 260HC.


 

Part 2L.4Trustee

  

260JA  Trustee’s duties

                   The trustee of a trust deed entered into under section 260FA must:

                     (a)  exercise reasonable diligence to ascertain whether the property of the borrower and of each guarantor that is or should be available (whether by way of security or otherwise) will be sufficient to repay the amount deposited or lent when it becomes due; and

                     (b)  exercise reasonable diligence to ascertain whether the borrower or any guarantor has committed any breach of:

                              (i)  the terms of the debentures; or

                             (ii)  the provisions of the trust deed or this Chapter; and

                     (c)  do everything in its power to ensure that the borrower or a guarantor remedies any breach known to the trustee of:

                              (i)  any term of the debentures; or

                             (ii)  any provision of the trust deed or this Chapter;

                            unless the trustee is satisfied that the breach will not materially prejudice the debenture holders’ interests or any security for the debentures; and

                     (d)  ensure that the borrower and each guarantor complies with Part 2K to the extent that it applies to the debentures; and

                     (e)  notify ASIC as soon as practicable if:

                              (i)  the borrower has not complied with section 260GE, 260GF or subsection 318(1) or (4); or

                             (ii)  a guarantor has not complied with section 260HC; and

                      (f)  notify ASIC and the borrower as soon as practicable if the trustee discovers that it cannot be a trustee under section 260FC; and

                     (g)  give the debenture holders a statement explaining the effect of any proposal that the borrower submits to the debenture holders before any meeting that:

                              (i)  the Court calls in relation to a scheme under subsection 411(1) or (1A); or

                             (ii)  the trustee calls under subsection 260KB(1); and

                     (h)  comply with any directions given to it at a debenture holders’ meeting referred to in section 260KA, 260KB or 260KC unless:

                              (i)  the trustee is of the opinion that the direction is inconsistent with the terms of the debentures or the provisions of the trust deed or this Law or is otherwise objectionable; and

                             (ii)  has either obtained, or is in the process of obtaining, an order from the Court under section 260NA setting aside or varying the direction; and

                      (i)  apply to the Court for an order under section 260NB if the borrower requests it to do so.

Note 1:       Paragraph (g)—Section 411 relates to compromises and arrangements.

Note 2:       Section 260JC deals with indemnification in respect of a trustee’s liability to the debenture holders.

260JB  Exemptions and indemnifications of trustee from liability

             (1)  A term of a debenture, provision of a trust deed or a term of a contract with holders of debentures secured by a trust deed, is void in so far as the term or provision would have the effect of:

                     (a)  exempting a trustee from liability for breach of section 260JA for failure to show the degree of care and diligence required of it as trustee; or

                     (b)  indemnifying the trustee against that liability;

unless the term or provision:

                     (c)  releases the trustee from liability for something done or omitted to be done before the release is given; or

                     (d)  enables a meeting of debenture holders to approve the release of the trustee from liability for something done or omitted to be done before the release is given.

             (2)  For the purposes of paragraph (1)(d):

                     (a)  a release is approved if the debenture holders who vote for the resolution hold 75% of the nominal value of the debentures held by all the debenture holders who attend the meeting and vote on the resolution; and

                     (b)  a debenture holder attends the meeting and votes on the resolution if:

                              (i)  they attend the meeting in person and vote on the resolution; or

                             (ii)  if proxies are permitted—they are represented at the meeting by a proxy and the proxy votes on the resolution.

260JC  Indemnity

                   The trustee is not liable for anything done or omitted to be done in accordance with a direction given to it by the debenture holders at any meeting called under section 260KA, 260KB or 260KC.


 

Part 2L.5Meetings of debenture holders

  

260KA  Borrower’s duty to call meeting

Duty to call meeting

             (1)  The borrower must call a meeting of debenture holders if:

                     (a)  debenture holders who together hold 10% or more of the nominal value of the issued debentures to which the trust relates direct the borrower to do so; and

                     (b)  the direction is given to the borrower in writing at its registered office; and

                     (c)  the purpose of the meeting is to:

                              (i)  consider the financial statements that were laid before the last AGM of the borrower; or

                             (ii)  give the trustee directions in relation to the exercise of any of its powers.

Note:          The trustee usually must comply with any directions given to it by the debenture holders at the meeting (see paragraph 260JA(h)).

Duty to give notification of meeting

             (2)  If the borrower is required to call a meeting, it must give notice of the time and place of the meeting to:

                     (a)  the trustee; and

                     (b)  the borrower’s auditor; and

                     (c)  each of the debenture holders whose names are entered on the register of debenture holders.

Notice to joint holders of a debenture must be given to the joint holder named first in the register of debenture holders.

             (3)  The borrower may give the notice to a debenture holder:

                     (a)  personally; or

                     (b)  by sending it by post to the address for the debenture holder in the register of debenture holders; or

                     (c)  by sending it to the fax number or electronic address (if any) nominated by the debenture holder; or

                     (d)  by any other means that the trust deed or the terms of the debentures permit.

Note:          A defect in the notice may not invalidate a meeting (see section 1322).

When notice by post or fax is given

             (4)  A notice of meeting sent to a debenture holder is taken to be given:

                     (a)  3 days after it is posted, if it is posted; or

                     (b)  on the business day after it is sent, if it is sent by fax or other electronic means;

unless the trust deed or the terms of the debentures provide otherwise.

260KB  Trustee’s power to call meeting

Trustee may call meeting in event of breach

             (1)  If the borrower or a guarantor fails to remedy any breach of the terms of the debentures or provisions of the trust deed or this Chapter when required by the trustee, the trustee may:

                     (a)  call a meeting of debenture holders; and

                     (b)  inform the debenture holders of the failure at the meeting; and

                     (c)  submit proposals for protection of the debenture holders’ interests to the meeting; and

                     (d)  ask for directions from the debenture holders in relation to the matter.

Trustee may appoint person to chair meeting

             (2)  The trustee may appoint a person to chair a meeting of debenture holders called under subsection (1). If the trustee does not exercise this power, the debenture holders present at the meeting may appoint a person to chair the meeting.

260KC  Court may order meeting

             (1)  Without limiting section 260NA or 260NB, the Court may make an order under either of those sections for a meeting of all or any of the debenture holders to be held to give directions to the trustee. The order may direct the trustee to:

                     (a)  place before the debenture holders any information concerning their interests; and

                     (b)  place before the debenture holders any proposals to protect their interests that the Court directs or the trustee considers appropriate; and

                     (c)  obtain the debenture holders’ directions concerning the protection of their interests.

             (2)  The meeting is to be held and conducted in the manner the Court directs. The trustee may appoint a person to chair the meeting. If the trustee does not exercise this power, the debenture holders present at the meeting may appoint a person to chair the meeting.


 

Part 2L.6Civil liability

  

260L  Civil liability for contravening this Chapter

             (1)  A person who suffers loss or damage because a person contravenes a provision of this Chapter may recover the amount of the loss or damage from:

                     (a)  the person who contravened the provision; or

                     (b)  a person involved in the contravention.

This is so even if the person did not commit, and was not involved in, the contravention.

             (2)  An action under subsection (1) may begin at any time within 6 years after the day on which the cause of action arose.

             (3)  This Part does not affect any liability that a person has under any other law.


 

Part 2L.7ASIC powers

  

260MA  ASIC’s power to exempt and modify

             (1)  ASIC may:

                     (a)  exempt a person from a provision of this Chapter; or

                     (b)  declare that this Chapter applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration.

             (2)  The exemption or declaration may do all or any of the following:

                     (a)  apply to all or specified provisions of this Chapter

                     (b)  apply to all persons, specified persons, or a specified class of persons

                     (c)  relate to all debentures, specified debentures or a specified class of debentures

                     (d)  relate to any other matter generally or as specified.

             (3)  An exemption may apply unconditionally or subject to specified conditions. A person to whom a condition specified in an exemption applies must comply with the condition. The Court may order the person to comply with the condition in a specified way. Only ASIC may apply to the Court for the order.

             (4)  The exemption or declaration must be in writing and ASIC must publish notice of it in the Gazette.

             (5)  For the purposes of this section, the provisions of this Chapter include:

                     (a)  regulations made for the purposes of this Chapter; and

                     (b)  definitions in this Law or the regulations as they apply to references in:

                              (i)  this Chapter; or

                             (ii)  regulations made for the purposes of this Chapter; and

                     (c)  Division 12 of Part 11.2.

260MB  ASIC may approve body corporate to be trustee

             (1)  ASIC may approve a body corporate in writing to be a trustee for the purposes of paragraph 260FC(1)(f). The approval may allow the body corporate to act as trustee:

                     (a)  in any circumstances; or

                     (b)  in relation to a particular borrower or particular class of borrower; or

                     (c)  in relation to a particular trust deed;

and may be given subject to conditions.

             (2)  ASIC must publish notice of the approval in the Gazette.


 

Part 2L.8Court

  

260NA  General Court power to give directions and determine questions

                   If the trustee applies to the Court for any direction in relation to the performance of the trustee’s functions or to determine any question in relation to the interests of the debenture holders, the Court may give any direction and make any declaration or determination in relation to the matter that the Court considers appropriate. The Court may also make ancillary or consequential orders.

Note:          Under this section, the Court may order a meeting of debenture holders to be held, see section 260KC.

260NB  Specific Court powers

             (1)  If the trustee or ASIC applies to the Court, the Court may make any or all of the following orders:

                     (a)  an order staying an action or other civil proceedings before a court by or against the borrower or a guarantor body

                     (b)  an order restraining the borrower from paying any money to the debenture holders or any holders of any other class of debentures

                     (c)  an order that any security for the debentures be enforceable immediately or at the time the Court directs (even if the debentures are irredeemable or redeemable only on the happening of a contingency)

                     (d)  an order appointing a receiver of any property constituting security for the debentures

                     (e)  an order restricting advertising by the borrower for deposits or loans

                      (f)  an order restricting borrowing by the borrower

                     (g)  any other order that the Court considers appropriate to protect the interests of existing or prospective debenture holders.

             (2)  In deciding whether to make an order under subsection (1), the Court must have regard to:

                     (a)  the ability of the borrower and each guarantor to repay the amount deposited or lent as and when it becomes due; and

                     (b)  any contravention of section 260MA by the borrower; and

                     (c)  the interests of the borrower’s members and creditors; and

                     (d)  the interests of the members of each of the guarantors.

Note:          The Court may order a meeting of debenture holders to be held (see section 260KC).


 

Part 2L.9Location of other debenture provisions

  

260P  Signpost to other debenture provisions

                   There are other rules relating to debentures in paragraph 124(1)(b) and section 563AAA.


 

Chapter 2MFinancial reports and audit

Part 2M.1Overview

  

285  Overview of obligations under this Chapter

Obligations under this Chapter

             (1)  Under this Chapter, all companies, registered schemes and disclosing entities must keep financial records (see sections
286-291)—and some must prepare financial reports (see sections 292-323D). All those that have to prepare financial reports have to prepare them annually; disclosing entities have to prepare half‑year financial reports as well. The following table sets out what is involved in annual financial reporting:

 

Annual financial reporting

 

steps

sections

comments

1

prepare financial report

s. 295

The financial report includes:

• financial statements

• disclosures and notes

• directors’ declaration.

2

prepare directors’ report

s. 298

The report has both a general component (s. 299) and a specific component (s. 300).

3

have the financial report audited and obtain auditor’s report

s. 301, 307, 308

A small proprietary company preparing a financial report in response to a shareholder direction under s. 293 only has to have an audit if the direction asks for it.

Under s. 312, officers must assist the auditor in the conduct of the audit.

ASIC may use its exemption powers under s. 340 and 341 to relieve large proprietary companies from the audit requirements in appropriate cases (s. 342(2) and (3)).

4

send the financial report, directors’ report and auditor’s report to members

s. 314

A concise financial report may be sent to members instead of the full financial statements (s. 314(1)-(2)).

For deadline see s. 315(1)-(4).

5

lodge the financial report, directors’ report and auditor’s report with ASIC

s. 319

For deadline see s. 319(3).

Companies that have the benefit of the grandfathering in s. 319(4) do not have to lodge.

6

[public companies only] lay financial report, directors’ report and auditor’s report before AGM

s. 317

For the AGM deadline see s. 250N.

Application to disclosing entities

             (2)  This Chapter covers all disclosing entities incorporated or formed in this jurisdiction (whether or not they are companies or registered schemes).

Application to registered schemes

             (3)  For the purposes of applying this Chapter to a registered scheme:

                     (a)  the scheme’s responsible entity is responsible for the performance of obligations in respect of the scheme; and

                     (b)  the directors and officers of the responsible entity are to be taken to be the directors and officers of the scheme; and

                     (c)  the debts incurred in operating the scheme are to be taken to be the debts of the scheme.

 


 

Part 2M.2Financial records

  

286  Obligation to keep financial records

             (1)  A company, registered scheme or disclosing entity must keep written financial records that:

                     (a)  correctly record and explain its transactions and financial position and performance; and

                     (b)  would enable true and fair financial statements to be prepared and audited.

The obligation to keep financial records of transactions extends to transactions undertaken as trustee.

Note:          Section 9 defines financial records.

Period for which records must be retained

             (2)  The financial records must be retained for 7 years after the transactions covered by the records are completed.

287  Language requirements

             (1)  The financial records may be kept in any language.

             (2)  An English translation of financial records not kept in English must be made available within a reasonable time to a person who:

                     (a)  is entitled to inspect the records; and

                     (b)  asks for the English translation.

288  Physical format

                   If financial records are kept in electronic form, they must be convertible into hard copy. Hard copy must be made available within a reasonable time to a person who is entitled to inspect the records.

289  Place where records are kept

             (1)  A company, registered scheme or disclosing entity may decide where to keep the financial records.

Records kept outside Australia

             (2)  If financial records about particular matters are kept outside Australia, sufficient written information about those matters must be kept in Australia to enable true and fair financial statements to be prepared. The company, registered scheme or disclosing entity must give ASIC written notice in the prescribed form of the place where the information is kept.

             (3)  ASIC may direct a company, registered scheme or disclosing entity to produce specified financial records that are kept outside Australia.

             (4)  The direction must:

                     (a)  be in writing; and

                     (b)  specify a place in Australia where the records are to be produced (the place must be reasonable in the circumstances); and

                     (c)  specify a day (at least 14 days after the direction is given) by which the records are to be produced.

290  Director access

Personal access

             (1)  A director of a company, registered scheme or disclosing entity has a right of access to the financial records at all reasonable times.

Court order for inspection on director’s behalf

             (2)  On application by a director, the Court may authorise a person to inspect the financial records on the director’s behalf.

             (3)  A person authorised to inspect records may make copies of the records unless the Court orders otherwise.

             (4)  The Court may make any other orders it consider appropriate, including either or both of the following:

                     (a)  an order limiting the use that a person who inspects the records may make of information obtained during the inspection

                     (b)  an order limiting the right of a person who inspects the records to make copies in accordance with subsection (3).

291  Signposts to other relevant provisions

                   The following table sets out other provisions that are relevant to access to financial records.

 

Other provisions relevant to access to financial records

 

 

 

1

 

section 247A

members

A member may apply to the Court for an order to inspect the records.

 

2

 

section 310

auditor

The auditor has a right of access to the records.

 

3

 

section 431

controllers

A controller of a corporation’s property (for example, a receiver or receiver and manager) has a right of access to the records.

 

4

 

sections 28 to 39 of the Australian Securities Commission Act 1989

ASC

ASIC has power to inspect the records. It also has power under subsection 289(3) of this Law to call for the production of financial records kept outside Australia.

 


 

Part 2M.3Financial reporting

Division 1Annual financial reports and directors’ reports

292  Who has to prepare annual financial reports and directors’ reports

             (1)  A financial report and a directors’ report must be prepared for each financial year by:

                     (a)  all disclosing entities; and

                     (b)  all public companies; and

                     (c)  all large proprietary companies; and

                     (d)  all registered schemes.

Note:          This Chapter only applies to disclosing entities incorporated or formed in Australia (see subsection 285(2)).

             (2)  A small proprietary company has to prepare the financial report and directors’ report only if:

                     (a)  it is directed to do so under section 293 or 294; or

                     (b)  it was controlled by a foreign company for all or part of the year and it is not consolidated for that period in financial statements for that year lodged with ASIC by:

                              (i)  a registered foreign company; or

                             (ii)  a company, registered scheme or disclosing entity.

The rest of this Part does not apply to any other small proprietary company.

293  Small proprietary company—shareholder direction

             (1)  Shareholders with at least 5% of the votes in a small proprietary company may give the company a direction to:

                     (a)  prepare a financial report and directors’ report for a financial year; and

                     (b)  send them to all shareholders.

             (2)  The direction must be:

                     (a)  signed by the shareholders giving the direction; and

                     (b)  made no later than 12 months after the end of the financial year concerned.

             (3)  The direction may specify all or any of the following:

                     (a)  that the financial report does not have to comply with some or all of the accounting standards

                     (b)  that a directors’ report or a part of that report need not be prepared

                     (c)  that the financial report is to be audited.

294  Small proprietary company—ASIC direction

             (1)  ASIC may give a small proprietary company a direction to comply with requirements of this Division and Divisions 3, 4, 5 and 6 for a financial year.

             (2)  The direction may be general or may specify the particular requirements that the company is to comply with.

             (3)  The direction must specify the date by which the documents have to be prepared, sent or lodged. The date must be a reasonable one in view of the nature of the direction.

             (4)  The direction must:

                     (a)  be made in writing; and

                     (b)  specify the financial year concerned; and

                     (c)  be made no later than 6 years after the end of that financial year.

295  Contents of annual financial report

Basic contents

             (1)  The financial report for a financial year consists of:

                     (a)  the financial statements for the year; and

                     (b)  the notes to the financial statements; and

                     (c)  the directors’ declaration about the statements and notes.

Financial statements

             (2)  The financial statements for the year are:

                     (a)  a profit and loss statement for the year; and

                     (b)  a balance sheet as at the end of the year; and

                     (c)  a statement of cash flows for the year; and

                     (d)  if required by the accounting standards—a consolidated profit and loss statement, balance sheet and statement of cash flows.

Notes to financial statements

             (3)  The notes to the financial statements are:

                     (a)  disclosures required by the regulations; and

                     (b)  notes required by the accounting standards; and

                     (c)  any other information necessary to give a true and fair view (see section 297).

Directors’ declaration

             (4)  The directors’ declaration is a declaration by the directors:

                     (a)  that the financial statements, and the notes referred to in paragraph (3)(b), comply with the accounting standards; and

                     (b)  that the financial statements and notes give a true and fair view (see section 297); and

                     (c)  whether, in the directors’ opinion, there are reasonable grounds to believe that the company, registered scheme or disclosing entity will be able to pay its debts as and when they become due and payable; and

                     (d)  whether, in the directors’ opinion, the financial statement and notes are in accordance with this law, including:

                              (i)  section 296 (compliance with accounting standards); and

                             (ii)  section 297 (true and fair view).

Note:          See paragraph 285(3)(c) for the reference to the debts of a registered scheme.

             (5)  The declaration must:

                     (a)  be made in accordance with a resolution of the directors; and

                     (b)  specify the date on which the declaration is made; and

                     (c)  be signed by a director.

296  Compliance with accounting standards and regulations

             (1)  The financial report for a financial year must comply with the accounting standards. However, a small proprietary company’s report does not have to comply with particular accounting standards if:

                     (a)  the report is prepared in response to a shareholder direction under section 293; and

                     (b)  the direction specifies that the report does not have to comply with those accounting standards.

             (2)  The financial report must comply with any further requirements in the regulations.

297  True and fair view

                   The financial statements and notes for a financial year must give a true and fair view of:

                     (a)  the financial position and performance of the company, registered scheme or disclosing entity; and

                     (b)  if consolidated financial statements are required—the financial position and performance of the consolidated entity.

This section does not affect the obligation under section 296 for a financial report to comply with accounting standards.

Note:          If the financial statements and notes prepared in compliance with the accounting standards would not give a true and fair view, additional information must be included in the notes to the financial statements under paragraph 295(3)(c).

298  Annual directors’ report

             (1)  The company, registered scheme or disclosing entity must prepare a directors’ report for each financial year. The report must include:

                     (a)  the general information required by section 299; and

                     (b)  the specific information required by section 300.

             (2)  The report must:

                     (a)  be made in accordance with a resolution of the directors; and

                     (b)  specify the date on which the report is made; and

                     (c)  be signed by a director.

             (3)  A small proprietary company does not have to comply with subsection (1) for a financial year if:

                     (a)  it is preparing financial statements for that year in response to a shareholder direction under section 293; and

                     (b)  the direction specified that a directors’ report need not be prepared.

299  Annual directors’ report—general information

General information about operations and activities

             (1)  The directors’ report for a financial year must:

                     (a)  contain a review of operations during the year of the entity reported on and the results of those operations; and

                     (b)  give details of any significant changes in the entity’s state of affairs during the year; and

                     (c)  state the entity’s principal activities during the year and any significant changes in the nature of those activities during the year; and

                     (d)  give details of any matter or circumstance that has arisen since the end of the year that has significantly affected, or may significantly affect:

                              (i)  the entity’s operations in future financial years; or

                             (ii)  the results of those operations in future financial years; or

                            (iii)  the entity’s state of affairs in future financial years; and

                     (e)  refer to likely developments in the entity’s operations in future financial years and the expected results of those operations; and

                      (f)  if the entity’s operations are subject to any particular and significant environmental regulation under a law of the Commonwealth or of a State or Territory—details of the entity’s performance in relation to environmental regulation.

             (2)  The entity reported on is:

                     (a)  the company, registered scheme or disclosing entity (if consolidated financial statements are not required); or

                     (b)  the consolidated entity (if consolidated financial statements are required).

Prejudicial information need not be disclosed

             (3)  The report may omit material that would otherwise be included under paragraph (1)(e) if it is likely to result in unreasonable prejudice to:

                     (a)  the company, registered scheme or disclosing entity; or

                     (b)  if consolidated financial statements are required—the consolidated entity or any entity (including the company, registered scheme or disclosing entity) that is part of the consolidated entity.

If material is omitted, the report must say so.

300  Annual directors’ report—specific information

             (1)  The directors’ report for a financial year must include details of:

                     (a)  dividends or distributions paid to members during the year; and

                     (b)  dividends or distributions recommended or declared for payment to members, but not paid, during the year; and

                     (c)  the name of each person who has been a director of the company, registered scheme or disclosing entity at any time during or since the end of the year and the period for which they were a director; and

                     (d)  options that are:

                              (i)  granted over unissued shares or unissued interests during or since the end of the year; and

                             (ii)  granted to any of the directors or any of the 5 most highly remunerated officers of the company; and

                            (iii)  granted to them as part of their remuneration;

                            (see subsections (3), (4) and (5)); and

                     (e)  unissued shares or interests under option as at the day the report is made (see subsections (3) and (6)); and

                      (f)  shares or interests issued during or since the end of the year as a result of the exercise of an option over unissued shares or interests (see subsections (3) and (7)); and

                     (g)  indemnities given and insurance premiums paid during or since the end of the year for a person who is or has been an officer or auditor (see subsections (8) and (9)).

Public companies, listed companies and registered schemes must include additional information under subsections (10), (11), (12) and (13).

             (2)  Details do not have to be included in the directors’ report under this section if they are included in the company’s financial report for the financial year.

             (3)  Paragraphs (1)(d), (e) and (f) cover:

                     (a)  options over unissued shares and interests of the company, registered scheme or disclosing entity; and

                     (b)  if consolidated financial statements are required—options over unissued shares and interests of any controlled entity that is a company, registered scheme or disclosing entity.

Options details

             (5)  The details of an option granted are:

                     (a)  the company, registered scheme or disclosing entity granting the option; and

                     (b)  the name of the person to whom the option is granted; and

                     (c)  the number and class of shares or interests over which the option is granted.

             (6)  The details of unissued shares or interests under option are:

                     (a)  the company, registered scheme or disclosing entity that will issue shares or interests when the options are exercised; and

                     (b)  the number and classes of those shares or interests; and

                     (c)  the issue price, or the method of determining the issue price, of those shares or interests; and

                     (d)  the expiry date of the options; and

                     (e)  any rights that option holders have under the options to participate in any share issue or interest issue of the company, registered scheme or disclosing entity or of any other body corporate or registered scheme.

Shares or interests issued as a result of exercise of option

             (7)  The details of shares or interests issued as a result of the exercise of an option are:

                     (a)  the company, registered scheme or disclosing entity issuing the shares or interests; and

                     (b)  the number of shares or interests issued; and

                     (c)  if the company, registered scheme or disclosing entity has different classes of shares or interests—the class to which each of those shares or interests belongs; and

                     (d)  the amount unpaid on each of those shares or interests; and

                     (e)  the amount paid, or agreed to be considered as paid, on each of those shares or interests.

Indemnities and insurance premiums for officers or auditors

             (8)  The report for a company must include details of:

                     (a)  any indemnity that is given to a current or former officer or auditor against a liability and that is covered by subsection 199A(2) or (3), or any relevant agreement under which an officer or auditor may be given an indemnity of that kind; and

                     (b)  any premium that is paid, or agreed to be paid, for insurance against a current or former officer’s or auditor’s liability for legal costs.

Note:          Sections 199A and 199B contain general prohibitions against giving certain indemnities and paying certain insurance premiums. This subsection requires transactions that are exceptions to these prohibitions to be reported.

             (9)  The details required under subsection (8) are:

                     (a)  for an officer—their name or the class of officer to which they belong or belonged; and

                     (b)  for an auditor—their name; and

                     (c)  the nature of the liability; and

                     (d)  for an indemnity given—the amount the company paid and any other action the company took to indemnify the officer or auditor; and

                     (e)  for an agreement to indemnify—the amount that the relevant agreement requires the company to pay and any other action the relevant agreement requires the company to take to indemnify the officer or auditor; and

                      (f)  for an insurance premium—the amount of the premium.

The report need not give details of the nature of the liability covered by, or the amount of the premium payable under, a contract of insurance to the extent that disclosure of those details is prohibited by the insurance contract.

Special rules for public companies

           (10)  The report for a public company that is not a wholly-owned subsidiary of another company or of a recognised company must also include details of:

                     (a)  each director’s qualifications, experience and special responsibilities; and

                     (b)  the number of meetings of the board of directors held during the year and each director’s attendance at those meetings; and

                     (c)  the number of meetings of each board committee held during the year and each director’s attendance at those meetings.

Special rules for listed companies

           (11)  The report for a listed company must also include the following details for each director:

                     (a)  their relevant interests in shares of the company or a related body corporate

                     (b)  their relevant interests in debentures of, or interests in a registered scheme made available by, the company or a related body corporate

                     (c)  their rights or options over shares in, debentures of or interests in a registered scheme made available by, the company or a related body corporate

                     (d)  contracts:

                              (i)  to which the director is a party or under which the director is entitled to a benefit; and

                             (ii)  that confer a right to call for or deliver shares in, or debentures of or interests in a registered scheme made available by the company or a related body corporate.

Note:          Directors must also disclose interests of these kinds to the ASX under section 205G as they are acquired.

Special rules for listed registered schemes

           (12)  The report for a registered scheme whose interests are quoted on a stock market of a securities exchange must also include the following details for each director of the company that is the responsible entity for the scheme:

                     (a)  their relevant interests in interests in the scheme

                     (b)  their rights or options over interests in the scheme

                     (c)  contracts to which the director is a party or under which the director is entitled to a benefit and that confer a right to call for or deliver interests in the scheme.

Special rules for registered schemes

           (13)  The report for a registered scheme must also include details of:

                     (a)  the fees paid to the responsible entity and its associates out of scheme property during the financial year; and

                     (b)  the number of interests in the scheme held by the responsible entity or its associates as at the end of the financial year; and

                     (c)  interests in the scheme issued during the financial year; and

                     (d)  withdrawals from the scheme during the financial year; and

                     (e)  the value of the scheme’s assets as at the end of the financial year, and the basis for the valuation; and

                      (f)  the number of interests in the scheme as at the end of the financial year.

Proceedings on behalf of a company

           (14)  The report for a company must also include the following details of any application for leave under section 237 made in respect of the company:

                     (a)  the applicant’s name; and

                     (b)  a statement whether leave was granted.

           (15)  The report for a company must also include the following details of any proceedings that a person has brought or intervened in on behalf of the company with leave under section 237:

                     (a)  the person’s name

                     (b)  the names of the parties to the proceedings

                     (c)  sufficient information to enable members to understand the nature and status of the proceedings (including the cause of action and any orders made by the court).

300A  Annual directors’ report—specific information to be provided by listed companies

             (1)  The directors’ report for a financial year for a company must also include:

                     (a)  discussion of broad policy for determining the nature and amount of emoluments of board members and senior executives of the company; and

                     (b)  discussion of the relationship between such policy and the company’s performance; and

                     (c)  details of the nature and amount of each element of the emolument of each director and each of the 5 named officers of the company receiving the highest emolument.

             (2)  This section applies only to a company that is:

                     (a)  incorporated in Australia; and

                     (b)  included in an official list of the Exchange.

             (3)  This section applies despite anything in the company’s constitution.

301  Audit of annual financial report

             (1)  A company, registered scheme or disclosing entity must have the financial report for a financial year audited in accordance with Division 3 and obtain an auditor’s report.

             (2)  A small proprietary company’s financial report for a financial year does not have to be audited if:

                     (a)  the report is prepared in response to a direction under section 293; and

                     (b)  the direction did not ask for the financial report to be audited.


 

Division 2Half-year financial report and directors’ report

302  Disclosing entity must prepare half-year financial report and directors’ report

                   A disclosing entity must:

                     (a)  prepare a financial report and directors’ report for each half‑year; and

                     (b)  have the financial report audited or reviewed in accordance with Division 3 and obtain an auditor’s report; and

                     (c)  lodge the financial report, the directors’ report and the auditor’s report on the financial report with ASIC;

unless the entity is not a disclosing entity when lodgment is due.

Note 1:       This Chapter only applies to disclosing entities incorporated or formed in Australia (see subsection 285(2)).

Note 2:       See section 320 for the time for lodgment with ASIC.

Note 3:       Subsection 318(4) requires disclosing entities that are borrowers in relation to debentures to also report to the trustee for debenture holders.

303  Contents of half-year financial report

Basic contents

             (1)  The financial report for a half-year consists of:

                     (a)  the financial statements for the half-year; and

                     (b)  the notes to the financial statements; and

                     (c)  the directors’ declaration about the statements and notes.

Financial statements

             (2)  The financial statements for the half-year are:

                     (a)  except where paragraph (b) applies:

                              (i)  a profit and loss statement for the half-year; and

                             (ii)  a balance sheet as at the end of the half-year; and

                            (iii)  a statement of cash flows for the half-year; and

                     (b)  if required by the accounting standards—a consolidated profit and loss statement, balance sheet and statement of cash flows.

Notes to financial statements

             (3)  The notes to the financial statements are:

                     (a)  disclosures required by the regulations; and

                     (b)  notes required by the accounting standards; and

                     (c)  any other information necessary to give a true and fair view (see section 305).

Directors’ declaration

             (4)  The directors’ declaration is a declaration by the directors:

                     (a)  that the financial statements, and the notes referred to in paragraph (3)(b), comply with the accounting standards; and

                     (b)  that the financial statements and notes give a true and fair view (see section 305); and

                     (c)  whether, in the directors’ opinion, there are reasonable grounds to believe that the disclosing entity will be able to pay its debts as and when they become due and payable.

Note:          See paragraph 285(3)(c) for the reference to the debts of a disclosing entity that is a registered scheme.

             (5)  The declaration must:

                     (a)  be made in accordance with a resolution of the directors; and

                     (b)  specify the day on which the declaration is made; and

                     (c)  be signed by a director.

304  Compliance with accounting standards and regulations

                   The financial report for a half-year must comply with the accounting standards and any further requirements in the regulations.

305  True and fair view

                   The financial statements and notes for a half-year must give a true and fair view of:

                     (a)  the financial position and performance of the disclosing entity; or

                     (b)  if consolidated financial statements are required—the financial position and performance of the consolidated entity.

This section does not affect the obligation under section 304 for financial reports to comply with accounting standards.

Note:          If the financial statements prepared in compliance with the accounting standards would not give a true and fair view, additional information must be included in the notes to the financial statements under paragraph 303(3)(c).

306  Half-year directors’ report

                   The directors of the disclosing entity must prepare a directors’ report for each half-year that consists of:

                     (a)  a review of the entity’s operations during the half-year and the results of those operations; and

                     (b)  the name of each person who has been a director of the disclosing entity at any time during or since the end of the half-year and the period for which they were a director.

If consolidated financial statements are required, the review under paragraph (a) must cover the consolidated entity.


 

Division 3Audit and auditor’s report

307  Audit

                   An auditor who conducts an audit of the financial report for a financial year or half-year must form an opinion about:

                     (a)  whether the financial report is in accordance with this Law, including:

                              (i)  section 296 or 304 (compliance with accounting standards); and

                             (ii)  section 297 or 305 (true and fair view); and

                     (b)  whether the auditor has been given all information, explanation and assistance necessary for the conduct of the audit; and

                     (c)  whether the company, registered scheme or disclosing entity has kept financial records sufficient to enable a financial report to be prepared and audited; and

                     (d)  whether the company, registered scheme or disclosing entity has kept other records and registers as required by this Law.

308  Auditor’s report on annual financial report

             (1)  An auditor who audits the financial report for a financial year must report to members on whether the auditor is of the opinion that the financial report is in accordance with this Law, including:

                     (a)  section 296 (compliance with accounting standards); and

                     (b)  section 297 (true and fair view).

If not of that opinion, the auditor’s report must say why.

             (2)  If the auditor is of the opinion that the financial report does not comply with an accounting standard, the auditor’s report must, to the extent it is practicable to do so, quantify the effect that non‑compliance has on the financial report. If it is not practicable to quantify the effect fully, the report must say why.

             (3)  The auditor’s report must describe:

                     (a)  any defect or irregularity in the financial report; and

                     (b)  any deficiency, failure or shortcoming in respect of the matters referred to in paragraph 307(b), (c) or (d).

             (4)  The report must specify the date on which it is made.

309  Auditor’s report on half-year financial report

Audit of financial report

             (1)  An auditor who audits the financial report for a half-year must report to members on whether the auditor is of the opinion that the financial report is in accordance with this Law, including:

                     (a)  section 304 (compliance with accounting standards); and

                     (b)  section 305 (true and fair view).

If not of that opinion, the auditor’s report must say why.

             (2)  If the auditor is of the opinion that the financial report does not comply with an accounting standard, the auditor’s report must, to the extent that it is practicable to do so, quantify the effect that non-compliance has on the financial report. If it is not practicable to quantify the effect fully, the report must say why.

             (3)  The auditor’s report must describe:

                     (a)  any defect or irregularity in the financial report; and

                     (b)  any deficiency, failure or shortcoming in respect of the matters referred to in paragraph 307(b), (c) or (d).

Review of financial report

             (4)  An auditor who reviews the financial report for a half-year must report to members on whether the auditor became aware of any matter in the course of the review that makes the auditor believe that the financial report does not comply with Division 2.

             (5)  A report under subsection (4) must:

                     (a)  describe any matter referred to in subsection (4); and

                     (b)  say why that matter makes the auditor believe that the financial report does not comply with Division 2.

Report to specify day made

             (6)  A report under subsection (1) or (4) must specify the date on which it is made.

310  Auditor’s power to obtain information

                   The auditor:

                     (a)  has a right of access at all reasonable times to the books of the company, registered scheme or disclosing entity; and

                     (b)  may require any officer to give the auditor information, explanations or other assistance for the purposes of the audit or review.

A request under paragraph (b) must be a reasonable one.

311  Reporting to ASIC

                   The auditor conducting an audit or review must, as soon as possible, notify ASIC in writing if the auditor:

                     (a)  has reasonable grounds to suspect that a contravention of this Law has occurred; and

                     (b)  believes that the contravention has not been or will not be adequately dealt with by commenting on it in the auditor’s report or bringing it to the attention of the directors.

Note:          Section 1289 gives an auditor qualified privilege for a notification to ASIC under this section.

312  Assisting auditor

                   An officer of a company, registered scheme or disclosing entity must:

                     (a)  allow the auditor access to the books of the company, scheme or entity; and

                     (b)  give the auditor any information, explanation or assistance required under section 310.

Note:          Books include registers and documents generally (not only the accounting “books”): see the definition of books in section 9.

313  Special provisions on audit of debenture issuers and guarantors

Auditor to give trustee for debenture holders copies of reports, certificates etc.

             (1)  The auditor of a borrower in relation to debentures must give the trustee for debenture holders:

                     (a)  a copy of any report, certificate or other document that the auditor must give the borrower or its members under this Law, the debentures or the trust deed; and

                     (b)  a copy of any document that accompanies it.

The copies must be given within 7 days after the auditor gives the originals to the borrower or its members.

Auditor to report on matters prejudicial to debenture holders’ interests

             (2)  The auditor of a borrower, or guarantor, in relation to debentures must give the borrower or guarantor a written report about any matter that:

                     (a)  the auditor became aware of in conducting the audit or review; and

                     (b)  in the auditor’s opinion, is or is likely to be prejudicial to the interests of debenture holders; and

                     (c)  in the auditor’s opinion, is relevant to the exercise of the powers of the trustee for debenture holders, or the performance of the trustee’s duties, under this Law or the trust deed.

The auditor must give a copy of the report to the trustee for debenture holders. The report and the copy must be given within 7 days after the auditor becomes aware of the matter.


 

Division 4Annual financial reporting to members

314  Annual financial reporting to members

Full or concise report to members

             (1)  A company, registered scheme or disclosing entity must report to members for a financial year by either:

                     (a)  sending members copies of:

                              (i)  the financial report for the year; and

                             (ii)  the directors’ report for the year (see sections 298-300); and

                            (iii)  the auditor’s report on the financial report; or

                     (b)  sending members a concise report for the year that complies with subsection (2).

Concise report

             (2)  A concise report for a financial year consists of:

                     (a)  a concise financial report for the year drawn up in accordance with accounting standards made for the purposes of this paragraph; and

                     (b)  the directors’ report for the year (see sections 298-300); and

                     (c)  a statement by the auditor:

                              (i)  that the financial report has been audited; and

                             (ii)  whether, in the auditor’s opinion, the concise financial report complies with the accounting standards made for the purposes of paragraph (a); and

                     (d)  a copy of any qualification in, and of any statements included in the emphasis of matter section of, the auditor’s report on the financial report; and

                     (e)  a statement that the report is a concise report and that the full financial report and auditor’s report will be sent to the member free of charge if the member asks for them.

             (3)  If the accounting standards made for the purposes of paragraph (2)(a) require a discussion and analysis to be included in a concise financial report:

                     (a)  the auditor must report on whether the discussion and analysis complies with the requirements that the accounting standards lay down for the discussion and analysis; and

                     (b)  the auditor does not otherwise need to audit the statements made in the discussion and analysis.

315  Deadline for reporting to members

Public companies and disclosing entities that are not registered schemes

             (1)  A public company, or a disclosing entity that is not a registered scheme, must report to members under section 314 by the earlier of:

                     (a)  21 days before the next AGM after the end of the financial year; or

                     (b)  4 months after the end of the financial year.

Note:          For the deadline for holding an AGM, see section 250N.

Small proprietary companies (shareholder direction under section 293)

             (2)  If a shareholder direction is given to a small proprietary company under section 293 after the end of the financial year, the company must report to members under section 314 by the later of:

                     (a)  2 months after the date on which the direction is given; and

                     (b)  4 months after the end of the financial year.

Registered schemes

             (3)  A registered scheme must report to members under section 314 within 3 months after the end of the financial year.

Other proprietary companies

             (4)  A proprietary company that is not covered by subsection (1) or (2) must report to members under section 314 within 4 months after the end of the financial year.

316  Member’s choices for annual financial information

             (1)  A member may request the company, registered scheme or disclosing entity:

                     (a)  not to send them the material required by section 314; or

                     (b)  to send them a full financial report and the directors’ report and auditor’s report.

A request may be a standing request or for a particular financial year. The member is not entitled to a report for a financial year earlier than the one before the financial year in which the request is made.

             (2)  The time for complying with a request under paragraph (1)(b) is:

                     (a)  7 days after the request is received; or

                     (b)  the deadline for reporting under section 315;

whichever is later.

             (3)  A full financial report, directors’ report and auditor’s report are to be sent free of charge unless the member has already received a copy of them free of charge.

317  Consideration of reports at AGM

                   The directors of a public company that is required to hold an AGM must lay before the AGM:

                     (a)  the financial report; and

                     (b)  the directors’ report; and

                     (c)  the auditor’s report;

for the last financial year that ended before the AGM.

Note 1:       If the company’s first AGM is held before the end of its first financial year, there will be no reports to lay before the meeting.

Note 2:       A public company that has only 1 member is not required to hold an AGM (see section 250N).

318  Additional reporting by debenture issuers

             (1)  A company or disclosing entity that was a borrower in relation to debentures at the end of a financial year must give a copy of the annual financial report, directors’ report and auditor’s report to the trustee for debenture holders by the deadline for the financial year set by section 315.

             (2)  A debenture holder may ask the company or disclosing entity that issued the debenture for copies of:

                     (a)  the last reports sent to members under section 314; or

                     (b)  the full financial report and the directors’ report and auditor’s report for the last financial year.

             (3)  The company or entity must give the debenture holder the copies as soon as practicable after the request and free of charge.

             (4)  A disclosing entity that was a borrower in relation to debentures at the end of a half-year must give a copy of the half-year financial report, directors’ report and auditor’s report to the trustee for debenture holders within 75 days after the end of the half-year.


 

Division 5Lodging reports with ASIC

319  Lodgment of annual reports with ASIC [see Note 2]

             (1)  A company, registered scheme or disclosing entity that has to prepare or obtain a report for a financial year under Division 1 must lodge the report with ASIC. This obligation extends to a concise report sent to members under section 314.

             (2)  Subsection (1) does not apply to a small proprietary company that prepares a report in response to a shareholder direction under section 293 or an ASC direction under section 294.

             (3)  The time for lodgment is:

                     (a)  within 3 months after the end of the financial year for a disclosing entity or registered scheme; and

                     (b)  within 4 months after the end of the financial year for anyone else.

             (4)  Subsection (1) does not apply to a large proprietary company that is not a disclosing entity if:

                     (a)  the company was an exempt proprietary company on 30 June 1994; and

                     (b)  the company has continued to meet the definition of exempt proprietary company (as in force at 30 June 1994) at all times since that date; and

                     (c)  the company was a large proprietary company at the end of the first financial year that ended after 9 December 1995; and

                     (d)  the company’s financial statements and financial reports for the financial year ending during 1993 and each later financial year have been audited before the deadline for reporting to members for that year; and

                     (e)  within 4 months after the end of the first financial year that ended after 9 December 1995, the company lodged with ASIC a notice that the company wanted subsection 317B(3), as in force at that time, to apply to the company. (ASIC may extend this period.)

Note:          9 December 1995 is the day on which the First Corporate Law Simplification Act 1995 commenced.

             (5)  A company that has the benefit of subsection (4) must lodge with ASIC notice of any of the following events:

                     (a)  the resignation or retirement of the company’s auditor

                     (b)  the appointment of a new auditor (including details of the new auditor).

The notice must be lodged within 14 days after the resignation, retirement or appointment.

             (6)  For the purposes of paragraph (4)(d), the deadline for reporting to members is:

                     (a)  for a financial year to which this Part applies—the deadline for reporting to members under section 315; and

                     (b)  for an earlier financial year—the deadline for that year within the meaning of this Law as in force immediately before the commencement of this Part.

320  Lodgment of half-year reports with ASIC

                   A disclosing entity that has to prepare or obtain a report for a half‑year under Division 2 must lodge the report with ASIC within 75 days after the end of the half-year.

321  ASC power to require lodgment

             (1)  ASIC may give a company, registered scheme or disclosing entity a direction to lodge with ASIC a copy of reports prepared or obtained by it under Division 1 or 2.

             (2)  The direction must:

                     (a)  be made in writing; and

                     (b)  specify the period or periods concerned; and

                     (c)  be made no later than 6 years after the end of the period or periods; and

                     (d)  specify the date by which the documents have to be lodged.

The date specified under paragraph (d) must be at least 14 days after the date on which the direction is given.

322  Relodgment if financial statements or directors’ reports amended after lodgment

             (1)  If a financial report or directors’ report is amended after it is lodged with ASIC, the company, registered scheme or disclosing entity must:

                     (a)  lodge the amended report with ASIC within 14 days after the amendment; and

                     (b)  give a copy of the amended report free of charge to any member who asks for it.

             (2)  If the amendment is a material one, the company, registered scheme or disclosing entity must also notify members as soon as practicable of:

                     (a)  the nature of the amendment; and

                     (b)  their right to obtain a copy of the amended report under subsection (1).


 

Division 6Special provisions about consolidated financial statements

323  Directors and officers of controlled entity to give information

                   If a company, registered scheme or disclosing entity has to prepare consolidated financial statements, a director or officer of a controlled entity must give the company, registered scheme or disclosing entity all information requested that is necessary to prepare the consolidated financial statements and the notes to those statements.

323A  Auditor’s power to obtain information from controlled entity

             (1)  An auditor who audits or reviews a financial report that includes consolidated financial statements:

                     (a)  has a right of access at all reasonable times to the books of any controlled entity; and

                     (b)  may require any officer of the entity to give the auditor information, explanations or other assistance for the purposes of the audit or review.

A request under paragraph (b) must be a reasonable one.

             (2)  The information, explanations or other assistance required under paragraph (1)(b) is to be given at the expense of the company, registered scheme or disclosing entity whose financial report is being audited or reviewed.

323B  Controlled entity to assist auditor

                   If a company, registered scheme or disclosing entity has to prepare a financial report that includes consolidated financial statements, an officer or auditor of a controlled entity must:

                     (a)  allow the auditor for the company, scheme or entity access to the controlled entity’s books; and

                     (b)  give the auditor any information, explanation or assistance required under section 323A.

323C  Application of Division to entity that has ceased to be controlled

                   Sections 323, 323A and 323B apply to the preparation or audit of a financial report that covers a controlled entity even if the entity is no longer controlled by the company, registered scheme or disclosing entity whose financial report is being prepared or audited.


 

Division 7Financial years and half-years

323D  Financial years and half-years

First financial year

             (1)  The first financial year for a company, registered scheme or disclosing entity starts on the day on which it is registered or incorporated. It lasts for 12 months or the period (not longer than 18 months) determined by the directors.

Financial years after first year

             (2)  Subject to subsection (4), subsequent financial years must:

                     (a)  start at the end of the previous financial year; and

                     (b)  be 12 months long.

The directors may determine that the financial year is to be shorter or longer (but not by more than 7 days).

Synchronisation of financial years where consolidated financial statements are required

             (3)  A company, registered scheme or disclosing entity that has to prepare consolidated financial statements must do whatever is necessary to ensure that the financial years of the consolidated entities are synchronised with its own financial years. It must achieve this synchronisation by the end of 12 months after the situation that calls for consolidation arises.

             (4)  To facilitate this synchronisation, the financial year for a controlled entity may be extended or shortened. The extended financial year cannot be longer than 18 months.

Half-years

             (5)  A half-year for a company, registered scheme or disclosing entity is the first 6 months of a financial year. The directors may determine that the half-year is to be shorter or longer (but not by more than 7 days).


 

Division 8Disclosure by listed companies of information filed overseas

323DA  Listed companies to disclose information filed overseas

             (1)  A company that discloses information to, or as required by:

                     (a)  the Securities and Exchange Commission of the United States of America; or

                     (b)  the New York Stock Exchange; or

                     (c)  a prescribed securities exchange in a foreign country;

must disclose that information in English to the Exchange on the next business day after doing so.

             (2)  This section applies only to a company that is:

                     (a)  incorporated in Australia; and

                     (b)  included in an official list of the Exchange.

             (3)  This section applies despite anything in the company’s constitution.


 

Part 2M.4Appointment and removal of auditors

Division 1Companies

324  Qualifications of auditors

             (1)  Subject to this section, a person shall not:

                     (a)  consent to be appointed as auditor of a company;

                     (b)  act as auditor of a company; or

                     (c)  prepare a report required by this Law to be prepared by a registered company auditor or by an auditor of a company;

if:

                     (d)  the person is not a registered company auditor;

                     (e)  the person, or a body corporate in which the person has a substantial holding, owes more than $5,000 to the company, to a related body corporate or to an entity that the company controls; or

                      (f)  except where the company is a proprietary company, the person:

                              (i)  is an officer of the company;

                             (ii)  is a partner, employer or employee of an officer of the company; or

                            (iii)  is a partner or employee of an employee of an officer of the company.

             (2)  Subject to this section, a firm shall not:

                     (a)  consent to be appointed as auditor of a company;

                     (b)  act as auditor of a company; or

                     (c)  prepare a report required by this Law to be prepared by a registered company auditor or by an auditor of a company;

unless:

                     (d)  at least 1 member of the firm is a registered company auditor who is ordinarily resident in Australia;

                     (e)  the business name under which the firm is carrying on business is registered under a law of a State or Territory relating to the registration of business names or a return in the prescribed form has been lodged showing, in relation to each member of the firm, the member’s full name and address as at the time when the firm so consents, acts or prepares a report;

                      (f)  no member of the firm, and no body corporate in which a member of the firm has a substantial holding, owes more than $5,000 to the company, to a related body corporate or to an entity that the company controls;

                     (g)  except where the company is a proprietary company, no member of the firm is:

                              (i)  an officer of the company;

                             (ii)  a partner, employer or employee of an officer of the company; or

                            (iii)  a partner or employee of an employee of an officer of the company; and

                     (h)  except where the company is a proprietary company, no officer of the company receives any remuneration from the firm for acting as a consultant to it on accounting or auditing matters.

             (3)  For the purposes of paragraphs (1)(e) and (2)(f), disregard a debt owed by a natural person to a body corporate or entity if:

                     (a)  the body corporate or entity is:

                              (i)  an Australian ADI; or

                             (ii)  a body corporate registered under the Life Insurance Act 1995; and

                     (b)  the debt arose because of a loan that the body corporate or entity made to the person in the ordinary course of its ordinary business; and

                     (c)  the person used the amount of the loan to pay the whole or part of the purchase price of premises that the person uses as their principal place of residence.

             (4)  For the purposes of subsections (1) and (2), a person shall be deemed to be an officer of a company if:

                     (a)  the person is an officer of a related body corporate or of an entity that the company controls; or

                     (b)  except where the Commission, if it thinks fit in the circumstances of the case, directs that this paragraph shall not apply in relation to the person in relation to the company—the person has, at any time within the immediately preceding period of 12 months, been an officer or promoter of the company, of a related body corporate or of an entity that the company controlled at that time.

             (5)  For the purposes of this section, a person shall not be taken to be an officer of a company by reason only of being or having been the liquidator of that company, of a related body corporate or of an entity that that company controls or has controlled.

             (6)  For the purposes of this section, a person is not taken to be an officer of a company merely because of one or more of the following:

                     (a)  having been appointed as auditor of the company, of a related body corporate or of an entity that the company controls or has controlled;

                     (b)  having been appointed, for any purpose relating to taxation, as public officer of a body corporate, an unincorporated body or a trust estate;

                     (c)  being or having been authorised to accept, on behalf of the company, a related body corporate or an entity that the company controls or has controlled, service of process or notices.

             (7)  The appointment of a firm as auditor of a company shall be deemed to be an appointment of all persons who are members of the firm and are registered company auditors, whether resident in Australia or not, at the date of the appointment.

             (8)  Where a firm that has been appointed as auditor of a company is reconstituted by reason of the death, retirement or withdrawal of a member or members or by reason of the admission of a new member or new members, or both:

                     (a)  a person who was deemed under subsection (7) to be an auditor of the company and who has so retired or withdrawn from the firm as previously constituted shall be deemed to have resigned as auditor of the company as from the day of his or her retirement or withdrawal but, unless that person was the only member of the firm who was a registered company auditor and, after the retirement or withdrawal of that person, there is no member of the firm who is a registered company auditor, section 329 does not apply to that resignation;

                     (b)  a person who is a registered company auditor and who is so admitted to the firm shall be deemed to have been appointed as an auditor of the company as from the day of his or her admission; and

                     (c)  the reconstitution of the firm does not affect the appointment of the continuing members of the firm who are registered company auditors as auditors of the company;

but nothing in this subsection affects the operation of subsection (2).

             (9)  Except as provided by subsection (8), the appointment of the members of a firm as auditors of a company that is deemed by subsection (7) to have been made by reason of the appointment of the firm as auditor of the company is not affected by the dissolution of the firm.

           (10)  A report or notice that purports to be made or given by a firm appointed as auditor of a company shall not be taken to be duly made or given unless it is signed in the firm name and in his or her own name by a member of the firm who is a registered company auditor.

           (11)  Without limiting the generality of section 1311, if, in contravention of this section, a firm consents to be appointed, or acts as, auditor of a company or prepares a report required by this Law to be prepared by an auditor of a company, each member of the firm is guilty of an offence.

           (12)  Where it is, in the opinion of the Commission, impracticable for a proprietary company to obtain the services of a registered company auditor as auditor of the company by reason of the place where the company carries on business, a person who is, in the opinion of the Commission, suitably qualified or experienced and is approved by the Commission for the purposes of this Law in relation to the audit of the company’s financial reports may be appointed as auditor of the company, subject to such terms and conditions as are specified in the approval.

           (13)  A person appointed in accordance with subsection (12) shall, in relation to the auditing of the company’s financial reports (if any), but subject to the terms and conditions of the approval under that subsection, be deemed to be a registered company auditor and the provisions of this Law shall, with the necessary modifications, apply in relation to the person accordingly.

           (14)  Where a person approved by the Commission under subsection (12) is acting as auditor of a company, the Commission may at any time, by notice in writing given to the company:

                     (a)  amend, revoke or vary the terms and conditions of its approval; or

                     (b)  terminate the appointment of that person as auditor of the company.

           (15)  A notice under subsection (14) terminating the appointment of a person as auditor of a company takes effect as if, on the date on which the notice is received by the company, the company had received from the person notice of the person’s resignation as auditor taking effect from that date.

           (16)  A person shall not:

                     (a)  if the person has been appointed auditor of a company—knowingly disqualify himself or herself while the appointment continues from acting as auditor of the company; or

                     (b)  if the person is a member of a firm that has been appointed auditor of a company—knowingly disqualify the firm while the appointment continues from acting as auditor of the company.

325  Appointment of auditor by proprietary company

                   The directors of a proprietary company may appoint an auditor for the company if an auditor has not been appointed by the company in general meeting.

327  Appointment of auditors

          (1A)  Only subsections (6) to (10) of this section apply to a proprietary company.

             (1)  Within 1 month after the day on which a company is incorporated, the directors of the company shall appoint, unless the company at a general meeting has appointed, a person or persons, a firm or firms, or a person or persons and a firm or firms, as auditor or auditors of the company.

             (2)  A person or firm appointed as auditor of a company under subsection (1) holds office, subject to this Part, until the first annual general meeting of the company.

             (3)  A company shall:

                     (a)  at its first annual general meeting appoint a person or persons, a firm or firms, or a person or persons and a firm or firms, as auditor or auditors of the company; and

                     (b)  at each subsequent annual general meeting, if there is a vacancy in the office of auditor of the company, appoint a person or persons, a firm or firms, or a person or persons and a firm or firms, to fill the vacancy.

             (4)  A person or firm appointed as auditor under subsection (3) holds office until death or removal or resignation from office in accordance with section 329 or until ceasing to be capable of acting as auditor by reason of subsection 324(1) or (2).

             (5)  Within 1 month after a vacancy, other than a vacancy caused by the removal of an auditor from office, occurs in the office of auditor of the company, if there is no surviving or continuing auditor of the company, the directors shall, unless:

                     (a)  the company at a general meeting has appointed a person or persons, a firm or firms, or a person or persons and a firm or firms, to fill the vacancy;

appoint a person or persons, a firm or firms, or a person or persons and a firm or firms, to fill the vacancy.

             (6)  While a vacancy in the office of auditor continues, the surviving or continuing auditor or auditors (if any) may act.

             (7)  A company or the directors of a company shall not appoint a person or firm as auditor of the company unless that person or firm has, before the appointment, consented by notice in writing given to the company or to the directors to act as auditor and has not withdrawn his, her or its consent by notice in writing given to the company or to the directors.

             (8)  A notice under subsection (7) given by a firm shall be signed in the firm name and in his or her own name by a member of the firm who is a registered company auditor.

             (9)  If a company appoints a person or firm as auditor of a company in contravention of subsection (7), the purported appointment does not have any effect and the company and any officer of the company who is in default are each guilty of an offence.

           (10)  Where an auditor of a company is removed from office at a general meeting in accordance with section 329:

                     (a)  the company may at that meeting (without adjournment), by a resolution passed by a majority of not less than three-quarters of such members of the company as, being entitled so to do, vote in person or, where proxies are allowed, by proxy, forthwith appoint as auditor or auditors a person or persons, a firm or firms, or a person or persons and a firm or firms, to whom or which has been sent a copy of the notice of nomination in accordance with subsection 328(3); or

                     (b)  if such a resolution is not passed or, by reason only that such a copy of the notice of nomination has not been sent to a person, could not be passed, the meeting may be adjourned to a day not earlier than 20 days and not later than 30 days after the day of the meeting and the company may, at the adjourned meeting, by ordinary resolution appoint as auditor or auditors a person or persons, a firm or firms, or a person or persons and a firm or firms, notice of whose nomination for appointment as auditor has been received by the company from a member of the company at least 14 clear days before the day to which the meeting is adjourned.

           (11)  Where, after the removal from office of an auditor of a company, the company fails to appoint an auditor under subsection (10), the company shall, within the period of 7 days commencing on the day of the failure, give to the Commission notice of the failure, and, subject to subsection (12), the Commission:

                     (a)  in a case where the company, before the end of that period, gives to the Commission notice of the failure—shall, upon receiving the notice; or

                     (b)  in any other case:

                              (i)  may, at any time after the end of that period and before the Commission receives from the company notice of the failure; and

                             (ii)  if the company, after the end of that period, gives to the Commission notice of the failure—shall, upon receiving the notice;

appoint as auditor or auditors of the company a person or persons, a firm or firms, or a person or persons and a firm or firms, who or which consents or consent to be so appointed.

           (12)  Where, after the removal from office of an auditor of a company, the company fails to appoint an auditor under subsection (10), the Commission shall not appoint an auditor of the company under subsection (11):

                     (a)  in any case—if there is another auditor of the company whom the Commission believes to be able to carry out the responsibilities of auditor alone and who agrees to continue as auditor;

                     (c)  in a case where, at the end of the period of 7 days commencing on the day of the failure, the company has not given to the Commission notice of the failure—if the Commission has, at any time after the end of that period, already appointed an auditor of the company under subsection (11).

           (13)  Subject to subsection (11), if a company does not appoint an auditor when required by this Law to do so, the Commission may, on the application in writing of a member of the company, appoint as auditor or auditors of the company a person or persons, a firm or firms, or a person or persons and a firm or firms, who or which consents or consent to be so appointed.

           (14)  A person or firm appointed as auditor of a company under subsection (5), (10), (11) or (13) holds office, subject to this Part, until the next annual general meeting of the company.

           (15)  Notwithstanding subsection (4), a person or firm who holds the office of auditor of a company that begins to be controlled by a corporation must, unless the person or firm sooner vacates that office, retire at the annual general meeting of the company next held after it begins to be controlled by the corporation but, subject to this Part, is eligible for re-appointment.

           (16)  If a director of a company fails to take all reasonable steps to comply with, or to secure compliance with, subsection (1) or (5), he or she is guilty of an offence.

328  Nomination of auditors

             (1)  Subject to this section, a company is not entitled to appoint a person or a firm as auditor of the company at its annual general meeting, not being a meeting at which an auditor is removed from office, unless notice in writing of his, her or its nomination as auditor was given to the company by a member of the company:

                     (a)  before the meeting was convened; or

                     (b)  not less than 21 days before the meeting.

             (2)  If a company purports to appoint a person or firm as auditor of the company in contravention of subsection (1), the purported appointment is of no effect and the company and any officer of the company who is in default are each guilty of an offence.

             (3)  Where notice of nomination of a person or firm for appointment as auditor of a company is received by the company, whether for appointment at a meeting or an adjourned meeting referred to in subsection 327(10) or at an annual general meeting, the company shall:

                     (a)  not less than 7 days before the meeting; or

                     (b)  at the time notice of the meeting is given;

send a copy of the notice of nomination to each person or firm nominated, to each auditor of the company and to each person entitled to receive notice of general meetings of the company.

329  Removal and resignation of auditors

             (1)  An auditor of a company may be removed from office by resolution of the company at a general meeting of which notice under subsection (1A) has been given, but not otherwise.

          (1A)  Notice of intention to move the resolution must be given to the company at least 2 months before the meeting is to be held. However, if the company calls a meeting after the notice of intention is given under this subsection, the meeting may pass the resolution even though the meeting is held less than 2 months after the notice of intention is given.

Note:          Short notice of the meeting cannot be given for this resolution (see subsection 249H(4)).

             (2)  Where notice under subsection (1A) of a resolution to remove an auditor is received by a company, it shall as soon as possible send a copy of the notice to the auditor and lodge a copy of the notice.

             (3)  Within 7 days after receiving a copy of the notice, the auditor may make representations in writing, not exceeding a reasonable length, to the company and request that, before the meeting at which the resolution is to be considered, a copy of the representations be sent by the company at its expense to every member of the company to whom notice of the meeting is sent.

             (4)  Unless the Commission on the application of the company otherwise orders, the company shall send a copy of the representations in accordance with the auditor’s request, and the auditor may, without prejudice to his or her right to be heard orally or, where a firm is the auditor, to have a member of the firm heard orally on its behalf, require that the representations be read out at the meeting.

             (5)  An auditor of a company may, by notice in writing given to the company, resign as auditor of the company if:

                     (a)  the auditor has, by notice in writing given to the Commission, applied for consent to the resignation and stated the reasons for the application and, at or about the same time as the notice was given to the Commission, notified the company in writing of the application to the Commission; and

                     (b)  the consent of the Commission has been given.

             (6)  The Commission shall, as soon as practicable after receiving a notice from an auditor under subsection (5), notify the auditor and the company whether it consents to the resignation of the auditor.

             (7)  A statement made by an auditor in an application to the Commission under subsection (5) or in answer to an inquiry by the Commission relating to the reasons for the application:

                     (a)  is not admissible in evidence in any civil or criminal proceedings against the auditor; and

                     (b)  may not be made the ground of a prosecution, action or suit against the auditor;

and a certificate by the Commission that the statement was made in the application or in the answer to the inquiry by the Commission is conclusive evidence that the statement was so made.

             (8)  Subject to subsection (9), the resignation of an auditor takes effect:

                     (a)  on the day (if any) specified for the purpose in the notice of resignation;

                     (b)  on the day on which the Commission gives its consent to the resignation; or

                     (c)  on the day (if any) fixed by the Commission for the purpose;

whichever last occurs.

             (9)  The resignation of an auditor of a proprietary company does not require the consent of the Commission under subsection (5), and takes effect:

                     (a)  on the day (if any) specified for the purpose in the notice of resignation; or

                     (b)  on the day on which the notice is received by the company;

whichever is the later.

           (10)  Where on the retirement or withdrawal from a firm of a member the firm will no longer be capable, by reason of the provisions of paragraph 324(2)(d) of acting as auditor of a company, the member so retiring or withdrawing shall (if not disqualified from acting as auditor of the company) be deemed to be the auditor of the company until he or she obtains the consent of the Commission to his or her retirement or withdrawal.

           (11)  Within 14 days after:

                     (a)  the removal from office of an auditor of a company; or

                     (b)  the receipt of a notice of resignation from an auditor of a company;

the company shall:

                     (c)  lodge with the Commission a notice of the removal or resignation in the prescribed form; and

                     (d)  where there is a trustee for the holders of debentures of the company—give to the trustee a copy of the notice lodged with the Commission.

330  Effect of winding up on office of auditor

                   An auditor of a company ceases to hold office if:

                     (a)  a special resolution is passed for the voluntary winding up of the company; or

                     (b)  in a case to which paragraph (a) does not apply an order is made by the Court for the winding up of the company.

331  Fees and expenses of auditors

                   The reasonable fees and expenses of an auditor of a company are payable by the company.


 

Division 2Registered schemes

331AA  Qualifications of auditors

             (1)  Subject to this section, a person must not:

                     (a)  consent to be appointed as auditor of a registered scheme; or

                     (b)  act as auditor of a registered scheme; or

                     (c)  prepare a report required by this Law to be prepared by a registered company auditor or by an auditor of a registered scheme;

if:

                     (d)  the person is not a registered company auditor; or

                     (e)  the person, or a body corporate in which the person has a substantial holding, owes more than $5,000 to the scheme’s responsible entity, to a related body corporate or to an entity that the responsible entity controls; or

                      (f)  the person:

                              (i)  is an officer of the responsible entity; or

                             (ii)  is a partner, employer or employee of an officer of the responsible entity; or

                            (iii)  is a partner or employee of an employee of an officer of the responsible entity.

             (2)  Subject to this section, a firm must not:

                     (a)  consent to be appointed as auditor of a registered scheme; or

                     (b)  act as auditor of a registered scheme; or

                     (c)  prepare a report required by this Law to be prepared by a registered company auditor or by an auditor of a registered scheme;

unless:

                     (d)  at least 1 member of the firm is a registered company auditor who is ordinarily resident in Australia; and

                     (e)  the business name under which the firm is carrying on business is registered under a law of a State or Territory relating to the registration of business names or a return in the prescribed form has been lodged showing, in relation to each member of the firm, the member’s full name and address as at the time when the firm so consents, acts or prepares a report; and

                      (f)  no member of the firm, and no body corporate in which a member of the firm has a substantial holding, owes more than $5,000 to the scheme’s responsible entity or to an entity that the responsible entity controls; and

                     (g)  no member of the firm is:

                              (i)  an officer of the responsible entity; or

                             (ii)  a partner, employer or employee of an officer of the responsible entity; or

                            (iii)  a partner or employee of an employee of an officer of the responsible entity; and

                     (h)  no officer of the responsible entity receives any remuneration from the firm for acting as a consultant to it on accounting or auditing matters.

             (3)  Subsections 324(3), (4), (5) and (6) apply in relation to a registered scheme as if:

                     (a)  those subsections were part of this section; and

                     (b)  references in those subsections to a company were instead references to the registered scheme’s responsible entity.

             (4)  Subsections 324(7), (8), (9), (10), (11) and (16) apply in relation to a registered scheme as if:

                     (a)  those subsections were part of this subsection; and

                     (b)  references in those subsections to a company were instead references to the registered scheme.

331AB  Appointment of auditors

             (1)  Within 1 month after the day on which a registered scheme is registered, the responsible entity must appoint a person or persons, a firm or firms, or a person or persons and a firm or firms, as auditor or auditors of the scheme.

             (2)  Within 1 month after a vacancy occurs in the office of auditor of a registered scheme, if there is no surviving or continuing auditor of the scheme, the responsible entity must appoint a person or persons, a firm or firms, or a person or persons and a firm or firms, to fill the vacancy.

             (3)  While a vacancy in the office of auditor of a registered scheme continues, the surviving or continuing auditor or auditors (if any) may act.

             (4)  The responsible entity of a registered scheme must not appoint a person or firm as auditor of the scheme unless that person or firm has, before the appointment, consented to act as auditor by notice in writing given to the responsible entity and has not withdrawn that consent by notice in writing given to the responsible entity.

             (5)  A notice given by a firm under subsection (4) is to be signed by a member of the firm who is a registered company auditor:

                     (a)  in the firm’s name; and

                     (b)  in the member’s name.

             (6)  If the responsible entity of a registered scheme appoints a person or firm as auditor of the scheme in contravention of subsection (4), the purported appointment does not have any effect and the responsible entity, and any officer of the responsible entity who is in default, are each guilty of an offence.

             (7)  If the responsible entity of a registered scheme does not appoint an auditor when required by this Law to do so, ASIC may, on application in writing by a member of the scheme, appoint as auditor or auditors of the scheme a person or persons, a firm or firms, or a person or persons and a firm or firms. An appointment can only be made with the consent of the person or firm concerned.

             (8)  If a director of the responsible entity of a registered scheme fails to take all reasonable steps to secure compliance with subsection (1) or (2), the director is guilty of an offence.

331AC  Removal and resignation of auditors

             (1)  The responsible entity of a registered scheme may, with ASIC’s consent, remove the auditor of the scheme from office.

             (2)  An auditor of a registered scheme may, by notice in writing given to the responsible entity, resign as auditor of the scheme if:

                     (a)  the auditor:

                              (i)  has, by notice in writing given to ASIC, applied for consent to the resignation and stated the reasons for the application; and

                             (ii)  has, at or about the same time as giving the notice to ASIC, given the responsible entity notice in writing of the application to ASIC; and

                     (b)  ASIC has given its consent.

             (3)  As soon as practicable after ASIC receives a notice from an auditor under subsection (2), ASIC must notify the auditor, and the responsible entity of the registered scheme, whether it consents to the resignation.

             (4)  A statement made by an auditor in an application to ASIC under subsection (2) or in answer to an inquiry by ASIC relating to the reasons for the application:

                     (a)  is not admissible in evidence in any civil or criminal proceedings against the auditor; and

                     (b)  must not be made the ground of a prosecution, action or suit against the auditor.

A certificate by the ASIC that the statement was made in the application or in answer to the inquiry by ASIC is conclusive evidence that the statement was so made.

             (5)  The resignation of an auditor takes effect:

                     (a)  on the day (if any) specified for the purpose in the notice of resignation; or

                     (b)  on the day on which ASIC gives its consent to the resignation; or

                     (c)  on the day (if any) fixed by ASIC for the purpose;

whichever occurs last.

             (6)  If, on the retirement or withdrawal of a member of a firm, the firm will no longer be capable of acting as auditor of a registered scheme because of paragraph 331AA(2)(d), the member is (if not disqualified from acting as auditor of the scheme) taken to be the auditor of the scheme until he or she obtains the consent of ASIC to his or her retirement or withdrawal.

             (7)  Within 14 days after:

                     (a)  the removal from office of an auditor of a registered scheme; or

                     (b)  the receipt of a notice of resignation from an auditor of a registered scheme;

the responsible entity must lodge with ASIC a notice of the removal or resignation in the prescribed form.

331AD  Effect of winding up an office of auditor

                   An auditor of a registered scheme ceases to hold office if:

                     (a)  the scheme’s constitution provides that the scheme is to be wound up at a specified time, in specified circumstances or on the happening of a specified event, and that time is reached, those circumstances occur or that event occurs; or

                     (b)  the members pass a resolution directing the responsible entity to wind up the scheme; or

                     (c)  the Court makes an order directing the responsible entity to wind up the scheme; or

                     (d)  the members pass a resolution to remove the responsible entity but do not, at the same meeting, pass a resolution choosing a company to be the new responsible entity that consents to becoming the scheme’s responsible entity.

331AE  Fees and expenses of auditors

                   The reasonable fees and expenses of an auditor of a registered scheme are payable by the responsible entity.


 

Part 2M.5Accounting standards

  

334  Accounting standards

AASB’s power to make accounting standards

             (1)  The AASB may make accounting standards for the purposes of this Law. The standards must be in writing and must not be inconsistent with this law or the Regulations.

             (2)  Section 46A of the Acts Interpretation Act 1901 of the Commonwealth applies to a standard made under subsection (1) as if it were a disallowable instrument for the purposes of that section.

             (4)  An accounting standard applies to:

                     (a)  periods ending after the commencement of the standard; or

                     (b)  periods ending, or starting, on or after a later date specified in the standard.

             (5)  A company, registered scheme or disclosing entity may elect to apply the accounting standard to an earlier period unless the standard says otherwise. The election must be made in writing by the directors.

335  Equity accounting

                   This Chapter (and, in particular, the provisions on consolidation of financial statements) does not prevent accounting standards from incorporating equity accounting principles.

337  Interpretation of accounting standards

                   In interpreting an accounting standard, unless the contrary intention appears:

                     (a)  expressions used in the standard have the same meaning as they have in this Chapter; and

                     (b)  the provisions of Part 1.2 apply as if the standard’s provisions were provisions of this Chapter.

338  Severing invalid provisions

                   If an accounting standard would otherwise have been interpreted as being inconsistent with this Law, the standard is nevertheless to be valid to the extent to which it is not inconsistent with this Law.

339  Evidence of text of accounting standard [see Note 2]

             (1)  This section applies to a document that purports to be published by or on behalf of the AASB or ASC and to set out the text of:

                     (a)  a specified standard as in force at a specified time under section 334; or

                     (b)  a specified provision of a standard of that kind.

It also applies to a copy of a document of that kind.

             (2)  In the absence of evidence to the contrary, a document to which this section applies is proof in proceedings under the Corporations Law of this jurisdiction that:

                     (a)  the specified standard was in force at that time under that section; and

                     (b)  the text set out in the document is the text of the standard referred to in paragraph (1)(a) or the provision referred to in paragraph (1)(b).

 


 

Part 2M.6Exemptions and modifications

  

340  ASIC’s power to make specific exemption orders

             (1)  On an application made in accordance with subsection (3) in relation to a company, registered scheme or disclosing entity, ASIC may make an order in writing relieving any of the following from all or specified requirements of Parts 2M.2, 2M.3 and 2M.4:

                     (a)  the directors

                     (b)  the company, scheme or entity

                     (c)  the auditor.

Note:          For the criteria for making orders under this section, see section 342.

             (2)  The order may:

                     (a)  be expressed to be subject to conditions; and

                     (b)  be indefinite or limited to a specified period.

             (3)  The application must be:

                     (a)  authorised by a resolution of the directors; and

                     (b)  in writing and signed by a director; and

                     (c)  lodged with ASIC.

             (4)  ASIC must give the applicant written notice of the making, revocation or suspension of the order.

341  ASIC’s power to make class orders

             (1)  ASIC may make an order in writing in respect of a specified class of companies, registered schemes or disclosing entities, relieving any of the following from all or specified requirements of Parts 2M.2, 2M.3 and 2M.4:

                     (a)  directors

                     (b)  the companies, registered schemes or disclosing entities themselves

                     (c)  auditors of the companies, registered schemes or disclosing entities.

Note:          For the criteria for making orders under this section, see section 342.

             (2)  The order may:

                     (a)  be expressed to be subject to conditions; and

                     (b)  be indefinite or limited to a specified period.

             (3)  Notice of the making, revocation or suspension of the order must be published in the Gazette.

342  Criteria for specific exemption orders and class orders

             (1)  To make an order under section 340 or 341, ASIC must be satisfied that complying with the relevant requirements of Parts 2M.2, 2M.3 and 2M.4 would:

                     (a)  make the financial report or other reports misleading; or

                     (b)  be inappropriate in the circumstances; or

                     (c)  impose unreasonable burdens.

             (2)  In deciding for the purposes of subsection (1) whether the audit requirements for a proprietary company, or a class of proprietary companies, would impose an unreasonable burden on the company or companies, ASIC is to have regard to:

                     (a)  the expected costs of complying with the audit requirements; and

                     (b)  the expected benefits of having the company or companies comply with the audit requirements; and

                     (c)  any practical difficulties that the company or companies face in complying effectively with the audit requirements (in particular, any difficulties that arise because a financial year is the first one for which the audit requirements apply or because the company or companies are likely to move frequently between the small and large proprietary company categories from one financial year to another); and

                     (d)  any unusual aspects of the operation of the company or companies during the financial year concerned; and

                     (e)  any other matters that ASIC considers relevant.

             (3)  In assessing expected benefits under subsection (2), ASIC is to take account of:

                     (a)  the number of creditors and potential creditors; and

                     (b)  the position of creditors and potential creditors (in particular, their ability to independently obtain financial information about the company or companies); and

                     (c)  the nature and extent of the liabilities of the company or companies.

343  Modification by regulations

                   The regulations may modify the operation of this Chapter in relation to:

                     (a)  a specified company, registered scheme or disclosing entity; or

                     (b)  all companies, registered schemes or disclosing entities of a specified kind.

 


 

Part 2M.7Sanctions for contraventions of Chapter

  

344  Contravention of Part 2M.2 or 2M.3

             (1)  A director of a company, registered scheme or disclosing entity contravenes this section if they fail to take all reasonable steps to comply with, or to secure compliance with, Part 2M.2 or 2M.3.

Note:          This section is a civil penalty provision (see section 1317E).

             (2)  Subsection (1) does not apply to section 310, 312, 323A or 323B.

             (3)  This section does not affect the application of the provisions of Part 2M.2 or 2M.3 to a director as an officer a person commits an offence if they contravene subsection (1) and the contravention is dishonest.

 


 

Chapter 2NAnnual return and lodgments with ASIC

Part 2N.1Annual returns

  

345  Deadline for lodging annual return

Companies

             (1)  A company must lodge an annual return with the ASIC by 31 January each year, unless ASIC and the company agree to a different lodgment date (see subsection (3)).

Responsible entities of registered schemes

             (2)  The responsible entity of a registered scheme must lodge an annual return for the scheme with ASIC. The return for a scheme must be lodged within 3 months after the end of the scheme’s financial year unless ASIC and the responsible entity agree to a different lodgment date (see subsection (3)).

Agreed lodgment date

             (3)  ASIC and the company or ASIC and the responsible entity may agree to a different lodgment date. The agreement must be in writing and may cover 1 or more years. The annual return must be lodged by the agreed date.

Company’s obligation to lodge some notices ceases on lodgment of annual return

             (4)  A company’s obligation to lodge a notice under section 142, 146, 242 or 254X, ceases when:

                     (a)  the company lodges an annual return; and

                     (b)  the annual return sets out the information required by the notice.

This subsection does not affect the company’s liability for late lodgment fees incurred before the annual return is lodged or continuing offences committed before that time.

Note:          ASIC has a practice of sending out partly completed annual returns. The partly completed return may be used to comply with the obligation to lodge an annual return by correcting any information in it that is not accurate, completing the rest and lodging it with ASIC.

346  Solvency resolution—companies

             (1)  Within 1 month before the annual return is lodged, the directors of a company must resolve whether, in their opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

             (2)  Subsection (1) does not apply to a company that has lodged a financial report of the company with ASIC under Chapter 2M within 12 months before the annual return is lodged.

347  Lodging annual return with ASIC

                   An annual return may be lodged with ASIC:

                     (a)  in writing in the form approved by ASIC and signed in accordance with section 351; or

                     (b)  electronically in accordance with section 352.

348  Contents of annual return—companies [see Notes 2 and 5]

                   A company’s annual return must contain the information set out in the following table, current as at the date when the annual return is signed or authenticated. It must also contain any other information required by the regulations.

 

Contents of annual return—companies

[operative table]

1

ACN

 

2

name

 

3

address of registered office

 

4

address of principal place of business

 

5

each director and company secretary

name and address

date and place of birth.

The address must be the person’s usual residential address. However, if the person is entitled to have an alternative address under subsection 242AA(2), the annual return may contain that address.

6

issued shares

The classes into which the shares are divided and for each class of share issued:

• the number of shares in the class

• the total amount paid up for the class

• the total amount unpaid for the class.

7

options granted

The number of unissued shares in each class that are subject to options.

8

all members (if company has 20 or fewer members)

OR

the top 20 members in each class (if company has more than 20 members)

The requirement to list the top 20 members does not apply to a company limited only by guarantee.

the names and addresses of the members

If the company has a share capital:

the total number of shares in each class held by each of them

whether or not the shares are fully paid

unless the company is a listed corporation—whether or not the shares are beneficially owned.

If 2 or more members in the top 20 members in a class of shares each hold the same number of shares, the company must include the details set out above for each of them.

9

company solvency

Not necessary if company lodged a financial report with ASC within last 12 months.

Statement whether the directors have resolved within the last month under section 346 that, in their opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

10

ultimate holding company

name

either:

its ACN or ARBN if registered in Australia

OR

the place at which it was incorporated or formed if not registered in Australia.

Note:          If the details referred to in items 3, 4, 5 and 6 change after the annual return is lodged, the company must notify ASIC of the change (see section 142 (registered office), section 146 (principal place of business), section 242 (director and company secretary) and section 254X (issued shares)).

349  Contents of annual return—registered schemes [see Note 3]

                   An annual return for a registered scheme must contain the information set out in the following table, current as at the date when the annual return is signed or authenticated. It must also contain any other information required by the regulations.

 

Contents of annual return—registered schemes

[operative table]

1

registration number of scheme

 

2

name of scheme

 

3

name and ACN of the responsible entity

 

4

issued interests in a managed investment scheme

Only if the scheme is a        unit trust.

The classes into which the interests are divided and for each class of interest issued:

the number of interests in the class

the total amount paid up for the class

the total amount unpaid for the class.

5

issued interests in a managed investment scheme

Only if 4 does not apply.

a description of the nature of the interests (for example, interest in a limited partnership, right to participate in a timesharing scheme)

the number of those interests

the total amount paid for those interests

the total amount unpaid for those interests.

6

options granted

the number of unissued managed investment interests that are subject to options

for each of the classes of interests that is subject to options—the average exercise price.

7

all interest holders (if scheme has 20 or fewer interest holders)

OR

the top 20 interest holders in each class (if scheme has more than 20 interest holders)

the names and addresses of the interest holders

the total number of interests in each class held by each of them

whether or not the interests are fully paid.

If 2 or more interest holders in the top 20 interest holders in a class each hold the same number of interests, the responsible entity must include the details set out above for each of them.

 


 

Part 2N.2Lodgments with ASIC

  

350  Forms for documents to be lodged with ASIC

                   A document that this Law requires to be lodged with the ASIC in a prescribed form must be:

                     (a)  if a form for the document is prescribed in the regulations—in the prescribed form; or

                     (b)  if a form for the document is not prescribed in regulations but the ASIC has approved a form for the document—in the approved form.

351  Signing documents lodged with ASIC

             (1)  A document lodged with ASIC in writing by, or on behalf of, a corporation or a registered scheme must be signed by a director or secretary of the corporation or of the responsible entity of the registered scheme. If the corporation is a foreign company, it may be signed by:

                     (a)  its local agent; or

                     (b)  if the local agent is a corporation—a director or secretary of the agent.

             (2)  An individual who lodges a document with ASIC in writing must sign it.

             (3)  The person’s name must be printed next to the signature.

352  Documents lodged with ASIC electronically

             (1)  A document may be lodged with ASIC electronically only if:

                     (a)  ASIC and the person seeking to lodge it (either on their own behalf or as agent) have agreed, in writing, that it may be lodged electronically; or

                     (b)  ASIC has approved, in writing, the electronic lodgment of documents of that kind.

The document is taken to be lodged with ASIC if it is lodged in accordance with the agreement or approval (including any requirements of the agreement or approval as to authentication).

             (2)  Any agreement or approval must provide for a signed copy of the document to be held by the person lodging the document and for the person to make the signed copy of the document available to the ASIC if required.

 


 

Chapter 5External administration

Part 5.1Arrangements and reconstructions

  

410  Interpretation

                   A reference in this Part, in relation to a Part 5.1 body, to the directors is a reference to the directors of the body or any one or more of them.

411  Administration of compromises etc.

             (1)  Where a compromise or arrangement is proposed between a Part 5.1 body and its creditors or any class of them or between a Part 5.1 body and its members or any class of them, the Court may, on the application in a summary way of the body or of any creditor or member of the body, or, in the case of a body being wound up, of the liquidator, order a meeting or meetings of the creditors or class of creditors or of the members of the body or class of members to be convened in such manner, and to be held in such place or places (in this jurisdiction or elsewhere), as the Court directs and, where the Court makes such an order, the Court may approve the explanatory statement required by paragraph 412(1)(a) to accompany notices of the meeting or meetings.

          (1A)  Where:

                     (a)  a compromise or arrangement is proposed:

                              (i)  between 30 or more Part 5.1 bodies that are wholly-owned subsidiaries of a holding company and the creditors or a class of the creditors of each of those subsidiaries; and

                             (ii)  between the holding company and the creditors or a class of the creditors of the holding company; and

                     (b)  the proposed compromise or arrangement in relation to each subsidiary includes a term that orders will be sought under section 413 transferring the whole of the undertaking and of the property and liabilities of the subsidiary to the holding company; and

                     (c)  the Court is satisfied, on the application in a summary way:

                              (i)  of the holding company or of a creditor of the holding company; or

                             (ii)  if the holding company is being wound up—of the liquidator;

                            that the number of meetings that would be required between creditors in order to consider the proposed compromises or arrangements would be so great as to result in a significant impediment to the timely and effective consideration by those creditors of the terms of the compromises or arrangements;

the Court may order a meeting or meetings, on a consolidated basis, of the creditors of the holding company and of each of the subsidiaries or of such class or classes of those creditors as the Court determines and, where the Court makes such an order, the Court may approve the explanatory statement required by paragraph 412(1)(a) to accompany notices of the meeting or meetings.

          (1B)  Where:

                     (a)  there are fewer than 30 wholly-owned subsidiaries of the holding company but the matters referred to in paragraphs (1A)(b) and (c) are satisfied; and

                     (b)  the Court considers that circumstances exist that would justify its doing so;

the Court may make an order under subsection (1A) in relation to the proposed compromise or arrangement.

          (1C)  Where an order is made under subsection (1A) in relation to a proposed compromise or arrangement, the succeeding provisions of this Part apply to the compromise or arrangement as if:

                     (a)  references in this Part to a company included references to all of the Part 5.1 bodies to which the order relates; and

                     (b)  references in this Part to creditors of a company included references to the creditors of all the Part 5.1 bodies to which the order relates; and

                     (c)  references in this Part to a class of the creditors of a company were references to the relevant class of creditors of all of the Part 5.1 bodies to which the order relates.

             (2)  The Court shall not make an order pursuant to an application under subsection (1) or (1A) unless:

                     (a)  14 days notice of the hearing of the application, or such lesser period of notice as the Court or the Commission permits, has been given to the Commission; and

                     (b)  the Court is satisfied that the Commission has had a reasonable opportunity:

                              (i)  to examine the terms of the proposed compromise or arrangement to which the application relates and a draft explanatory statement relating to the proposed compromise or arrangement; and

                             (ii)  to make submissions to the Court in relation to the proposed compromise or arrangement and the draft explanatory statement.

             (3)  In subsection (2), draft explanatory statement, in relation to a proposed compromise or arrangement between a body and its creditors or any class of them or between a body and its members or any class of them, means a statement:

                     (a)  explaining the effect of the proposed compromise or arrangement and, in particular, stating any material interests of the directors of the body, whether as directors, as members or creditors of the body or otherwise, and the effect on those interests of the proposed compromise or arrangement in so far as that effect is different from the effect on the like interests of other persons; and

                     (b)  setting out such information as is prescribed and any other information that is material to the making of a decision by a creditor or member of the body whether or not to agree to the proposed compromise or arrangement, being information that is within the knowledge of the directors of the body and has not previously been disclosed to the creditors or members of the body.

          (3A)  In considering whether to make an order under subsection (1) or (1A) for a meeting to be held in another jurisdiction, the Court must have regard to where the creditors or members, or the creditors or members included in the class concerned, as the case requires, reside.

             (4)  A compromise or arrangement is binding on the creditors, or on a class of creditors, or on the members, or on a class of members, as the case may be, of the body and on the body or, if the body is in the course of being wound up, on the liquidator and contributories of the body, if, and only if:

                     (a)  at a meeting convened in accordance with an order of the Court under subsection (1) or (1A):

                              (i)  in the case of a compromise or arrangement between a body and its creditors or a class of creditors—the compromise or arrangement is agreed to by a majority in number of the creditors, or of the creditors included in that class of creditors, present and voting, either in person or by proxy, being a majority whose debts or claims against the company amount in the aggregate to at least 75% of the total amount of the debts and claims of the creditors present and voting in person or by proxy, or of the creditors included in that class present and voting in person or by proxy, as the case may be; and

                             (ii)  in the case of a compromise or arrangement between a body and its members or a class of members—a resolution in favour of the compromise or arrangement is:

                                        (A)  passed by a majority in number of the members, or members in that class, present and voting (either in person or by proxy); and

                                        (B)  if the body has a share capital—passed by 75% of the votes cast on the resolution; and

                     (b)  it is approved by order of the Court.

             (5)  Where the Court orders 2 or more meetings of creditors or of a class of creditors, or 2 or more meetings of members or of a class of members, to be held in relation to the proposed compromise or arrangement:

                     (a)  in the case of meetings of creditors—the meetings shall, for the purposes of subsection (4), be deemed together to constitute a single meeting and the votes in favour of the proposed compromise or arrangement cast at each of the meetings shall be aggregated, and the votes against the proposed compromise or arrangement cast at each of the meetings shall be aggregated, accordingly; or

                     (b)  in the case of meetings of members—the meetings shall, for the purposes of subsection (4), be deemed together to constitute a single meeting and the votes in favour of the proposed compromise or arrangement cast at each of the meetings shall be aggregated, and the votes against the proposed compromise or arrangement cast at each of the meetings shall be aggregated, accordingly.

             (6)  The Court may grant its approval to a compromise or arrangement subject to such alterations or conditions as it thinks just.

             (7)  Except with the leave of the Court, a person shall not be appointed to administer, and shall not administer, a compromise or arrangement approved under this Law between a body and its creditors or any class of them or between a body and its members or any class of them, whether by the terms of that compromise or arrangement or pursuant to a power given by the terms of a compromise or arrangement, if the person:

                     (a)  is a mortgagee of any property of the body;

                     (b)  is an auditor or an officer of the body;

                     (c)  is an officer of a body corporate that is a mortgagee of property of the body;

                     (d)  is not a registered liquidator;

                     (e)  is an officer of a body corporate related to the body; or

                      (f)  unless the Commission directs in writing that this paragraph does not apply in relation to the person in relation to the body—has at any time within the last 12 months been an officer or promoter of the body or of a related body corporate.

             (8)  Paragraph (7)(d) does not apply in relation to a body corporate authorised by or under a law of this jurisdiction to administer the compromise or arrangement concerned.

          (8A)  Subsection (7) does not disqualify a person from administering a compromise or arrangement under an appointment validly made before the commencement of this section.

             (9)  Where a person is or persons are appointed by, or under a power given by, the terms of a compromise or arrangement, to administer the compromise or arrangement:

                     (a)  section 425, subsections 427(2) and (4) and sections 428, 432 and 434 apply in relation to that person or those persons as if:

                              (i)  the appointment of the person or persons to administer the compromise or arrangement were an appointment of the person or persons as a receiver and manager, or as receivers and managers, of property of the body; and

                             (ii)  a reference in any of those sections or subsections to a receiver, or to a receiver of property, of a corporation were a reference to that person or to those persons; and

                     (b)  section 536 applies in relation to that person or those persons as if:

                              (i)  the appointment of the person or persons to administer the compromise or arrangement were an appointment of the person or persons as a liquidator of the body; and

                             (ii)  a reference in that section to a liquidator were a reference to that person or to those persons.

           (10)  An order of the Court made for the purposes of paragraph (4)(b) does not have any effect until an office copy of the order is lodged with the Commission, and upon being so lodged, the order takes effect, or shall be deemed to have taken effect, on and from the date of lodgment or such earlier date as the Court determines and specifies in the order.

           (11)  Subject to subsection (12), a copy of every order of the Court made for the purposes of paragraph (4)(b) shall be annexed to every copy of the constitution of the body issued after the order has been made.

           (12)  The Court may, by order, exempt a body from compliance with subsection (11) or determine the period during which the body shall comply with that subsection.

           (13)  Where a compromise or arrangement referred to in subsection (1) or (1A) (whether or not for the purposes of or in connection with a scheme for the reconstruction of a body or bodies or the amalgamation of any 2 or more bodies) has been proposed, the directors of the body shall:

                     (a)  if a meeting of the members of the body by resolution so directs—instruct such accountants or solicitors or both as are named in the resolution to report on the proposals and send their report or reports to the directors as soon as practicable; and

                     (b)  if a report or reports is or are obtained pursuant to paragraph (a)—make the report or reports available at the registered office of the body for inspection by the shareholders and creditors of the body at least 7 days before the day of the meeting ordered by the Court to be convened as provided in subsection (1) or (1A), as the case may be.

           (14)  If default is made in complying with subsection (11), the body contravenes this subsection.

           (15)  If default is made in complying with subsection (13), each director of the body contravenes this subsection.

           (16)  Where no order has been made or resolution passed for the winding up of a Part 5.1 body and a compromise or arrangement has been proposed between the body and its creditors or any class of them, the Court may, in addition to exercising any of its other powers, on the application in a summary way of the body or of any member or creditor of the body, restrain further proceedings in any action or other civil proceeding against the body except by leave of the Court and subject to such terms as the Court imposes.

           (17)  The Court shall not approve a compromise or arrangement under this section unless:

                     (a)  it is satisfied that the compromise or arrangement has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6; or

                     (b)  there is produced to the Court a statement in writing by the Commission stating that the Commission has no objection to the compromise or arrangement;

but the Court need not approve a compromise or arrangement merely because a statement by the Commission stating that the Commission has no objection to the compromise or arrangement has been produced to the Court as mentioned in paragraph (b).

412  Information as to compromise with creditors

             (1)  Where a meeting is convened under section 411, the body shall:

                     (a)  with every notice convening the meeting that is sent to a creditor or member, send a statement (in this section called the explanatory statement):

                              (i)  explaining the effect of the compromise or arrangement and, in particular, stating any material interests of the directors, whether as directors, as members or creditors of the body or otherwise, and the effect on those interests of the compromise or arrangement in so far as that effect is different from the effect on the like interests of other persons; and

                             (ii)  setting out such information as is prescribed and any other information that is material to the making of a decision by a creditor or member whether or not to agree to the compromise or arrangement, being information that is within the knowledge of the directors and has not previously been disclosed to the creditors or members; and

                     (b)  in every notice convening the meeting that is given by advertisement, include either a copy of the explanatory statement or a notification of the place at which and the manner in which creditors or members entitled to attend the meeting may obtain copies of the explanatory statement.

             (2)  In the case of a creditor whose debt does not exceed $200, paragraph (1)(a) does not apply unless the Court otherwise orders but the notice convening the meeting that is sent to such a creditor shall specify a place at which a copy of the explanatory statement can be obtained on request and, where the creditor makes such a request, the body shall as soon as practicable comply with the request.

             (3)  Where the compromise or arrangement affects the rights of debenture holders, the explanatory statement shall specify any material interests of the trustees for the debenture holders, whether as such trustees, as members or creditors of the body or otherwise, and the effect on those interests of the compromise or arrangement in so far as that effect is different from the effect on the like interests of other persons.

             (4)  Where a notice given by advertisement includes a notification that copies of the explanatory statement can be obtained in a particular manner, every creditor or member entitled to attend the meeting shall, on making application in that matter, be furnished by the body free of charge with a copy of the explanatory statement.

             (5)  Each person who is a director or trustee for debenture holders shall give notice to the body of such matters relating to the person as are required to be included in the explanatory statement.

             (6)  In the case of a compromise or arrangement that is not, or does not include, a compromise or arrangement between a Part 5.1 body and its creditors or any class of them, the body shall not send out an explanatory statement pursuant to subsection (1) unless a copy of that statement has been registered by the Commission.

             (7)  Where an explanatory statement sent out under subsection (1) is not required by subsection (6) to be registered by the Commission, the Court shall not make an order approving the compromise or arrangement unless it is satisfied that the Commission has had a reasonable opportunity to examine the explanatory statement and to make submissions to the Court in relation to that statement.

             (8)  Where a copy of an explanatory statement is lodged with the Commission for registration under subsection (6), the Commission shall not register the copy of the statement unless the statement appears to comply with this Law and the Commission is of the opinion that the statement does not contain any matter that is false in a material particular or materially misleading in the form or context in which it appears.

             (9)  Where a body contravenes this section, a person involved in the contravention contravenes this subsection.

           (10)  It is a defence to a prosecution for a contravention of this section if it is proved that the contravention was due to the failure of a person (other than the defendant), being a director of the body or a trustee for debenture holders of the body, to supply for the purposes of the explanatory statement particulars of the person’s interests.

413  Provisions for facilitating reconstruction and amalgamation of Part 5.1 bodies

             (1)  Where an application is made to the Court under this Part for the approval of a compromise or arrangement and it is shown to the Court that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of a Part 5.1 body or Part 5.1 bodies or the amalgamation of 2 or more Part 5.1 bodies and that, under the scheme, the whole or any part of the undertaking or of the property of a body concerned in the scheme (in this section called the transferor body) is to be transferred to a company (in this section called the transferee company), the Court may, either by the order approving the compromise or arrangement or by a later order, provide for all or any of the following matters:

                     (a)  the transfer to the transferee company of the whole or a part of the undertaking and of the property or liabilities of the transferor body;

                     (b)  the allotting or appropriation by the transferee company of shares, debentures, policies or other interests in that company that, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person;

                     (c)  the continuation by or against the transferee company of any legal proceedings pending by or against the transferor body;

                     (d)  if the transferor body is a company—the deregistration by ASIC, without winding up, of the transferor body;

                     (e)  the provision to be made for any persons who, within such time and in such manner as the Court directs, dissent from the compromise or arrangement;

                      (f)  the transfer or allotment of any interest in property to any person concerned in the compromise or arrangement;

                     (g)  such incidental, consequential and supplemental matters as are necessary to ensure that the reconstruction or amalgamation is fully and effectively carried out.

             (2)  Where an order made under this section provides for the transfer of property or liabilities, then, by virtue of the order, that property shall be transferred to and vest in, and those liabilities shall be transferred to and become the liabilities of, the transferee company, free, in the case of any particular property if the order so directs, from any charge that is, by virtue of the compromise or arrangement, to cease to have effect.

             (3)  Where an order is made under this section, each body to which the order relates shall, within 14 days after the making of the order, lodge with the Commission an office copy of the order.

             (4)  In this section:

liabilities includes duties of any description, including duties that are of a personal character or are incapable under the general law of being assigned or performed vicariously.

property includes rights and powers of any description, including rights and powers that are of a personal character and are incapable under the general law of being assigned or performed vicariously.

414  Acquisition of shares of shareholders dissenting from scheme or contract approved by majority

             (1)  In this section:

dissenting shareholder, in relation to a scheme or contract, means a shareholder who has not assented to the scheme or contract or who has failed to transfer his, her or its shares in accordance with the scheme or contract.

excluded shares, in relation to a scheme or contract involving a transfer to a person of shares in a class of shares in a company, means shares in that class that, when the offer relating to the scheme or contract is made, are held by:

                     (a)  in any case—the person or a nominee of the person; or

                     (b)  if the person is a body corporate—a subsidiary of the body.

             (2)  Where a scheme or contract (not being a scheme or contract arising out of the making of offers under a takeover bid) involving a transfer of shares in a class of shares in a company (in this section called the transferor company) to a person (in this section called the transferee) has, within 4 months after the making of the offer relating to the scheme or contract by the transferee, been approved by members holding shares in that class carrying at least 90% of the votes attached to shares in that class (other than excluded shares), the transferee may, within 2 months after the offer has been so approved, give notice as prescribed to a dissenting shareholder that the transferee wishes to acquire the shares held by that shareholder.

             (3)  Where such a notice is given, then, unless the Court orders otherwise on an application by a dissenting shareholder made within one month after the day on which the notice was given or within 14 days after a statement is supplied under subsection (7) to a dissenting shareholder, whichever is the later, the transferee is entitled and bound, subject to this section, to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders are to be transferred to the transferee.

             (4)  Where alternative terms were offered to the approving shareholders, the dissenting shareholder is entitled to elect not later than the end of one month after the date on which the notice is given under subsection (2) or 14 days after a statement is supplied under subsection (7), whichever is the later, which of those terms he, she or it prefers and, if he, she or it fails to make the election within the time allowed by this subsection, the transferee may, unless the Court otherwise orders, determine which of those terms is to apply to the acquisition of the shares of the dissenting shareholder.

             (5)  Despite subsections (3) and (4), if the number of votes attached to the excluded shares is more than 10% of the votes attached to the excluded shares and the shares (other than excluded shares) to be transferred under the scheme or contract, those subsections do not apply unless:

                     (a)  the transferee offers the same terms to all holders of the shares (other than excluded shares) to be transferred under the scheme or contract; and

                     (b)  the holders who approve the scheme or contract hold shares to which are attached at least 90% of the votes attached to the shares (other than excluded shares) to be transferred under the scheme or contract and are also at least 75% in number of the holders of those shares.

             (6)  For the purposes of paragraph (5)(b), 2 or more persons registered as holding shares jointly shall be counted as one person.

             (7)  When a notice is given under subsection (2), the dissenting shareholder may, by written notice given to the transferee within one month after the day on which the notice was given under subsection (2), ask for a statement in writing of the names and addresses of all other dissenting shareholders as shown in the register of members.

             (8)  Where a notice is given under subsection (7), the transferee shall comply with it.

             (9)  Where, under a scheme or contract referred to in subsection (2), the transferee becomes beneficially entitled to shares in the transferor company which, together with any other shares in the transferor company to which the transferee or, where the transferee is a body corporate, a body corporate related to the transferee is beneficially entitled, have attached to them at least 90% of the votes attached to the shares included in the class of shares concerned, then:

                     (a)  the transferee shall, within one month after the date on which he, she or it becomes beneficially entitled to those shares (unless in relation to the scheme or contract he, she or it has already complied with this requirement), give notice of the fact as prescribed to the holders of the remaining shares included in that class who, when the notice was given, had not assented to the scheme or contract or been given notice by the transferee under subsection (2); and

                     (b)  such a holder may, within 3 months after the giving of the notice to him, her or it by notice to the transferee, require the transferee to acquire his, her or its share and, where alternative terms were offered to the approving shareholders, elect which of those terms he, she or it will accept.

           (10)  Where a shareholder gives notice under paragraph (9)(b) with respect to his, her or its shares, the transferee is entitled and bound to acquire those shares:

                     (a)  on the terms on which under the scheme or contract the shares of the approving shareholders were transferred to him, her or it and, where alternative terms were offered to those shareholders, on the terms for which the shareholder has elected, or where he, she or it has not so elected, for whichever of the terms the transferee determines; or

                     (b)  on such other terms as are agreed or as the Court, on the application of the transferee or of the shareholder, thinks fit to order.

           (11)  Subsections (12) and (13) apply where a notice has been given under subsection (1) unless the Court, on an application made by the dissenting shareholder, orders to the contrary.

           (12)  The transferee shall, within 14 days after:

                     (a)  the end of one month after the day on which the notice was given;

                     (b)  the end of 14 days after a statement under subsection (7) is supplied; or

                     (c)  if an application has been made to the Court by a dissenting shareholder—the application is disposed of;

whichever last happens:

                     (d)  send a copy of the notice to the transferor company together with an instrument of transfer that relates to the shares that the transferee is entitled to acquire under this section and is executed, on the shareholder’s behalf, by a person appointed by the transferee and, on the transferee’s own behalf, by the transferee; and

                     (e)  pay, allot or transfer to the transferor company the consideration for the shares.

           (13)  When the transferee has complied with subsection (12), the transferor company shall register the transferee as the holder of the shares.

           (14)  All sums received by the transferor company under this section shall be paid into a separate bank account and those sums, and any other consideration so received, shall be held by that company in trust for the several persons entitled to the shares in respect of which they were respectively received.

           (15)  Where a sum or other property received by a company under this section or a corresponding previous law has been held in trust by the company for a person for at least 2 years (whether or not that period began before the commencement of this Part), the company shall, before the end of 10 years after the day on which the sum was paid, or the consideration was allotted or transferred, to the company, pay the sum or transfer the consideration, and any accretions to it and any property that may become substituted for it or for part of it, to the Commission to be dealt with under Part 9.7.

415  Notification of appointment of scheme manager and power of Court to require report

             (1)  Within 14 days after being appointed to administer a compromise or arrangement approved under this Part, a person shall lodge a notice in writing of the appointment.

             (2)  Where an application is made to the Court under this Part in relation to a proposed compromise or arrangement, the Court may:

                     (a)  before making any order on the application, require the Commission or another person specified by the Court to give to the Court a report as to the terms of the compromise or arrangement or of the scheme for the purposes of or in connection with which the compromise or arrangement has been proposed, the conduct of the officers of the body or bodies concerned and any other matters that, in the opinion of the Commission or that person, ought to be brought to the attention of the Court;

                     (b)  in deciding the application, have regard to anything contained in the report; and

                     (c)  make such order or orders as to the payment of the costs of preparing and giving the report as the Court thinks fit.

 415A  Enforcement of orders made in other jurisdictions

             (1)  Where:

                     (a)  the Federal Court makes an order under subsection 411(1) or (1A) of the Corporations Law of another jurisdiction; or

                     (b)  the Supreme Court of another jurisdiction makes an order under subsection 411(1) or (1A) of the Corporations Law of any jurisdiction; or

                     (c)  the Supreme Court of this jurisdiction makes an order under subsection 411(1) or (1A) of the Corporations Law of another jurisdiction;

the order has effect, and may be enforced in all respects, in this jurisdiction as if it were an order made under subsection 411(1) or (1A) of this Law, in relation to a Part 5.1 body, by:

                     (d)  if paragraph (a) applies—the Federal Court; or

                     (e)  if paragraph (b) or (c) applies—the Supreme Court of this jurisdiction.

             (2)  A compromise or arrangement that is binding on the creditors, or a class of creditors, of a body corporate because of subsection 411(4) of the Corporations Law of another jurisdiction is also binding on the creditors of the body, or the creditors in that class, whose debts are recoverable by action in a court of this jurisdiction.


 

Part 5.2Receivers, and other controllers, of property of corporations

  

416  Interpretation

                   In this Part, unless the contrary intention appears:

officer, in relation to a registered foreign company, includes a local agent of the foreign company.

property, in relation to a corporation, means property:

                     (a)  in the case of a company—within or outside Australia; or

                     (b)  in the case of a registered foreign company—within Australia or an external Territory; or

                     (c)  otherwise—within this jurisdiction.

receiver, in relation to property of a corporation, includes a receiver and manager.

417  Application of Part

                   Except so far as the contrary intention appears in this Part or Part 11.2, this Part applies in relation to a receiver of property of a corporation who is appointed after the commencement of this section, even if the appointment arose out of a transaction entered into, or an act or thing done, before that commencement.

418  Persons not to act as receivers

             (1)  A person is not qualified to be appointed, and shall not act, as receiver of property of a corporation if the person:

                     (a)  is a mortgagee of property of the corporation;

                     (b)  is an auditor or an officer of the corporation;

                     (c)  is an officer of a body corporate that is a mortgagee of property of the corporation;

                     (d)  is not a registered liquidator;

                     (e)  is an officer of a body corporate related to the corporation; or

                      (f)  unless the Commission directs in writing that this paragraph does not apply in relation to the person in relation to the corporation—has at any time within the last 12 months been an officer or promoter of the corporation or of a related body corporate.

             (2)  In subsection (1):

officer, in relation to a body corporate, does not include a receiver, appointed under an instrument whether before or after the commencement of this section, of property of the body.

             (3)  Paragraph (1)(d) does not apply in relation to a body corporate authorised by or under a law of the Commonwealth, of a State or of a Territory to act as receiver of property of the corporation concerned.

Note:          See section 1362CF for appointments made before the introduction of the Corporations Law.

418A  Court may declare whether controller is validly acting

             (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.

419  Liability of controller

             (1)  A receiver, or any other authorised person, who, whether as agent for the corporation concerned or not, enters into possession or assumes control of any property of a corporation for the purpose of enforcing any charge is, notwithstanding any agreement to the contrary, but without prejudice to the person’s rights against the corporation or any other person, liable for debts incurred by the person in the course of the receivership, possession or control for services rendered, goods purchased or property hired, leased, used or occupied.

             (2)  Subsection (1) does not constitute the person entitled to the charge a mortgagee in possession.

             (3)  Where:

                     (a)  a person (in this subsection called the controller) enters into possession or assumes control of property of a corporation;

                     (b)  the controller purports to have been properly appointed as a receiver in respect of that property under a power contained in an instrument, but has not been properly so appointed; and

                     (c)  civil proceedings in an Australian court arise out of an act alleged to have been done by the controller;

the court may, if it is satisfied that the controller believed on reasonable grounds that the controller had been properly so appointed, order that:

                     (d)  the controller be relieved in whole or in part of a liability that the controller has incurred but would not have incurred if the controller had been properly so appointed; and

                     (e)  a person who purported to appoint the controller as receiver be liable in respect of an act, matter or thing in so far as the controller has been relieved under paragraph (d) of liability in respect of that act, matter or thing.

419A  Liability of controller under pre-existing agreement about property used by corporation

             (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 a 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).

420  Powers of receiver

             (1)  Subject to this section, a receiver of property of a corporation has power to do, in Australia and elsewhere, all things necessary or convenient to be done for or in connection with, or as incidental to, the attainment of the objectives for which the receiver was appointed.

             (2)  Without limiting the generality of subsection (1), but subject to any provision of the court order by which, or the instrument under which, the receiver was appointed, being a provision that limits the receiver’s powers in any way, a receiver of property of a corporation has, in addition to any powers conferred by that order or instrument, as the case may be, or by any other law, power, for the purpose of attaining the objectives for which the receiver was appointed:

                     (a)  to enter into possession and take control of property of the corporation in accordance with the terms of that order or instrument;

                     (b)  to lease, let on hire or dispose of property of the corporation;

                     (c)  to grant options over property of the corporation on such conditions as the receiver thinks fit;

                     (d)  to borrow money on the security of property of the corporation;

                     (e)  to insure property of the corporation;

                      (f)  to repair, renew or enlarge property of the corporation;

                     (g)  to convert property of the corporation into money;

                     (h)  to carry on any business of the corporation;

                      (j)  to take on lease or on hire, or to acquire, any property necessary or convenient in connection with the carrying on of a business of the corporation;

                     (k)  to execute any document, bring or defend any proceedings or do any other act or thing in the name of and on behalf of the corporation;

                    (m)  to draw, accept, make and indorse a bill of exchange or promissory note;

                     (n)  to use a seal of the corporation;

                     (o)  to engage or discharge employees on behalf of the corporation;

                     (p)  to appoint a solicitor, accountant or other professionally qualified person to assist the receiver;

                     (q)  to appoint an agent to do any business that the receiver is unable to do, or that it is unreasonable to expect the receiver to do, in person;

                      (r)  where a debt or liability is owed to the corporation—to prove the debt or liability in a bankruptcy, insolvency or winding up and, in connection therewith, to receive dividends and to assent to a proposal for a composition or a scheme of arrangement;

                      (s)  if the receiver was appointed under an instrument that created a charge on uncalled share capital of the corporation:

                              (i)  to make a call in the name of the corporation for the payment of money unpaid on the corporation’s shares; or

                             (ii)  on giving a proper indemnity to a liquidator of the corporation—to make a call in the liquidator’s name for the payment of money unpaid on the corporation’s shares;

                      (t)  to enforce payment of any call that is due and unpaid, whether the calls were made by the receiver or otherwise;

                     (u)  to make or defend an application for the winding up of the corporation; and

                    (w)  to refer to arbitration any question affecting the corporation.

             (3)  The conferring by this section on a receiver of powers in relation to property of a corporation does not affect any rights in relation to that property of any other person other than the corporation.

             (4)  In this section, a reference, in relation to a receiver, to property of a corporation is, unless the contrary intention appears, a reference to the property of the corporation in relation to which the receiver was appointed.

420A  Controller’s duty of care in exercising power of sale

             (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 180, 181, 182, 183 or 184.

420B  Court may authorise managing controller to dispose of property despite prior charge

             (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.

420C  Receiver’s power to carry on corporation’s business during winding up

             (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.

421  Controller’s duties in relation to bank accounts and financial records

             (1)  A controller of property of a corporation must:

                     (a)  open and maintain an account, with an Australian ADI, 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 financial records as correctly record and explain all transactions that the controller enters into as the controller.

             (2)  Any director, creditor or member of a corporation may, unless the Court otherwise orders, personally or by an agent, inspect records kept by a controller of property of the corporation for the purposes of paragraph (1)(d).

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

             (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.

422  Reports by receiver

             (1)  If it appears to the receiver of property of a corporation that:

                     (a)  a past or present officer, or a member, of the corporation may have been guilty of an offence in relation to the corporation; or

                     (b)  a person who has taken part in the formation, promotion, administration, management or winding up of the corporation:

                              (i)  may have misapplied or retained, or may have become liable or accountable for, any money or property (whether the property is within or outside Australia) of the corporation; or

                             (ii)  may have been guilty of any negligence, default, breach of duty or breach of trust in relation to the corporation;

the receiver shall:

                     (c)  lodge as soon as practicable a report about the matter; and

                     (d)  give to the Commission such information, and such access to and facilities for inspecting and taking copies of any documents, as the Commission requires.

             (2)  The receiver may also lodge further reports specifying any other matter that, in the receiver’s opinion, it is desirable to bring to the notice of the Commission.

             (3)  If it appears to the Court:

                     (a)  that a past or present officer, or a member, of a corporation in respect of property of which a receiver has been appointed has been guilty of an offence under a law referred to in paragraph (1)(a) in relation to the corporation; or

                     (b)  that a person who has taken part in the formation, promotion, administration, management or winding up of a corporation in respect of property of which a receiver has been appointed has engaged in conduct referred to in paragraph (1)(b) in relation to the corporation;

and that the receiver has not lodged a report about the matter, the Court may, on the application of a person interested in the appointment of the receiver or of its own motion, direct the receiver to lodge such a report.

423  Supervision of controller

             (1)  If:

                     (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;

the Court or the Commission, as the case may be, may inquire into the matter and, where the Court or Commission so inquires, the Court may take such action as it thinks fit.

             (2)  The Commission may report to the Court any matter that in its opinion is a misfeasance, neglect or omission on the part of a controller of property of a corporation and the Court may order the controller to make good any loss that the estate of the corporation has sustained thereby and may make such other order or orders as it thinks fit.

             (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.

424  Controller may apply to Court

             (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.

425  Court’s power to fix receiver’s remuneration

             (1)  The Court may by order fix the amount to be paid by way of remuneration to any person who, under a power contained in an instrument, has been appointed as receiver of property of a corporation.

             (2)  The power of the Court to make an order under this section:

                     (a)  extends to fixing the remuneration for any period before the making of the order or the application for the order;

                     (b)  is exercisable even if the receiver has died, or ceased to act, before the making of the order or the application for the order; and

                     (c)  if the receiver has been paid or has retained for the receiver’s remuneration for any period before the making of the order any amount in excess of that fixed for that period—extends to requiring the receiver or the receiver’s personal representatives to account for the excess or such part of the excess as is specified in the order.

             (3)  The power conferred by paragraph (2)(c) shall not be exercised in respect of any period before the making of the application for the order unless, in the opinion of the Court, there are special circumstances making it proper for the power to be so exercised.

             (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).

426  Controller has qualified privilege in certain cases

                   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).

427  Notification of matters relating to controller

             (1)  A person who obtains an order for the appointment of a receiver of property of a corporation, or who appoints such a receiver under a power contained in an instrument, shall:

                     (a)  within 7 days after obtaining the order or making the appointment, lodge notice that the order has been obtained, or that the appointment has been made, as the case may be; and

                     (b)  within 21 days after obtaining the order or making the appointment, cause notice that the order has been obtained, or that the appointment has been made, as the case may be, to be published in the Gazette.

          (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.

428  Statement that receiver appointed or other controller acting

             (1)  Where a receiver of property (whether within or outside this jurisdiction or within or outside Australia) of a corporation has been appointed, the corporation shall set out, in every public document, and in every negotiable instrument, of the corporation, after the name of the corporation where it first appears, a statement that a receiver, or a receiver and manager, as the case requires, has been appointed.

             (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 negotiable instrument, of the corporation, after the corporation’s name where it first appears, a statement that a controller is acting.

429  Officers to report to controller about corporation’s affairs

             (1)  In this section:

reporting officer, in relation to a corporation in respect of property of which a person is controller, means a person who was:

                     (a)  in the case of a company or registered Australian corporation—a director or secretary of the company or registered Australian corporation; or

                     (b)  in the case of a foreign company—a local agent of the foreign company;

on the control day.

             (2)  Where a person becomes a controller of property of a corporation:

                     (a)  the person shall serve on the corporation as soon as practicable notice that the person is a controller of property of the corporation;

                     (b)  within 14 days after the corporation receives the notice, the reporting officers shall make out and submit to the person a report in the prescribed form about the affairs of the corporation as at the control day; and

                     (c)  the person shall, within one month after receipt of the report:

                              (i)  lodge a copy of the report and a notice setting out any comments the person sees fit to make relating to the report or, if the person does not see fit to make any comment, a notice stating that the person does not see fit to make any comment;

                             (ii)  send to the corporation a copy of the notice lodged in accordance with subparagraph (i); and

                            (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).

             (3)  Where notice has been served on a corporation under paragraph (2)(a), the reporting officers may apply to the controller or to the Court to extend the period within which the report is to be submitted and:

                     (a)  if application is made to the controller—if the controller believes that there are special reasons for so doing, the controller may, by notice in writing given to the reporting officers, extend that period until a specified day; and

                     (b)  if application is made to the Court—if the Court believes that there are special reasons for so doing, the Court may, by order, extend that period until a specified day.

             (4)  As soon as practicable after granting an extension under paragraph (3)(a), the controller shall lodge a copy of the notice.

             (5)  As soon as practicable after the Court grants an extension under paragraph (3)(b), the reporting officers shall lodge a copy of the order.

             (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.

             (7)  Where a corporation is being wound up, this section (including subsection (6A)) and section 430 apply even if the controller and the liquidator are the same person, but with any necessary modifications arising from that fact.

430  Controller may require reports

             (1)  A controller of property of a corporation may, by notice given to the person or persons, require one or more persons included in one or more of the following classes of persons to make out as required by the notice, verify by a statement in writing in the prescribed form, and submit to the controller, a report, containing such information as is specified in the notice as to the affairs of the corporation or as to such of those affairs as are specified in the notice, as at a date specified in the notice:

                     (a)  persons who are or have been officers of the corporation;

                     (b)  where the corporation was incorporated within one year before the control day—persons who have taken part in the formation of the corporation;

                     (c)  persons who are employed by the corporation or have been so employed within one year before the control day and are, in the opinion of the controller, capable of giving the information required;

                     (d)  persons who are, or have been within one year before the control day, officers of, or employed by, a corporation that is, or within that year was, an officer of the corporation.

             (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.

             (3)  A person making a report and verifying it as required by subsection (1) shall, subject to the regulations, be allowed, and shall be paid by the controller (or the controller’s successor) out of the controller’s receipts, such costs and expenses incurred in and about the preparation and making of the report and the verification of the report as the controller (or the controller’s successor) considers reasonable.

             (4)  A person shall comply with a requirement made under subsection (1).

             (5)  A reference in this section to the controller’s successor includes a reference to a continuing controller.

431  Controller may inspect books

                   A controller of property of a corporation is entitled to inspect at any reasonable time any books of the corporation that relate to that property and a person shall not fail to allow the controller to inspect such books at such a time.

432  Lodging controller’s accounts

             (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.

             (2)  The Commission may, of its own motion or on the application of the corporation or a creditor of the corporation, cause the accounts lodged in accordance with subsection (1) to be audited by a registered company auditor appointed by the Commission and, for the purpose of the audit, the controller must furnish the auditor with such books and information as the auditor requires.

             (3)  Where the Commission causes the accounts to be audited on the request of the corporation or a creditor, the Commission may require the corporation or creditor, as the case may be, to give security for the payment of the cost of the audit.

             (4)  The costs of an audit under subsection (2) shall be fixed by the Commission and the Commision may if it thinks fit make an order declaring that, for the purposes of subsection 419(1), those costs shall be deemed to be a debt incurred by the controller as mentioned in subsection 419(1) and, where such an order is made, the controller is liable accordingly.

             (5)  A person shall comply with a requirement made under this section.

433  Payment of certain debts, out of property subject to floating charge, in priority to claims under charge

             (1)  In this section:

registered body does not include a registrable local body.

             (2)  This section applies where:

                     (a)  a receiver is appointed on behalf of the holders of any debentures of a company or registered body that are secured by a floating charge, or possession is taken or control is assumed, by or on behalf of the holders of any debentures of a company or registered body, of any property comprised in or subject to a floating charge; and

                     (b)  at the date of the appointment or of the taking of possession or assumption of control (in this section called the relevant date):

                              (i)  the company or registered body has not commenced to be wound up voluntarily; and

                             (ii)  the company or registered body has not been ordered to be wound up by the Court.

             (3)  In the case of a company, the receiver or other person taking possession or assuming control of property of the company shall pay, out of the property coming into his, her or its hands, the following debts or amounts in priority to any claim for principal or interest in respect of the debentures:

                     (a)  first, any amount that in a winding up is payable in priority to unsecured debts pursuant to section 562;

                     (b)  next, if an auditor of the company had applied to the Commission under subsection 329(6) for consent to his, her or its resignation as auditor and the Commission had refused that consent before the relevant date—the reasonable fees and expenses of the auditor incurred during the period beginning on the day of the refusal and ending on the relevant date;

                     (c)  subject to subsections (6) and (7), next, any debt or amount that in a winding up is payable in priority to other unsecured debts pursuant to paragraph 556(1)(e), (g) or (h) or section 560.

             (4)  In the case of a registered body, the receiver or other person taking possession or assuming control of property of the registered body shall pay, out of the property of the registered body coming into his, her or its hands, the following debts or amounts in priority to any claim for principal or interest in respect of the debentures:

                     (a)  first, any amount that in a winding up is payable in priority to unsecured debts pursuant to section 562;

                     (b)  next, any debt or amount that in a winding up is payable in priority to other unsecured debts pursuant to paragraph 556(1)(e), (g) or (h) or section 560.

             (5)  The receiver or other person taking possession or assuming control of property shall pay debts and amounts payable pursuant to paragraph (3)(c) or (4)(b) in the same order of priority as is prescribed by Division 6 of Part 5.6 in respect of those debts and amounts.

             (6)  In the case of a company, if an auditor of the company had applied to the Commission under subsection 329(6) for consent to his, her or its resignation as auditor and the Commission had, before the relevant date, refused that consent, a receiver shall, when property comes to the receiver’s hands, before paying any debt or amount referred to in paragraph (3)(c), make provision out of that property for the reasonable fees and expenses of the auditor incurred after the relevant date but before the date on which the property comes into the receiver’s hands, being fees and expenses in respect of which provision has not already been made under this subsection.

             (7)  If an auditor of the company applies to the Commission under subsection 329(6) for consent to his, her or its resignation as auditor and, after the relevant date, the Commission refuses that consent, the receiver shall, in relation to property that comes into the receiver’s hands after the refusal, before paying any debt or amount referred to in paragraph (3)(c), make provision out of that property for the reasonable fees and expenses of the auditor incurred after the refusal and before the date on which the property comes into the receiver’s hands, being fees and expenses in respect of which provision has not already been made under this subsection.

             (8)  A receiver shall make provision in respect of reasonable fees and expenses of an auditor in respect of a particular period as required by subsection (6) or (7) whether or not the auditor has made a claim for fees and expenses for that period, but where the auditor has not made a claim, the receiver may estimate the reasonable fees and expenses of the auditor for that period and make provision in accordance with the estimate.

             (9)  For the purposes of this section the references in Division 6 of Part 5.6 to the relevant date shall be read as references to the date of the appointment of the receiver, or of possession being taken or control being assumed, as the case may be.

434  Enforcing controller’s duty to make returns

             (1)  If a controller of property of a corporation:

                     (a)  who has made default in making or lodging any return, account or other document or in giving any notice required by law fails to make good the default within 14 days after the service on the controller, by any member or creditor of the corporation or trustee for debenture holders, of a notice requiring the controller to do so; or

                     (b)  who has become a controller of property of the corporation otherwise than by being appointed a receiver of such property by a court and who has, after being required at any time by the liquidator of the corporation so to do, failed to render proper accounts of, and to vouch, the controller’s receipts and payments and to pay over to the liquidator the amount properly payable to the liquidator;

the Court may make an order directing the controller to make good the default within such time as is specified in the order.

             (2)  An application under subsection (1) may be made:

                     (a)  if paragraph (1)(a) applies—by a member or creditor of the corporation or by a trustee for debenture holders; and

                     (b)  if paragraph (1)(b) applies—by the liquidator of the corporation.

434A  Court may remove controller for misconduct

                   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.

434B  Court may remove redundant controller

             (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).

434C  Effect of sections 434A and 434B

             (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).


 

Part 5.3AAdministration of a company’s affairs with a view to executing a deed of company arrangement

Division 1Preliminary

435A  Object of Part

                   The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that:

                     (a)  maximises the chances of the company, or as much as possible of its business, continuing in existence; or

                     (b)  if it is not possible for the company or its business to continue in existence—results in a better return for the company’s creditors and members than would result from an immediate winding up of the company.

435B  Interpretation

                   In this Part, unless the contrary intention appears:

receiver includes a receiver and manager.

435C  When administration begins and ends

             (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

436A  Company may appoint administrator if board thinks it is or will become insolvent

             (1)  A company may, by writing, 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.

436B  Liquidator may appoint administrator

             (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.

436C  Chargee may appoint administrator

             (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.

436D  Company already under administration

                   An administrator cannot be appointed under section 436A, 436B or 436C if the company is already under administration.

436E  Purpose and timing of first meeting of creditors

             (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.

436F  Functions of committee of creditors

             (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.

436G  Membership of committee

                   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

437A  Role of administrator

             (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.

437B  Administrator acts as company’s agent

                   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.

437C  Powers of other officers suspended

             (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.

437D  Only administrator can deal with company’s property

             (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 ADI out of an account kept by the company with the ADI; and

                     (b)  in good faith and in the ordinary course of the ADI’s banking business; and

                     (c)  after the administration began and on or before the day on which:

                              (i)  the administrator gives to the ADI (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.

437E  Order for compensation where officer involved in void transaction

             (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.

437F  Effect of administration on company’s members

                   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

438A  Administrator to investigate affairs and consider possible courses of action

                   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.

438B  Directors to help administrator

             (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).

438C  Administrator’s rights to company’s books

             (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.

438D  Reports by administrator

             (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

439A  Administrator to convene meeting and inform creditors

             (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).

Note:          For body corporate representatives’ powers at a meeting of the company’s creditors, see section 250D.

             (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.

439B  Conduct of meeting

             (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.

439C  What creditors may decide

                   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

440A  Winding up company

             (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.

440B  Charge unenforceable

                   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.

440C  Owner or lessor cannot recover property used by company

                   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.

440D  Stay of proceedings

             (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.

440E  Administrator not liable in damages for refusing consent

                   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.

440F  Suspension of enforcement process

                   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.

440G  Duties of court officer in relation to property of company

             (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.

440H  Lis pendens taken to exist

             (1)  This section has effect only for the purposes of a law about the effect of a lis pendens on purchasers or mortgagees.

             (2)  During the administration of a company, an application to wind up the company is taken to be pending.

             (3)  An application that is taken because of subsection (2) to be pending constitutes a lis pendens.

440J  Administration not to trigger liability of director or relative under guarantee of company’s liability

             (1)  During the administration of a company:

                     (a)  a guarantee of a liability of the company cannot be enforced, as against:

                              (i)  a director of the company who is a natural person; or

                             (ii)  a spouse, de facto spouse or relative of such a director; and

                     (b)  without limiting paragraph (a), a proceeding in relation to such a guarantee cannot be begun against such a director, spouse, de facto spouse or relative;

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

             (2)  While subsection (1) prevents a person (the creditor) from:

                     (a)  enforcing as against another person (the guarantor) a guarantee of a liability of a company; or

                     (b)  beginning a proceeding against another person (the guarantor) in relation to such a guarantee;

section 1323 applies in relation to the creditor and the guarantor as if:

                     (c)  a civil proceeding against the guarantor had begun under this Law; and

                     (d)  the creditor were the only person of a kind referred to in that section as an aggrieved person.

Note:          Under section 1323 the Court can make a range of orders to ensure that a person can meet the person’s liabilities.

             (3)  The effect that section 1323 has because of a particular application of subsection (2) is additional to, and does not prejudice, the effect the section otherwise has.

             (4)  In this section:

guarantee, in relation to a liability of a company, includes a relevant agreement (as defined in section 9) because of which a person other than the company has incurred, or may incur, whether jointly with the company or otherwise, a liability in respect of the liability of the company.

liability means a debt, liability or other obligation.


 

Division 7Rights of chargee, owner or lessor

441A  Where chargee acts before or during decision period

             (1)  This section applies where:

                     (a)  the whole, or substantially the whole, of the property of a company under administration is subject to a charge; and

                     (b)  before or during the decision period, the chargee enforced the charge in relation to all property of the company subject to the charge, whether or not the charge was enforced in the same way in relation to all that property.

             (2)  This section also applies where:

                     (a)  a company is under administration; and

                     (b)  the same person is the chargee in relation to each of 2 or more charges on property of the company; and

                     (c)  the property of the company (in this subsection called the charged property) subject to the respective charges together constitutes the whole, or substantially the whole, of the company’s property; and

                     (d)  before or during the decision period, the chargee enforced the charges in relation to all the charged property:

                              (i)  whether or not the charges were enforced in the same way in relation to all the charged property; and

                             (ii)  whether or not any of the charges was enforced in the same way in relation to all the property of the company subject to that charge; and

                            (iii)  in so far as the charges were enforced in relation to property of the company in a way referred to in paragraph (a), (b) or (d) of the definition of enforce in section 9—whether or not the same person was appointed in respect of all of the last-mentioned property.

             (3)  Nothing in section 437C or 440B, or in an order under subsection 444F(2), prevents any of the following from enforcing the charge, or any of the charges:

                     (a)  the chargee;

                     (b)  a receiver or person appointed as mentioned in paragraph (a), (b) or (d) of the definition of enforce in section 9 as that definition applies in relation to the charge, or any of the charges (even if appointed after the decision period).

             (4)  Section 437D does not apply in relation to a transaction or dealing that affects property of the company and is entered into by:

                     (a)  the chargee; or

                     (b)  a receiver or person of a kind referred to in paragraph (3)(b) of this section;

in the performance or exercise of a function or power as chargee, or as such a receiver or person, as the case may be.

441B  Where enforcement of charge begins before administration

             (1)  This section applies if, before the beginning of the administration of a company, a chargee, receiver or other person:

                     (a)  entered into possession, or assumed control, of property of the company; or

                     (b)  entered into an agreement to sell such property; or

                     (c)  made arrangements for such property to be offered for sale by public auction; or

                     (d)  publicly invited tenders for the purchase of such property; or

                     (e)  exercised any other power in relation to such property;

for the purpose of enforcing a charge on that property.

             (2)  Nothing in section 437C or 440B prevents the chargee, receiver or other person from enforcing the charge in relation to that property.

             (3)  Section 437D does not apply in relation to a transaction or dealing that affects that property and is entered into:

                     (a)  in the exercise of a power of the chargee as chargee; or

                     (b)  in the performance or exercise of a function or power of the receiver or other person;

as the case may be.

441C  Charge on perishable property

             (1)  This section applies where perishable property of a company under administration is subject to a charge.

             (2)  Nothing in section 437C or 440B prevents:

                     (a)  the chargee; or

                     (b)  a receiver or person appointed (at any time) as mentioned in paragraph (a), (b) or (d) of the definition of enforce in section 9;

from enforcing the charge, so far as it is a charge on perishable property.

             (3)  Section 437D does not apply in relation to a transaction or dealing that affects perishable property of the company and is entered into by:

                     (a)  the chargee; or

                     (b)  a receiver or person appointed (at any time) as mentioned in paragraph (a), (b) or (d) of the definition of enforce in section 9;

in the performance or exercise of a function or power as chargee, or as such a receiver or person, as the case may be.

441D  Court may limit powers of chargee etc. in relation to charged property

             (1)  This section applies if:

                     (a)  for the purpose of enforcing a charge on property of a company, the chargee, or a receiver or other person, does an act of a kind referred to in a paragraph of subsection 441B(1); and

                     (b)  the company is under administration when the chargee, receiver or other person does the act, or the company later begins to be under administration;

but does not apply in a case where section 441A applies.

             (2)  On application by the administrator, the Court may order the chargee, receiver or other person not to perform specified functions, or exercise specified powers, except as permitted by the order.

             (3)  The Court may only make an order if satisfied that what the administrator proposes to do during the administration will adequately protect the chargee’s interests.

             (4)  An order may only be made, and only has effect, during the administration.

             (5)  An order has effect despite sections 441B and 441C.

441E  Giving a notice under a charge

                   Nothing in section 437C or 440B prevents a person from giving a notice under the provisions of a charge.

441F  Where recovery of property begins before administration

             (1)  This section applies if, before the beginning of the administration of a company, a receiver or other person:

                     (a)  entered into possession, or assumed control, of property used or occupied by, or in the possession of, the company; or

                     (b)  exercised any other power in relation to such property;

for the purpose of enforcing a right of the owner or lessor of the property to take possession of the property or otherwise recover it.

             (2)  Nothing in section 437C or 440C prevents the receiver or other person from performing a function, or exercising a power, in relation to the property.

             (3)  Section 437D does not apply in relation to a transaction or dealing that affects the property and is entered into in the performance or exercise of a function or power of the receiver or other person.

441G  Recovering perishable property

             (1)  Nothing in section 437C or 440C prevents a person from taking possession of, or otherwise recovering, perishable property.

             (2)  Section 437D does not apply in relation to a transaction or dealing that affects perishable property and is entered into for the purpose of enforcing a right of the owner or lessor of the property to take possession of the property or otherwise recover it.

441H  Court may limit powers of receiver etc. in relation to property used by company

             (1)  This section applies if:

                     (a)  for the purpose of enforcing a right of the owner or lessor of property used or occupied by, or in the possession of, a company to take possession of the property or otherwise recover it, a person:

                              (i)  enters into possession, or assumes control, of the property; or

                             (ii)  exercises any other power in relation to the property; and

                     (b)  the company is under administration when the person does so, or the company later begins to be under administration.

             (2)  On application by the administrator, the Court may order the person not to perform specified functions, or exercise specified powers, in relation to the property, except as permitted by the order.

             (3)  The Court may only make an order if satisfied that what the administrator proposes to do during the administration will adequately protect the interests of the owner or lessor.

             (4)  An order may only be made, and only has effect, during the administration.

             (5)  An order has effect despite sections 441F and 441G.

441J  Giving a notice under an agreement about property

                   Nothing in section 437C or 440C prevents a person from giving a notice to a company under an agreement relating to property that is used or occupied by, or is in the possession of, the company.

441K  Effect of Division

                   Except as expressly provided, nothing in this Division limits the generality of anything else in it.


 

Division 8Powers of administrator

442A  Additional powers of administrator

                   Without limiting section 437A, the administrator of a company under administration has power to do any of the following:

                     (a)  remove from office a director of the company;

                     (b)  appoint a person as such a director, whether to fill a vacancy or not;

                     (c)  execute a document, bring or defend proceedings, or do anything else, in the company’s name and on its behalf;

                     (d)  whatever else is necessary for the purposes of this Part.

442B  Dealing with property subject to a floating charge that has crystallised

             (1)  This section applies where a charge on property of a company under administration was a floating charge when created but has since become a fixed or specific charge.

             (2)  Subject to sections 442C and 442D, the administrator may deal with any of that property as if the charge were still a floating charge.

442C  When administrator may dispose of encumbered property

             (1)  The administrator of a company under administration or of a deed of company arrangement must not dispose of:

                     (a)  property of the company that is subject to a charge; or

                     (b)  property that is used or occupied by, or is in the possession of, the company but of which someone else is the owner or lessor.

             (2)  Subsection (1) does not prevent a disposal:

                     (a)  in the ordinary course of the company’s business; or

                     (b)  with the written consent of the chargee, owner or lessor, as the case may be; or

                     (c)  with the leave of the Court.

             (3)  The Court may only give leave under paragraph (2)(c) if satisfied that arrangements have been made to protect adequately the interests of the chargee, owner or lessor, as the case may be.

442D  Administrator’s powers subject to powers of chargee, receiver etc.

             (1)  Where section 441A applies, the administrator’s functions and powers are subject to the functions and powers of a person as:

                     (a)  the chargee; or

                     (b)  a receiver or person of a kind referred to in paragraph 441A(3)(b) (even if appointed after the decision period).

             (2)  Where section 441C applies, then, so far as concerns perishable property of the company, the administrator’s functions and powers are subject to the functions and powers of a person as:

                     (a)  the chargee; or

                     (b)  a receiver or person appointed (at any time) as mentioned in paragraph (a), (b) or (d) of the definition of enforce in section 9.

             (3)  Where section 441B, 441F or 441G applies, then, so far as concerns the property referred to in subsection 441B(1), 441F(1) or 441G(1), the administrator’s functions and powers are subject to the functions and powers of the chargee, receiver or other person.

442E  Administrator has qualified privilege

                   A person who is or has been the administrator of a company under administration has qualified privilege in respect of a statement that he or she has made, whether orally or in writing, in the course of performing or exercising any of his or her functions and powers as administrator of the company.

442F  Protection of persons dealing with administrator

             (1)  Sections 128 and 129 apply in relation to a company under administration as if:

                     (a)  a reference in those sections to the company, or to an officer of the company, included a reference to the administrator; and

                     (b)  a reference in those sections to an assumption referred to in section 129 included a reference to an assumption that the administrator is:

                              (i)  acting within his or her functions and powers as administrator; and

                             (ii)  in particular, is complying with this Law.

             (2)  The effect that sections 128 and 129 have because of subsection (1) of this section is additional to, and does not prejudice, the effect that sections 128 and 129 otherwise have in relation to a company under administration.


 

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

Subdivision ALiability

443A  General debts

             (1)  The administrator of a company under administration is liable for debts he or she incurs, in the performance or exercise, or purported performance or exercise, of any of his or her functions and powers as administrator, for:

                     (a)  services rendered; or

                     (b)  goods bought; or

                     (c)  property hired, leased, used or occupied.

             (2)  Subsection (1) has effect despite any agreement to the contrary, but without prejudice to the administrator’s rights against the company or anyone else.

443B  Payments for property used or occupied by, or in the possession of, the company

             (1)  This section applies if, under an agreement made before the administration of a company began, the company continues to use or occupy, or to be in possession of, property of which someone else is the owner or lessor.

             (2)  Subject to this section, the administrator is liable for so much of the rent or other amounts payable by the company under the agreement as is attributable to a period:

                     (a)  that begins more than 7 days after the administration began; and

                     (b)  throughout which:

                              (i)  the company continues to use or occupy, or to be in possession of, the property; and

                             (ii)  the administration continues.

             (3)  Within 7 days after the beginning of the administration, the administrator may give to the owner or lessor a notice that specifies the property and states that the company does not propose to exercise rights in relation to the property.

             (4)  Despite subsection (2), the administrator is not liable for so much of the rent or other amounts payable by the company under the agreement as is attributable to a period during which a notice under subsection (3) is in force, but such a notice does not affect a liability of the company.

             (5)  A notice under subsection (3) ceases to have effect if:

                     (a)  the administrator revokes it by writing given to the owner or lessor; or

                     (b)  the company exercises, or purports to exercise, a right in relation to the property.

             (6)  For the purposes of subsection (5), the company does not exercise, or purport to exercise, a right in relation to the property merely because the company continues to occupy, or to be in possession of, the property, unless the company:

                     (a)  also uses the property; or

                     (b)  asserts a right, as against the owner or lessor, so to continue.

             (7)  Subsection (2) does not apply in relation to so much of a period as elapses after:

                     (a)  a receiver of the property is appointed; or

                     (b)  a chargee appoints an agent, under the provisions of a charge on the property, to enter into possession, or to assume control, of the property; or

                     (c)  a chargee takes possession, or assumes control, of the property under the provisions of a charge on the property;

but this subsection does not affect a liability of the company.

             (8)  Subsection (2) does not apply in so far as a court, by order, excuses the administrator from liability, but an order does not affect a liability of the company.

             (9)  The administrator is not taken because of subsection (2):

                     (a)  to have adopted the agreement; or

                     (b)  to be liable under the agreement otherwise than as mentioned in subsection (2).

443BA  Certain taxation liabilities

             (1)  The administrator of a company is liable to pay to the Commissioner of Taxation:

                     (a)  each amount payable under a remittance provision because of a deduction made by the administrator; and

                     (b)  without limiting paragraph (a), so much of each amount payable under a remittance provision because of a deduction made by the company during the administration as equals so much of the deduction as is attributable to a period throughout which the administration continued;

even if the amount became payable after the end of the administration.

             (2)  In this section:

remittance provision means any of the following provisions of the Income Tax Assessment Act 1936:

                     (a)  section 221F (except subsection 221F(12)) or section 221G (except subsection 221G(4A));

                     (b)  subsection 221YHDC(2);

                     (c)  subsection 221YHZD(1) or (1A);

                     (d)  subsection 221YN(1);

and any of the provisions of Subdivision 16‑B in Schedule 1 to the Taxation Administration Act 1953.

unpaid amount, in relation to an estimate, has the same meaning as in Division 8 of Part VI of the Income Tax Assessment Act 1936.

443C  Administrator not otherwise liable for company’s debts

                   The administrator of a company under administration is not liable for the company’s debts except under this Subdivision.

Subdivision BIndemnity

443D  Right of indemnity

                   The administrator of a company under administration is entitled to be indemnified out of the company’s property for:

                     (a)  debts for which the administrator is liable under Subdivision A or a remittance provision as defined in subsection 443BA(3); and

                     (b)  his or her remuneration as fixed under section 449E.

443E  Right of indemnity has priority over other debts

             (1)  Subject to section 556, a right of indemnity under section 443D has priority over:

                     (a)  all the company’s unsecured debts; and

                     (b)  subject to subsections (2) and (3) of this section, debts of the company secured by a floating charge on property of the company.

             (2)  Where:

                     (a)  debts of a company under administration are secured by a floating charge on property of the company; and

                     (b)  before the beginning of the administration, the chargee:

                              (i)  appointed a receiver of property of the company under a power contained in an instrument relating to the charge; or

                             (ii)  obtained an order for the appointment of a receiver of property of the company for the purpose of enforcing the charge; or

                            (iii)  entered into possession, or assumed control, of property of the company for that purpose; or

                            (iv)  appointed a person so to enter into possession or assume control (whether as agent for the chargee or for the company); and

                     (c)  the receiver or person is still in office, or the chargee is still in possession or control of the property;

the right of indemnity of the administrator under section 443D does not have priority over those debts, except so far as the chargee agrees.

             (3)  Where:

                     (a)  debts of a company under administration are secured by a floating charge on property of the company; and

                     (b)  during the administration, the chargee, consistently with this Part:

                              (i)  appoints a receiver of property of the company under a power contained in an instrument relating to the charge; or

                             (ii)  obtains an order for the appointment of a receiver of property of the company for the purpose of enforcing the charge; or

                            (iii)  enters into possession, or assumes control, of property of the company for that purpose; or

                            (iv)  appoints a person so to enter into possession or assume control (whether as agent for the chargee or for the company);

the right of indemnity of the administrator under section 443D has priority over those debts only in so far as it is a right of indemnity for debts incurred, or remuneration accruing, before written notice of the appointment, or of the entering into possession or assuming of control, as the case may be, was given to the administrator.

443F  Lien to secure indemnity

             (1)  To secure a right of indemnity under section 443D, the administrator has a lien on the company’s property.

             (2)  A lien under subsection (1) has priority over a charge only in so far as the right of indemnity under section 443D has priority over debts secured by the charge.


 

Division 10Execution and effect of deed of company arrangement

444A  Effect of creditors’ resolution

             (1)  This section applies where, at a meeting convened under section 439A, a company’s creditors resolve that the company execute a deed of company arrangement.

             (2)  The administrator of the company is to be the administrator of the deed, unless the creditors, by resolution passed at the meeting, appoint someone else to be administrator of the deed.

             (3)  The administrator of the deed must prepare an instrument setting out the terms of the deed.

             (4)  The instrument must also specify the following:

                     (a)  the administrator of the deed;

                     (b)  the property of the company (whether or not already owned by the company when it executes the deed) that is to be available to pay creditors’ claims;

                     (c)  the nature and duration of any moratorium period for which the deed provides;

                     (d)  to what extent the company is to be released from its debts;

                     (e)  the conditions (if any) for the deed to come into operation;

                      (f)  the conditions (if any) for the deed to continue in operation;

                     (g)  the circumstances in which the deed terminates;

                     (h)  the order in which proceeds of realising the property referred to in paragraph (b) are to be distributed among creditors bound by the deed;

                      (i)  the day (not later than the day when the administration began) on or before which claims must have arisen if they are to be admissible under the deed.

             (5)  The instrument is taken to include the prescribed provisions, except so far as it provides otherwise.

444B  Execution of deed

             (1)  This section applies where an instrument is prepared under section 444A.

             (2)  The company must execute the instrument within:

                     (a)  21 days after the end of the meeting of creditors; or

                     (b)  such further period as the Court allows on an application made within those 21 days.

             (3)  The board of the company may, by resolution, authorise the instrument to be executed by or on behalf of the company.

             (4)  Subsection (3) has effect despite section 437C, but does not limit the functions and powers of the administrator of the company.

             (5)  The administrator of the deed must execute the instrument before, or as soon as practicable after, the company executes it.

             (6)  When executed by both the company and the deed’s administrator, the instrument becomes a deed of company arrangement.

             (7)  Division 12 provides for consequences of the company contravening subsection (2).

444C  Creditor etc. not to act inconsistently with deed before its execution

             (1)  Where, at a meeting convened under section 439A, a company’s creditors resolve that the company execute a deed of company arrangement, this section applies until:

                     (a)  the deed is executed by both the company and the deed’s administrator; or

                     (b)  the period within which subsection 444B(2) requires the company to execute the deed ends;

whichever happens sooner.

             (2)  In so far as a person would be bound by the deed if it had already been so executed, the person:

                     (a)  must not do anything inconsistent with the deed, except with the leave of the Court; and

                     (b)  is subject to section 444E.

444D  Effect of deed on creditors

             (1)  A deed of company arrangement binds all creditors of the company, so far as concerns claims arising on or before the day specified in the deed under paragraph 444A(4)(i).

             (2)  Subsection (1) does not prevent a secured creditor from realising or otherwise dealing with the security, except so far as:

                     (a)  the deed so provides in relation to a secured creditor who voted in favour of the resolution of creditors because of which the company executed the deed; or

                     (b)  the Court orders under subsection 444F(2).

             (3)  Subsection (1) does not affect a right that an owner or lessor of property has in relation to that property, except so far as:

                     (a)  the deed so provides in relation to an owner or lessor of property who voted in favour of the resolution of creditors because of which the company executed the deed; or

                     (b)  the Court orders under subsection 444F(4).

444E  Protection of company’s property from persons bound by deed

             (1)  Until a deed of company arrangement terminates, this section applies to a person bound by the deed.

             (2)  The person cannot:

                     (a)  make an application for an order to wind up the company; or

                     (b)  proceed with such an application made before the deed became binding on the person.

             (3)  The person cannot:

                     (a)  begin or proceed with a proceeding against the company or in relation to any of its property; or

                     (b)  begin or proceed with enforcement process in relation to property of the company;

except:

                     (c)  with the leave of the Court; and

                     (d)  in accordance with such terms (if any) as the Court imposes.

             (4)  In subsection (3):

property, in relation to the company, includes property used or occupied by, or in the possession of, the company.

444F  Court may limit rights of secured creditor or owner or lessor

             (1)  This section applies where:

                     (a)  it is proposed that a company execute a deed of company arrangement; or

                     (b)  a company has executed such a deed.

             (2)  Subject to subsection 441A(3), the Court may order a secured creditor of the company not to realise or otherwise deal with the security, except as permitted by the order.

             (3)  The Court may only make an order under subsection (2) if satisfied that:

                     (a)  for the creditor to realise or otherwise deal with the security would have a material adverse effect on achieving the purposes of the deed; and

                     (b)  having regard to:

                              (i)  the terms of the deed; and

                             (ii)  the terms of the order; and

                            (iii)  any other relevant matter;

                            the creditor’s interests will be adequately protected.

             (4)  The Court may order the owner or lessor of property that is used or occupied by, or is in the possession of, the company not to take possession of the property or otherwise recover it.

             (5)  The Court may only make an order under subsection (4) if satisfied that:

                     (a)  for the owner or lessor to take possession of the property or otherwise recover it would have a material adverse effect on achieving the purposes of the deed; and

                     (b)  having regard to:

                              (i)  the terms of the deed; and

                             (ii)  the terms of the order; and

                            (iii)  any other relevant matter;

                            the interests of the owner or lessor will be adequately protected.

             (6)  An order under this section may be made subject to conditions.

             (7)  An order under this section may only be made on the application of:

                     (a)  if paragraph (1)(a) applies—the administrator of the company; or

                     (b)  if paragraph (1)(b) applies—the deed’s administrator.

444G  Effect of deed on company, officers and members

                   A deed of company arrangement also binds:

                     (a)  the company; and

                     (b)  its officers and members; and

                     (c)  the deed’s administrator.

444H  Extent of release of company’s debts

                   A deed of company arrangement releases the company from a debt only in so far as:

                     (a)  the deed provides for the release; and

                     (b)  the creditor concerned is bound by the deed.


 

Division 11Variation, termination and avoidance of deed

445A  Variation of deed by creditors

                   A deed of company arrangement may be varied by a resolution passed at a meeting of the company’s creditors convened under section 445F, but only if the variation is not materially different from a proposed variation set out in the notice of the meeting.

445B  Court may cancel variation

             (1)  Where a deed of company arrangement is varied under section 445A, a creditor of the company may apply to the Court for an order cancelling the variation.

             (2)  On an application, the Court:

                     (a)  may make an order cancelling the variation, or confirming it, either wholly or in part, on such conditions (if any) as the order specifies; and

                     (b)  may make such other orders as it thinks appropriate.

445C  When deed terminates

                   A deed of company arrangement terminates when:

                     (a)  the Court makes under section 445D an order terminating the deed; or

                     (b)  the company’s creditors pass a resolution terminating the deed at a meeting that was convened under section 445F by a notice setting out the proposed resolution; or

                     (c)  if the deed specifies circumstances in which it is to terminate—those circumstances exist;

whichever happens first.

445D  When Court may terminate deed

             (1)  The Court may make an order terminating a deed of company arrangement if satisfied that:

                     (a)  information about the company’s business, property, affairs or financial circumstances that:

                              (i)  was false or misleading; and

                             (ii)  can reasonably be expected to have been material to creditors of the company in deciding whether to vote in favour of the resolution that the company execute the deed;

                            was given to the administrator of the company or to such creditors; or

                     (b)  such information was contained in a report or statement under subsection 439A(4) that accompanied a notice of the meeting at which the resolution was passed; or

                     (c)  there was an omission from such a report or statement and the omission can reasonably be expected to have been material to such creditors in so deciding; or

                     (d)  there has been a material contravention of the deed by a person bound by the deed; or

                     (e)  effect cannot be given to the deed without injustice or undue delay; or

                      (f)  the deed or a provision of it is, an act or omission done or made under the deed was, or an act or omission proposed to be so done or made would be:

                              (i)  oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more such creditors; or

                             (ii)  contrary to the interests of the creditors of the company as a whole; or

                     (g)  the deed should be terminated for some other reason.

             (2)  An order may be made on the application of:

                     (a)  a creditor of the company; or

                     (b)  the company; or

                     (c)  any other interested person.

445E  Creditors may terminate deed and resolve that company be wound up

                   Where:

                     (a)  at a meeting convened under section 445F, the company’s creditors pass a resolution terminating the deed; and

                     (b)  the notice of the meeting set out a proposed resolution that the company be wound up;

the creditors may also resolve at the meeting that the company be wound up.

445F  Meeting of creditors to consider proposed variation or termination of deed

             (1)  The administrator of a deed of company arrangement:

                     (a)  may at any time convene a meeting of the company’s creditors; and

                     (b)  must convene such a meeting if so requested in writing by creditors the value of whose claims against the company is not less than 10% of the value of all the creditors’ claims against the company.

             (2)  A meeting under this section must be convened by the deed’s administrator:

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

                     (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.

             (3)  The notice given to a creditor under paragraph (2)(a) must:

                     (a)  set out each resolution (if any) under section 445A or paragraph 445C(b) that the deed’s administrator proposes that the meeting vote on; and

                     (b)  if the meeting is convened under paragraph (1)(b) of this section—set out each proposed resolution under section 445A or paragraph 445C(b) that is set out in the request.

             (4)  At a meeting convened under this section, the deed’s administrator is to preside.

             (5)  A meeting convened under this section may be adjourned from time to time.

445G  When Court may void or validate deed

             (1)  Where there is doubt, on a specific ground, whether a deed of company arrangement was entered into in accordance with this Part or complies with this Part, the administrator of the deed, a member or creditor of the company, or the Commission, may apply to the Court for an order under this section.

             (2)  On an application, the Court may make an order declaring the deed, or a provision of it, to be void or not to be void, as the case requires, on the ground specified in the application or some other ground.

             (3)  On an application, the Court may declare the deed, or a provision of it, to be valid, despite a contravention of a provision of this Part, if the Court is satisfied that:

                     (a)  the provision was substantially complied with; and

                     (b)  no injustice will result for anyone bound by the deed if the contravention is disregarded.

             (4)  Where the Court declares a provision of a deed of company arrangement to be void, the Court may by order vary the deed, but only with the consent of the deed’s administrator.

445H  Effect of termination or avoidance

                   The termination or avoidance, in whole or in part, of a deed of company arrangement does not affect the previous operation of the deed.


 

Division 12Transition to creditors’ voluntary winding up

446A  Administrator becomes liquidator in certain cases

             (1)  This section applies if:

                     (a)  the creditors of a company under administration resolve at a particular time under paragraph 439C(c) that the company be wound up; or

                     (b)  a company under administration contravenes subsection 444B(2) at a particular time; or

                     (c)  at a meeting convened under section 445F, a company’s creditors:

                              (i)  pass a resolution terminating a deed of company arrangement executed by the company; and

                             (ii)  also resolve at a particular time under section 445E that the company be wound up.

             (2)  The company is taken:

                     (a)  to have passed, at the time referred to in paragraph (1)(a) or (b) or subparagraph (1)(c)(ii), as the case may be, a special resolution under section 491 that the company be wound up voluntarily; and

                     (b)  to have done so without a declaration having been made and lodged under section 494.

             (3)  Section 497 is taken to have been complied with in relation to the winding up.

             (4)  For the purposes of subsection 499(1):

                     (a)  the company is taken to have nominated:

                              (i)  if paragraph (1)(a) or (b) of this section applies—the administrator of the company; or

                             (ii)  if paragraph (1)(c) of this section applies—the administrator of the deed;

                            to be liquidator for the purposes of the winding up; and

                     (b)  the creditors are taken not to have so nominated anyone.

             (5)  The liquidator must:

                     (a)  within 7 days after the day on which the company is taken to have passed the resolution, lodge a written notice stating that the company is taken because of this section to have passed such a resolution and specifying that day; and

                     (b)  cause a notice of that kind to be published, within 21 days after that day:

                              (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.

             (6)  Section 482 applies in relation to the winding up as if it were a winding up in insolvency or by the Court.

Note:          Section 482 empowers the Court to stay or terminate a winding up and give consequential directions.

             (7)  An application under section 482 as applying because of subsection (6) may be made:

                     (a)  despite subsection 499(4), by the company pursuant to a resolution of the board; or

                     (b)  by the liquidator; or

                     (c)  by a creditor; or

                     (d)  by a contributory.

446B  Regulations may provide for transition in other cases

             (1)  The regulations may prescribe cases where:

                     (a)  a company under administration; or

                     (b)  a company that has executed a deed of company arrangement (even if the deed has terminated);

is taken to have passed a special resolution under section 491 that the company be wound up voluntarily.

             (2)  The regulations may provide for Part 5.5 to apply with prescribed modifications in cases prescribed for the purposes of subsection (1).

             (3)  Without limiting subsection (2), the regulations may provide, in relation to such cases, for matters of a kind provided for by any of subsections 446A(2) to (7), inclusive.

             (4)  Regulations in force for the purposes of this section have effect accordingly.


 

Division 13Powers of Court

447A  General power to make orders

             (1)  The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company.

             (2)  For example, if the Court is satisfied that the administration of a company should end:

                     (a)  because the company is solvent; or

                     (b)  because provisions of this Part are being abused; or

                     (c)  for some other reason;

the Court may order under subsection (1) that the administration is to end.

             (3)  An order may be made subject to conditions.

             (4)  An order may be made on the application of:

                     (a)  the company; or

                     (b)  a creditor of the company; or

                     (c)  in the case of a company under administration—the administrator of the company; or

                     (d)  in the case of a company that has executed a deed of company arrangement—the deed’s administrator; or

                     (e)  the Commission; or

                      (f)  any other interested person.

447B  Orders to protect creditors during administration

             (1)  On the application of the Commission, the Court may make such order as it thinks necessary to protect the interests of a company’s creditors while the company is under administration.

             (2)  On the application of a creditor of a company, the Court may make such order as it thinks necessary to protect the creditor’s interests while the company is under administration.

             (3)  An order may be made subject to conditions.

447C  Court may declare whether administrator validly appointed

             (1)  If there is doubt, on a specific ground, about whether a purported appointment of a person as administrator of a company, or of a deed of company arrangement, is valid, the person, the company or any of the company’s creditors may apply to the Court for an order under subsection (2).

             (2)  On an application, the Court may make an order declaring whether or not the purported appointment was valid on the ground specified in the application or on some other ground.

447D  Administrator may seek directions

             (1)  The administrator of a company under administration, or of a deed of company arrangement, may apply to the Court for directions about a matter arising in connection with the performance or exercise of any of the administrator’s functions and powers.

             (2)  The administrator of a deed of company arrangement may apply to the Court for directions about a matter arising in connection with the operation of, or giving effect to, the deed.

447E  Supervision of administrator of company or deed

             (1)  Where the Court is satisfied that the administrator of a company under administration, or of a deed of company arrangement:

                     (a)  has managed, or is managing, the company’s business, property or affairs in a way that is prejudicial to the interests of some or all of the company’s creditors or members; or

                     (b)  has done an act, or made an omission, or proposes to do an act, or to make an omission, that is or would be prejudicial to such interests;

the Court may make such order as it thinks just.

             (2)  Where the Court is satisfied that:

                     (a)  a company is under administration but:

                              (i)  there is a vacancy in the office of administrator of the company; or

                             (ii)  no administrator of the company is acting; or

                     (b)  a deed of company arrangement has not yet terminated but:

                              (i)  there is a vacancy in the office of administrator of the deed; or

                             (ii)  no administrator of the deed is acting;

the Court may make such order as it thinks just.

             (3)  An order may only be made on the application of the Commission or of a creditor or member of the company.

447F  Effect of Division

                   Nothing in this Division limits the generality of anything else in it.


 

Division 14Qualifications of administrators

448A  Appointee must consent

                   A person cannot be appointed as administrator of a company or of a deed of company arrangement unless:

                     (a)  the person has consented in writing to the appointment; and

                     (b)  as at the time of the appointment, the person has not withdrawn the consent.

448B  Administrator must be registered liquidator

                   A person must not consent to be appointed, and must not act, as administrator of a company or of a deed of company arrangement unless he or she is a registered liquidator.

448C  Disqualification of person connected with company

             (1)  Subject to this section, a person must not, except with the leave of the Court, seek or consent to be appointed as, or act as, administrator of a company or of a deed of company arrangement if:

                     (a)  the person, or a body corporate in which the person has a substantial holding, is indebted in an amount exceeding $5,000 to the company or to a body corporate related to the company; or

                     (b)  the person is, otherwise than in a capacity as administrator or liquidator of, or as administrator of a deed of company arrangement executed by, the company or a related body corporate, a creditor of the company or of a related body corporate in an amount exceeding $5,000; or

                     (c)  the person is an officer of the company (otherwise than because of being an administrator or liquidator of, or an administrator of a deed of company arrangement executed by, a body corporate related to the company); or

                     (d)  the person is an officer of a body corporate that is a mortgagee of property of the company; or

                     (e)  the person is an auditor of the company; or

                      (f)  the person is a partner or employee of an auditor of the company; or

                     (g)  the person is a partner, employer or employee of an officer of the company; or

                     (h)  the person is a partner or employee of an employee of an officer of the company.

             (2)  For the purposes of paragraph (1)(a), disregard a debt owed by a natural person to a body corporate if:

                     (a)  the body corporate is:

                              (i)  an Australian ADI; or

                             (ii)  a body corporate registered under the Life Insurance Act 1995; and

                     (b)  the debt arose because of a loan that the body corporate or entity made to the person in the ordinary course of its ordinary business; and

                     (c)  the person used the amount of the loan to pay the whole or part of the purchase price of premises that the person uses as their principal place of residence.

             (3)  For the purposes of subsection (1), a person is taken to be an officer or auditor of a company if:

                     (a)  the person is an officer or auditor of the company or of a related body corporate; or

                     (b)  except where the Commission, if it thinks fit in the circumstances of the case, directs that this paragraph not apply in relation to the person—the person has, within the last 2 years, been an officer, auditor or promoter of the company or of a related body corporate.

448D  Disqualification of insolvent under administration

                   A person must not consent to be appointed, and must not act, as administrator of a company or of a deed of company arrangement if he or she is an insolvent under administration.


 

Division 15Removal, replacement and remuneration of administrator

449A  Appointment of administrator cannot be revoked

                   The appointment of a person as administrator of a company or of a deed of company arrangement cannot be revoked.

449B  Court may remove administrator

                   On the application of the Commission or of a creditor of the company concerned, the Court may:

                     (a)  remove from office the administrator of a company under administration or of a deed of company arrangement; and

                     (b)  appoint someone else as administrator of the company or deed.

449C  Vacancy in office of administrator of company

             (1)  Where the administrator of a company under administration:

                     (a)  dies; or

                     (b)  becomes prohibited from acting as administrator of the company; or

                     (c)  resigns by notice in writing given to his or her appointer and to the company;

his or her appointer may appoint someone else as administrator of the company.

             (2)  In subsection (1):

appointer, in relation to the administrator of a company under administration, means:

                     (a)  if the administrator was appointed by the Court under section 449B or subsection (6) of this section—the Court; or

                     (b)  otherwise:

                              (i)  if the administration began because of an appointment under section 436A—the company; or

                             (ii)  if the administration began because of an appointment under section 436B—a liquidator or provisional liquidator of the company; or

                            (iii)  if the administration began because of an appointment under section 436C—a person who is entitled, or would apart from section 440B or 441D be entitled, to enforce the charge.

             (3)  An appointment under subsection (1) by the company under administration must be made pursuant to a resolution of the board.

             (4)  Within 5 business days after being appointed under subsection (1) as administrator of a company otherwise than by the Court, a person must convene a meeting of the company’s creditors so that they may:

                     (a)  determine whether to remove the person from office; and

                     (b)  if so, appoint someone else as administrator of the company.

             (5)  A person must convene a meeting under subsection (4) by:

                     (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.

             (6)  Where a company is under administration, but for some reason no administrator is acting, the Court may appoint a person as administrator on the application of the Commission or of an officer, member or creditor of the company.

             (7)  Subsections (3) and (6) have effect despite section 437C.

449D  Vacancy in office of administrator of deed of company arrangement

             (1)  Where the administrator of a deed of company arrangement:

                     (a)  dies; or

                     (b)  becomes prohibited from acting as administrator of the deed; or

                     (c)  resigns by notice in writing given to the company;

the Court may appoint someone else as administrator of the deed.

             (2)  Where a deed of company arrangement has not yet terminated, but for some reason no administrator of the deed is acting, the Court may appoint a person as administrator of the deed.

             (3)  An appointment may be made on the application of the Commission or of an officer, member or creditor of the company.

449E  Remuneration of administrator

             (1)  The administrator of a company under administration, or of a deed of company arrangement, is entitled to:

                     (a)  such remuneration as is fixed by a resolution of the company’s creditors passed at a meeting convened under section 439A, or under section 439A or 445F, as the case may be; or

                     (b)  if no remuneration is so fixed—such remuneration as the Court fixes on the application of the administrator.

             (2)  Where remuneration is fixed under paragraph (1)(a), the Court may, on the application of the administrator or of an officer, member or creditor of the company:

                     (a)  review the remuneration; and

                     (b)  confirm, increase or reduce it.

             (3)  Subsection (2) has effect despite section 437C.


 

Division 16Notices about steps taken under Part

450A  Appointment of administrator

             (1)  Where an administrator of a company is appointed under section 436A, 436B or 436C, the administrator must:

                     (a)  lodge a notice of the appointment before the end of the next business day after the appointment; and

                     (b)  cause such a notice to be published, within 3 business days after the appointment:

                              (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.

             (2)  As soon as practicable, and in any event before the end of the next business day, after appointing an administrator of a company under section 436C, a person must give to the company a written notice of the appointment.

             (3)  As soon as practicable, and in any event before the end of the next business day, after an administrator of a company is appointed under section 436A, 436B or 436C, he or she must give a written notice of the appointment to:

                     (a)  each person who holds a charge on the whole, or substantially the whole, of the company’s property; and

                     (b)  each person who holds 2 or more charges on property of the company where the property of the company subject to the respective charges together constitutes the whole, or substantially the whole, of the company’s property.

             (4)  An administrator need not give a notice under subsection (3) to the person who appointed the administrator.

450B  Execution of deed of company arrangement

                   As soon as practicable after a deed of company arrangement is executed, the deed’s administrator must:

                     (a)  send to each creditor of the company a written notice of the execution of the deed; and

                     (b)  cause such a notice to be published:

                              (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; and

                     (c)  lodge a copy of the deed.

450C  Failure to execute deed of company arrangement

                   As soon as practicable after a company contravenes subsection 444B(2), the deed’s administrator must:

                     (a)  lodge a notice that the company has failed to execute the instrument within the required period; and

                     (b)  cause a notice of the failure to be published as prescribed.

450D  Termination of deed of company arrangement

                   Where a deed of company arrangement terminates because of paragraph 445C(b), the deed’s administrator must:

                     (a)  lodge a notice of the termination; and

                     (b)  send such a notice to each of the company’s creditors; and

                     (c)  cause such a notice to be published as prescribed.

450E  Notice in public documents etc. of company

             (1)  A company under administration must set out, in every public document, and in every negotiable instrument, of the company, after the company’s name where it first appears, the expression (“administrator appointed”).

             (2)  Until a deed of company arrangement terminates, the company must set out, in every public document, and in every negotiable instrument, of the company, after the company’s name where it first appears, the expression (“subject to deed of company arrangement”).

450F  Effect of contravention of this Division

                   A contravention of this Division does not affect the validity of anything done or omitted under this Part, except so far as the Court otherwise orders.


 

Division 17Miscellaneous

451A  Appointment of 2 or more administrators of company

             (1)  Where a provision of this Law provides for an administrator of a company to be appointed, 2 or more persons may be appointed as administrators of the company.

             (2)  Where, because of subsection (1), there are 2 or more administrators of a company:

                     (a)  a function or power of an administrator of the company may be performed or exercised by any one of them, or by any 2 or more of them together, except so far as the instrument or resolution appointing them otherwise provides; and

                     (b)  a reference in this Law to an administrator, or to the administrator, of a company is, in the case of the first-mentioned company, a reference to whichever one or more of those administrators the case requires.

451B  Appointment of 2 or more administrators of deed of company arrangement

             (1)  Where a provision of this Law provides for an administrator of a deed of company arrangement to be appointed, 2 or more persons may be appointed as administrators of the deed.

             (2)  Where, because of subsection (1), there are 2 or more administrators of a deed of company arrangement:

                     (a)  a function or power of an administrator of the deed may be performed or exercised by any one of them, or by any 2 or more of them together, except so far as the deed, or the resolution or instrument appointing them, otherwise provides; and

                     (b)  a reference in this Law to an administrator, or to the administrator, of a deed of company arrangement is, in the case of the first-mentioned deed, a reference to whichever one or more of those administrators the case requires.

451C  Effect of things done during administration of company

                   A payment made, transaction entered into, or any other act or thing done, in good faith, by, or with the consent of, the administrator of a company under administration:

                     (a)  is valid and effectual for the purposes of this Law; and

                     (b)  is not liable to be set aside in a winding up of the company.

451D  Time for doing act does not run while act prevented by this Part

                   Where:

                     (a)  for any purpose (for example, the purposes of a law, agreement or instrument) an act must or may be done within a particular period or before a particular time; and

                     (b)  this Part prevents the act from being done within that period or before that time;

the period is extended, or the time is deferred, because of this section, according to how long this Part prevented the act from being done.


 

Part 5.4Winding up in insolvency

Division 1When company to be wound up in insolvency

459A  Order that insolvent company be wound up in insolvency

                   On an application under section 459P, the Court may order that an insolvent company be wound up in insolvency.

459B  Order made on application under section 234, 462 or 464

                   Where, on an application under section 234, 462 or 464, the Court is satisfied that the company is insolvent, the Court may order that the company be wound up in insolvency.

459C  Presumptions to be made in certain proceedings

             (1)  This section has effect for the purposes of:

                     (a)  an application under section 234, 459P, 462 or 464; or

                     (b)  an application for leave to make an application under section 459P.

             (2)  The Court must presume that the company is insolvent if, during or after the 3 months ending on the day when the application was made:

                     (a)  the company failed (as defined by section 459F) to comply with a statutory demand; or

                     (b)  execution or other process issued on a judgment, decree or order of an Australian court in favour of a creditor of the company was returned wholly or partly unsatisfied; or

                     (c)  a receiver, or receiver and manager, of property of the company was appointed under a power contained in an instrument relating to a floating charge on such property; or

                     (d)  an order was made for the appointment of such a receiver, or receiver and manager, for the purpose of enforcing such a charge; or

                     (e)  a person entered into possession, or assumed control, of such property for such a purpose; or

                      (f)  a person was appointed so to enter into possession or assume control (whether as agent for the chargee or for the company).

             (3)  A presumption for which this section provides operates except so far as the contrary is proved for the purposes of the application.

459D  Contingent or prospective liability relevant to whether company solvent

             (1)  In determining, for the purposes of an application of a kind referred to in subsection 459C(1), whether or not the company is solvent, the Court may take into account a contingent or prospective liability of the company.

             (2)  Subsection (1) does not limit the matters that may be taken into account in determining, for a particular purpose, whether or not a company is solvent.


 

Division 2Statutory demand

459E  Creditor may serve statutory demand on company

             (1)  A person may serve on a company a demand relating to:

                     (a)  a single debt that the company owes to the person, that is due and payable and whose amount is at least the statutory minimum; or

                     (b)  2 or more debts that the company owes to the person, that are due and payable and whose amounts total at least the statutory minimum.

             (2)  The demand:

                     (a)  if it relates to a single debt—must specify the debt and its amount; and

                     (b)  if it relates to 2 or more debts—must specify the total of the amounts of the debts; and

                     (c)  must require the company to pay the amount of the debt, or the total of the amounts of the debts, or to secure or compound for that amount or total to the creditor’s reasonable satisfaction, within 21 days after the demand is served on the company; and

                     (d)  must be in writing; and

                     (e)  must be in the prescribed form (if any); and

                      (f)  must be signed by or on behalf of the creditor.

             (3)  Unless the debt, or each of the debts, is a judgment debt, the demand must be accompanied by an affidavit that:

                     (a)  verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and

                     (b)  complies with the rules.

             (4)  A person may make a demand under this section relating to a debt even if the debt is owed to the person as assignee.

             (5)  A demand under this section may relate to a liability under any of the following provisions of the Income Tax Assessment Act 1936:

                     (a)  section 221F (except subsection 221F(12)), section 221G (except subsection 221G(4A)) or section 221P;

                     (b)  subsection 221YHDC(2);

                     (c)  subsection 221YHZD(1) or (1A);

                     (d)  subsection 221YN(1);

                     (e)  section 222AHA;

and any of the provisions of Subdivision 16‑B in Schedule 1 to the Taxation Administration Act 1953, even if the liability arose before the commencement of this section.

             (6)  Subsection (5) is to avoid doubt and is not intended to limit the generality of a reference in this Law to a debt.

459F  When company taken to fail to comply with statutory demand

             (1)  If, as at the end of the period for compliance with a statutory demand, the demand is still in effect and the company has not complied with it, the company is taken to fail to comply with the demand at the end of that period.

             (2)  The period for compliance with a statutory demand is:

                     (a)  if the company applies in accordance with section 459G for an order setting aside the demand:

                              (i)  if, on hearing the application under section 459G, or on an application by the company under this paragraph, the Court makes an order that extends the period for compliance with the demand—the period specified in the order, or in the last such order, as the case requires, as the period for such compliance; or

                             (ii)  otherwise—the period beginning on the day when the demand is served and ending 7 days after the application under section 459G is finally determined or otherwise disposed of; or

                     (b)  otherwise—21 days after the demand is served.


 

Division 3Application to set aside statutory demand

459G  Company may apply

             (1)  A company may apply to the Court for an order setting aside a statutory demand served on the company.

             (2)  An application may only be made within 21 days after the demand is so served.

             (3)  An application is made in accordance with this section only if, within those 21 days:

                     (a)  an affidavit supporting the application is filed with the Court; and

                     (b)  a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company.

459H  Determination of application where there is a dispute or offsetting claim

             (1)  This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:

                     (a)  that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;

                     (b)  that the company has an offsetting claim.

             (2)  The Court must calculate the substantiated amount of the demand in accordance with the formula:

where:

Admitted total means:

                     (a)  the admitted amount of the debt; or

                     (b)  the total of the respective admitted amounts of the debts;

as the case requires, to which the demand relates.

Offsetting total means:

                     (a)  if the Court is satisfied that the company has only one offsetting claim—the amount of that claim; or

                     (b)  if the Court is satisfied that the company has 2 or more offsetting claims—the total of the amounts of those claims; or

                     (c)  otherwise—a nil amount.

             (3)  If the substantiated amount is less than the statutory minimum, the Court must, by order, set aside the demand.

             (4)  If the substantiated amount is at least as great as the statutory minimum, the Court may make an order:

                     (a)  varying the demand as specified in the order; and

                     (b)  declaring the demand to have had effect, as so varied, as from when the demand was served on the company.

             (5)  In this section:

admitted amount, in relation to a debt, means:

                     (a)  if the Court is satisfied that there is a genuine dispute between the company and the respondent about the existence of the debt—a nil amount; or

                     (b)  if the Court is satisfied that there is a genuine dispute between the company and the respondent about the amount of the debt—so much of that amount as the Court is satisfied is not the subject of such a dispute; or

                     (c)  otherwise—the amount of the debt.

offsetting claim means a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates).

respondent means the person who served the demand on the company.

             (6)  This section has effect subject to section 459J.

459J  Setting aside demand on other grounds

             (1)  On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:

                     (a)  because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or

                     (b)  there is some other reason why the demand should be set aside.

             (2)  Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect.

459K  Effect of order setting aside demand

                   A statutory demand has no effect while there is in force under section 459H or 459J an order setting aside the demand.

459L  Dismissal of application

                   Unless the Court makes, on an application under section 459J, an order under section 459H or 459J, the Court is to dismiss the application.

459M  Order subject to conditions

                   An order under section 459H or 459J may be made subject to conditions.

459N  Costs where company successful

                   Where, on an application under section 459G, the Court sets aside the demand, it may order the person who served the demand to pay the company’s costs in relation to the application.


 

Division 4Application for order to wind up company in insolvency

459P  Who may apply for order under section 459A

             (1)  Any one or more of the following may apply to the Court for a company to be wound up in insolvency:

                     (a)  the company;

                     (b)  a creditor (even if the creditor is a secured creditor or is only a contingent or prospective creditor);

                     (c)  a contributory;

                     (d)  a director;

                     (e)  a liquidator or provisional liquidator of the company;

                      (f)  the Commission;

                     (g)  a prescribed agency.

             (2)  An application by any of the following, or by persons including any of the following, may only be made with the leave of the Court:

                     (a)  a person who is a creditor only because of a contingent or prospective debt;

                     (b)  a contributory;

                     (c)  a director;

                     (d)  the Commission.

             (3)  The Court may give leave if satisfied that there is a prima facie case that the company is insolvent, but not otherwise.

             (4)  The Court may give leave subject to conditions.

             (5)  Except as permitted by this section, a person cannot apply for a company to be wound up in insolvency.

459Q  Application relying on failure to comply with statutory demand

                   If an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the application:

                     (a)  must set out particulars of service of the demand on the company and of the failure to comply with the demand; and

                     (b)  must have attached to it:

                              (i)  a copy of the demand; and

                             (ii)  if the demand has been varied by an order under subsection 459H(4)—a copy of the order; and

                     (c)  unless the debt, or each of the debts, to which the demand relates is a judgment debt—must be accompanied by an affidavit that:

                              (i)  verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and

                             (ii)  complies with the rules.

459R  Period within which application must be determined

             (1)  An application for a company to be wound up in insolvency is to be determined within 6 months after it is made.

             (2)  The Court may by order extend the period within which an application must be determined, but only if:

                     (a)  the Court is satisfied that special circumstances justify the extension; and

                     (b)  the order is made within that period as prescribed by subsection (1), or as last extended under this subsection, as the case requires.

             (3)  An application is, because of this subsection, dismissed if it is not determined as required by this section.

             (4)  An order under subsection (2) may be made subject to conditions.

459S  Company may not oppose application on certain grounds

             (1)  In so far as an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the company may not, without the leave of the Court, oppose the application on a ground:

                     (a)  that the company relied on for the purposes of an application by it for the demand to be set aside; or

                     (b)  that the company could have so relied on, but did not so rely on (whether it made such an application or not).

             (2)  The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent.

459T  Application to wind up joint debtors in insolvency

             (1)  A single application may be made for 2 or more companies to be wound up in insolvency if they are joint debtors, whether partners or not.

             (2)  On such an application, the Court may order that one or more of the companies be wound up in insolvency, even if it dismisses the application in so far as it relates to another or others.


 

Part 5.4AWinding up by the Court on other grounds

  

461  General grounds on which company may be wound up by Court

             (1)  The Court may order the winding up of a company if:

                     (a)  the company has by special resolution resolved that it be wound up by the Court;

                     (c)  the company does not commence business within one year from its incorporation or suspends its business for a whole year;

                     (d)  the company has no members;

                     (e)  directors have acted in affairs of the company in their own interests rather than in the interests of the members as a whole, or in any other manner whatsoever that appears to be unfair or unjust to other members;

                      (f)  affairs of the company are being conducted in a manner that is oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or members or in a manner that is contrary to the interests of the members as a whole;

                     (g)  an act or omission, or a proposed act or omission, by or on behalf of the company, or a resolution, or a proposed resolution, of a class of members of the company, was or would be oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or members or was or would be contrary to the interests of the members as a whole;

                     (h)  the Commission has stated in a report prepared under Division 1 of Part 3 of the ASIC Law that, in its opinion:

                              (i)  the company cannot pay its debts and should be wound up; or

                             (ii)  it is in the interests of the public, of the members, or of the creditors, that the company should be wound up;

                      (j)  if the application was made by APRA—the Court is of opinion that it is in the interests of the public, of the members or of the creditors that the company should be wound up; or

                     (k)  the Court is of opinion that it is just and equitable that the company be wound up.

             (2)  A company must lodge a copy of a special resolution referred to in paragraph (1)(a) with ASIC within 14 days after the resolution is passed.

462  Standing to apply for winding up

             (1)  A reference in this section to an order to wind up a company is a reference to an order to wind up the company on a ground provided for by section 461.

             (2)  Subject to this section, any one or more of the following may apply for an order to wind up a company:

                     (a)  the company; or

                     (b)  a creditor (including a contingent or prospective creditor) of the company; or

                     (c)  a contributory; or

                     (d)  the liquidator of the company; or

                     (e)  the Commission pursuant to section 464; or

                      (f)  the Commission (in the circumstances set out in subsection (2A)); or

                     (h)  APRA.

          (2A)  The Commission may apply for an order to wind up a company under paragraph (2)(f) only if:

                     (a)  the company has no members; and

                     (b)  the Commission has given the company at least 1 month’s written notice of its intention to apply for the order.

             (3)  A person being, or persons including, APRA may only apply for an order to wind up a company if:

                     (a)  an inspector has been appointed to make an investigation in respect of the company under section 52 of the Insurance Act 1973; and

                     (b)  the company’s liabilities within the meaning of Part III of that Act exceed the company’s assets within the meaning of that Part.

             (4)  The Court shall not hear an application by a person being, or persons including, a contingent or prospective creditor of a company for an order to wind up the company unless and until:

                     (a)  such security for costs has been given as the Court thinks reasonable; and

                     (b)  a prima facie case for winding up the company has been established to the Court’s satisfaction.

             (5)  Except as permitted by this section, a person is not entitled to apply for an order to wind up a company.

464  Application for winding up in connection with investigation under ASIC Law

             (1)  Where the Commission is investigating, or has investigated, under Division 1 of Part 3 of the ASIC Law:

                     (a)  matters being, or connected with, affairs of a company; or

                     (b)  matters including such matters;

the Commission may apply to the Court for the winding up of the company.

             (2)  For the purposes of an application under subsection (1), this Law applies, with such modifications as the circumstances require, as if a winding up application had been made by the company.

             (3)  The Commission shall give a copy of an application made under subsection (1) to the company.


 

Part 5.4BWinding up in insolvency or by the Court

Division 1General

465A  Notice of application

                   A person who applies under section 459P, 462 or 464 for a company to be wound up must:

                     (a)  lodge notice in the prescribed form that the application has been made; and

                     (b)  within 14 days after the application is made, serve a copy of it on the company; and

                     (c)  advertise the application as prescribed by the rules.

465B  Substitution of applicants

             (1)  The Court may by order substitute, as applicant or applicants in an application under section 459P, 462 or 464 for a company to be wound up, a person or persons who might otherwise have so applied for the company to be wound up.

             (2)  The Court may only make an order if the Court thinks it appropriate to do so:

                     (a)  because the application is not being proceeded with diligently enough; or

                     (b)  for some other reason.

             (3)  The substituted applicant may be, or the substituted applicants may be or include, the person who was the applicant, or any of the persons who were the applicants, before the substitution.

             (4)  After an order is made, the application may proceed as if the substituted applicant or applicants had been the original applicant or applicants.

465C  Applicant to be given notice of grounds for opposing application

                   On the hearing of an application under section 459P, 462 or 464, a person may not, without the leave of the Court, oppose the application unless, within the period prescribed by the rules, the person has filed, and served on the applicant:

                     (a)  notice of the grounds on which the person opposes the application; and

                     (b)  an affidavit verifying the matters stated in the notice.

466  Payment of preliminary costs etc.

             (1)  The persons, other than the company itself or the liquidator of the company, on whose application any winding up order is made shall, at their own cost, prosecute all proceedings in the winding up until a liquidator has been appointed under this Part.

             (2)  The liquidator shall, unless the Court orders otherwise, reimburse the applicant out of the property of the company the taxed costs incurred by the applicant in any such proceedings.

             (3)  Where the company has no property or does not have sufficient property and, in the opinion of the Commission, a fraud has been committed by any person in the promotion or formation of the company or by any officer of the company in relation to the company since its formation, the taxed costs or so much of them as is not reimbursed under subsection (2) may be reimbursed by the Commission to an amount not exceeding $1,000.

             (4)  Where any winding up order is made upon the application of the company or a liquidator of the company, the costs incurred shall, subject to any order of the Court, be paid out of the property of the company in like manner as if they were the costs of any other applicant.

467  Court’s powers on hearing application

             (1)  Subject to subsection (2) and section 467A, on hearing a winding up application the Court may:

                     (a)  dismiss the application with or without costs, even if a ground has been proved on which the Court may order the company to be wound up on the application; or

                     (b)  adjourn the hearing conditionally or unconditionally; or

                     (c)  make any interim or other order that it thinks fit.

             (2)  The Court shall not refuse to make a winding up order merely because:

                     (a)  the property of the company has been mortgaged to an amount equal to or greater than the value or amount of that property; or

                     (b)  the company has no property.

             (3)  The Court may, on the application coming on for hearing or at any time at the request of the applicant, the company or any person who has given notice of intention to appear on the hearing of the application:

                     (a)  direct that any notices be given or any steps be taken before or after the hearing of the application;

                     (b)  dispense with any notices being given or steps being taken that are required by this Law, or by the rules, or by any prior order of the Court;

                     (c)  direct that oral evidence be taken on the application or any matter relating to the application;

                     (d)  direct a speedy hearing or trial of the application or of any issue or matter;

                     (e)  allow the application to be amended or withdrawn; and

                      (f)  give such directions as to the proceedings as the Court thinks fit.

             (4)  Where the application is made by members as contributories on the ground that it is just and equitable that the company should be wound up or that the directors have acted in a manner that appears to be unfair or unjust to other members, the Court, if it is of the opinion that:

                     (a)  the applicants are entitled to relief either by winding up the company or by some other means; and

                     (b)  in the absence of any other remedy it would be just and equitable that the company should be wound up;

shall make a winding up order unless it is also of the opinion that some other remedy is available to the applicants and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.

             (5)  Notwithstanding any rule of law to the contrary, the Court shall not refuse to make an order for winding up on the application of a contributory on the ground that, if the order were made, no property of the company would be available for distribution among the contributories.

             (7)  At any time after the filing of a winding up application and before a winding up order has been made, the company or any creditor or contributory may, where any action or other civil proceeding against the company is pending, apply to the Court to stay or restrain further proceedings in the action or proceeding, and the Court may stay or restrain the proceedings accordingly on such terms as it thinks fit.

467A  Effect of defect or irregularity on application under Part 5.4 or 5.4A

                   An application under Part 5.4 or 5.4A must not be dismissed merely because of one or more of the following:

                     (a)  in any case—a defect or irregularity in connection with the application;

                     (b)  in the case of an application for a company to be wound up in insolvency—a defect in a statutory demand;

unless the Court is satisfied that substantial injustice has been caused that cannot otherwise be remedied (for example, by an adjournment or an order for costs).

467B  Court may order winding up of company that is being wound up voluntarily

                   The Court may make an order under section 233, 459A, 459B or 461 even if the company is already being wound up voluntarily.

468  Avoidance of dispositions of property, attachments etc.

             (1)  Any disposition of property of the company, other than an exempt disposition, and any transfer of shares or alteration in the status of the members of the company made after the commencement of the winding up by the Court is, unless the Court otherwise orders, void.

             (2)  In subsection (1), exempt disposition, in relation to a company that has commenced to be wound up by the Court, means:

                     (a)  a disposition made by the liquidator, or by a provisional liquidator, of the company pursuant to a power conferred on him or her by:

                              (i)  this Law; or,

                             (ii)  rules of the Court that appointed him or her; or

                            (iii)  an order of the Court; or

                    (aa)  a disposition made in good faith by, or with the consent of, an administrator of the company; or

                    (ab)  a disposition under a deed of company arrangement executed by the company; or

                     (b)  a payment of money by an Australian ADI out of an account maintained by the company with the Australian ADI, being a payment made by the Australian ADI:

                              (i)  on or before the day on which the Court makes the order for the winding up of the company; and

                             (ii)  in good faith and in the ordinary course of the banking business of the Australian ADI.

             (3)  Notwithstanding subsection (1), the Court may, where an application for winding up has been filed but a winding up order has not been made, by order:

                     (a)  validate the making, after the filing of the application, of a disposition of property of the company; or

                     (b)  permit the business of the company or a portion of the business of the company to be carried on, and such acts as are incidental to the carrying on of the business or portion of the business to be done, during the period before a winding up order (if any) is made;

on such terms as it thinks fit.

             (4)  Any attachment, sequestration, distress or execution put in force against the property of the company after the commencement of the winding up by the Court is void.

469  Application to be lis pendens

                   An application for winding up a company constitutes a lis pendens for the purposes of any law relating to the effect of a lis pendens upon purchasers or mortgagees.

470  Certain notices to be lodged

             (1)  An applicant (other than the Commission) for the winding up of a company shall:

                     (a)  lodge, not later than 10.30 a.m. on the next business day after the filing of the application, notice of the filing of the application and of the date on which the application was filed;

                     (b)  after an order for winding up is made—lodge, within 2 business days after the making of the order, notice of the making of the order, of the date on which the order was made and of the name and address of the liquidator; and

                     (c)  if the application is withdrawn or dismissed—lodge, within 2 business days after the withdrawal or dismissal of the application, notice of the withdrawal or dismissal of the application and of the date on which the application was withdrawn or dismissed.

             (2)  The applicant shall, within 7 days after the passing and entering of a winding up order:

                     (a)  except where the applicant is the Commission—lodge an office copy of the order;

                     (b)  serve an office copy of the order on the company or such other person as the Court directs; and

                     (c)  deliver to the liquidator an office copy of the order together with a statement that the order has been served as mentioned in paragraph (b).

             (3)  Where the Commission applies for the winding up of a company, the Commission shall enter in its records particulars of the application and, after the passing and entering of a winding up order, an office copy of the order, and subsection 1274(2) applies in relation to the document containing those particulars and to the office copy as if they were documents lodged with the Commission.


 

Division 1AEffect of winding up order

471  Effect on creditors and contributories

             (1)  An order for winding up a company operates in favour of all the creditors and contributories of the company as if it had been made on the joint application of all the creditors and contributories.

471A  Powers of other officers suspended during winding up

             (1)  While a company is being wound up in insolvency or by the Court, a person cannot perform or exercise, and must not purport to perform or exercise, a function or power as an officer of the company, except:

                     (a)  as a liquidator appointed for the purposes of the winding up; or

                     (b)  as an administrator appointed for the purposes of an administration of the company beginning after the winding up order was made; or

                     (c)  with the liquidator’s written approval; or

                     (d)  with the approval of the Court.

             (2)  While a provisional liquidator of a company is acting, a person cannot perform or exercise, and must not purport to perform or exercise, a function or power as an officer of the company, except:

                     (a)  as a provisional liquidator of the company; or

                     (b)  as an administrator appointed for the purposes of an administration of the company beginning after the provisional liquidator was appointed; or

                     (c)  with the provisional liquidator’s written approval; or

                     (d)  with the approval of the Court.

             (3)  This section does not remove an officer of a company from office.

             (4)  For the purposes of this section, a person is not an officer of a company merely because he or she is:

                     (a)  a receiver and manager, appointed under a power contained in an instrument, of property of the company; or

                     (b)  an employee of the company.

471B  Stay of proceedings and suspension of enforcement process

                   While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with:

                     (a)  a proceeding in a court against the company or in relation to property of the company; or

                     (b)  enforcement process in relation to such property;

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

471C  Secured creditor’s rights not affected

                   Nothing in section 471A or 471B affects a secured creditor’s right to realise or otherwise deal with the security.


 

Division 2Court-appointed liquidators

472  Court to appoint official liquidator

             (1)  On an order being made for the winding up of a company, the Court may appoint an official liquidator to be liquidator of the company.

             (2)  The Court may appoint an official liquidator provisionally at any time after the filing of a winding up application and before the making of a winding up order or, if there is an appeal against a winding up order, before a decision in the appeal is made.

             (3)  A liquidator appointed provisionally has or may exercise such functions and powers:

                     (a)  as are conferred on him or her by this Law or by rules of the Court that appointed him or her; or

                     (b)  as the Court specifies in the order appointing him or her.

             (4)  A liquidator of a company appointed provisionally also has:

                     (a)  power to carry on the company’s business; and

                     (b)  the powers that a liquidator of the company would have under paragraph 477(1)(d), subsection 477(2) (except paragraph 477(2)(m)) and subsection 477(3) if the company were being wound up in insolvency or by the Court.

             (5)  Subsections 477(2A) and (2B) apply in relation to a company’s provisional liquidator, with such modifications (if any) as the circumstances require, as if he or she were a liquidator appointed for the purposes of a winding up in insolvency or by the Court.

             (6)  The exercise by a company’s provisional liquidator of the powers conferred by subsection (4) is subject to the control of the Court, and a creditor or contributory, or the Commission, may apply to the Court in relation to the exercise or proposed exercise of any of those powers.

473  General provisions about liquidators

             (1)  A liquidator appointed by the Court may resign or, on cause shown, be removed by the Court.

             (2)  A provisional liquidator is entitled to receive such remuneration by way of percentage or otherwise as is determined by the Court.

             (3)  A liquidator is entitled to receive such remuneration by way of percentage or otherwise as is determined:

                     (a)  if there is a committee of inspection—by agreement between the liquidator and the committee of inspection; or

                     (b)  if there is no committee of inspection or the liquidator and the committee of inspection fail to agree:

                              (i)  by resolution of the creditors; or

                             (ii)  if no such resolution is passed—by the Court.

             (4)  A meeting of creditors for the purposes of subsection (3) shall be convened by the liquidator by sending to each creditor a notice to which is attached a statement of all receipts and expenditure by the liquidator and of the amount of remuneration sought by him or her.

             (5)  Where the remuneration of a liquidator is determined in the manner specified in paragraph (3)(a), the Court may, on the application of:

                     (a)  a member or members whose shareholding or shareholdings represents or represent in the aggregate at least 10% of the issued capital of the company;

                     (b)  a creditor or creditors whose debts against the company that have been admitted to proof amount in the aggregate to at least 10% of the total amount of the debts of the creditors of the company that have been admitted to proof; or

                     (c)  the Commission;

review the liquidator’s remuneration and may confirm, increase or reduce that remuneration.

             (6)  Where the remuneration of a liquidator is determined in the manner specified in subparagraph (3)(b)(i) the Court may, on the application of the liquidator or of a member or members referred to in subsection (5), review the liquidator’s remuneration and may confirm, increase or reduce that remuneration.

             (7)  A vacancy in the office of a liquidator appointed by the Court shall be filled by the Court.

             (8)  If more than one liquidator is appointed by the Court, the Court shall declare whether anything that is required or authorised by this Law to be done by the liquidator is to be done by all or any one or more of the persons appointed.

             (9)  Subject to this Law, the acts of a liquidator are valid notwithstanding any defects that may afterwards be discovered in his or her appointment or qualification.

474  Custody and vesting of company’s property

             (1)  If a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company has been appointed, the liquidator or provisional liquidator shall take into his or her custody or under his or her control all the property to which the company is or appears to be entitled, and, if there is no liquidator, all the property of the company shall be in the custody of the Court.

             (2)  The Court may, on the application of the liquidator, by order direct that all or any part of the property of the company shall vest in the liquidator and thereupon the property to which the order relates shall vest accordingly and the liquidator may, after giving such indemnity (if any) as the Court directs, bring, or may defend, any action or other legal proceeding that relates to that property or that it is necessary to bring or defend for the purpose of effectually winding up the company and recovering its property.

             (3)  Where an order is made under this section, the liquidator of the company to which the order relates shall, within 14 days after the making of the order, lodge with the Commission an office copy of the order.

475  Report as to company’s affairs to be submitted to liquidator

          (1A)  In this section:

liquidator includes a provisional liquidator.

             (1)  There shall be made out and verified by a statement in writing in the prescribed form, and submitted to the liquidator, by the persons who were, at the date of the winding up order or, if the liquidator specifies an earlier date, that earlier date, the directors and secretary of the company a report in the prescribed form as to the affairs of the company as at the date concerned.

             (2)  The liquidator may, by notice in writing served personally or by post addressed to the last known address of the person, require one or more persons included in one or more of the following classes of persons to make out as required by the notice, verify by a statement in writing in the prescribed form, and submit to him or her, a report, containing such information as is specified in the notice as to the affairs of the company or as to such of those affairs as are specified in the notice, as at a date specified in the notice:

                     (a)  persons who are or have been officers of the company;

                     (b)  where the company was formed within one year before the date of the winding up order—persons who have taken part in the formation of the company;

                     (c)  persons who are employed by the company or have been employed by the company within one year before the date of the winding up order and are, in the opinion of the liquidator, capable of giving the information required;

                     (d)  persons who are, or have been within one year before the date of the winding up order, officers of, or employed by, a body corporate that is, or within that year was, an officer of the company to the affairs of which the report relates;

                     (e)  a person who was a provisional liquidator of the company.

             (3)  The liquidator may, in a notice under subsection (2), specify the information that he or she requires as to affairs of the company by reference to information required by this Law or the regulations to be included in any other report, statement or notice under this Law.

             (4)  A report referred to in subsection (1) shall, subject to subsection (6), be submitted to the liquidator not later than 14 days after the making of the winding up order.

             (5)  A person required to submit a report referred to in subsection (2) shall, subject to subsection (6), submit it not later than 14 days after the liquidator serves notice of the requirement.

             (6)  Where the liquidator believes there are special reasons for so doing, he or she may, on an application in writing made to him or her before the end of the time limited by subsection (4) or (5) for the submission by the applicant of a report under subsection (1) or (2), grant, by notice in writing, an extension of that time.

             (7)  A liquidator:

                     (a)  shall, within 7 days after receiving a report under subsection (1) or (2), cause a copy of the report to be filed with the Court and a copy to be lodged; and

                     (b)  shall, where he or she gives a notice under subsection (6), as soon as practicable lodge a copy of the notice.

             (8)  A person making or concurring in making a report required by this section and verifying it as required by this section shall, subject to the rules, be allowed, and shall be paid by the liquidator out of the property of the company, such costs and expenses incurred in and about the preparation and making of the report and the verification of that report as the liquidator considers reasonable.

             (9)  A person shall not, without reasonable excuse, contravene a provision of this section other than subsection (7).

           (10)  A person shall not, without reasonable excuse, contravene subsection (7).

476  Preliminary report by liquidator

                   A liquidator of a company shall, within 2 months, or such longer period (if any) as the Commission allows, after receiving a report referred to in subsection 475(1) or (2), lodge a preliminary report:

                     (a)  in the case of a company having a share capital—as to the amount of capital issued, subscribed and paid up;

                     (b)  as to the estimated amounts of assets and liabilities of the company;

                     (c)  if the company has failed—as to the causes of the failure; and

                     (d)  as to whether, in his or her opinion, further inquiry is desirable with respect to a matter relating to the promotion, formation or insolvency of the company or the conduct of the business of the company.

477  Powers of liquidator

             (1)  Subject to this section, a liquidator of a company may:

                     (a)  carry on the business of the company so far as is necessary for the beneficial disposal or winding up of that business;

                     (b)  subject to the provisions of section 556, pay any class of creditors in full;

                     (c)  make any compromise or arrangement with creditors or persons claiming to be creditors or having or alleging that they have any claim (present or future, certain or contingent, ascertained or sounding only in damages) against the company or whereby the company may be rendered liable; and

                     (d)  compromise any calls, liabilities to calls, debts, liabilities capable of resulting in debts and any claims (present or future, certain or contingent, ascertained or sounding only in damages) subsisting or supposed to subsist between the company and a contributory or other debtor or person apprehending liability to the company, and all questions in any way relating to or affecting the property or the winding up of the company, on such terms as are agreed, and take any security for the discharge of, and give a complete discharge in respect of, any such call, debt, liability or claim.

             (2)  Subject to this section, a liquidator of a company may:

                     (a)  bring or defend any legal proceeding in the name and on behalf of the company;

                     (b)  appoint a solicitor to assist him or her in his or her duties;

                     (c)  sell or otherwise dispose of, in any manner, all or any part of the property of the company;

                    (ca)  exercise the Court’s powers under subsection 483(3) (except paragraph 483(3)(b)) in relation to calls on contributories;

                     (d)  do all acts and execute in the name and on behalf of the company all deeds, receipts and other documents and for that purpose use when necessary a seal of the company;

                     (e)  subject to the Bankruptcy Act 1966, prove in the bankruptcy of any contributory or debtor of the company or under any deed executed under that Act;

                      (f)  draw, accept, make and indorse any bill of exchange or promissory note in the name and on behalf of the company;

                     (g)  obtain credit, whether on the security of the property of the company or otherwise;

                     (h)  take out letters of administration of the estate of a deceased contributory or debtor, and do any other act necessary for obtaining payment of any money due from a contributory or debtor, or his or her estate, that cannot be conveniently done in the name of the company;

                     (k)  appoint an agent to do any business that the liquidator is unable to do, or that it is unreasonable to expect the liquidator to do, in person; and

                    (m)  do all such other things as are necessary for winding up the affairs of the company and distributing its property.

          (2A)  Except with the approval of the Court, of the committee of inspection or of a resolution of the creditors, a liquidator of a company must not compromise a debt to the company if the amount claimed by the company is more than:

                     (a)  if an amount greater than $20,000 is prescribed—the prescribed amount; or

                     (b)  otherwise—$20,000.

          (2B)  Except with the approval of the Court, of the committee of inspection or of a resolution of the creditors, a liquidator of a company must not enter into an agreement on the company’s behalf (for example, but without limitation, a lease or a charge) if:

                     (a)  without limiting paragraph (b), the term of the agreement may end; or

                     (b)  obligations of a party to the agreement may, according to the terms of the agreement, be discharged by performance;

more than 3 months after the agreement is entered into, even if the term may end, or the obligations may be discharged, within those 3 months.

             (3)  A liquidator of a company is entitled to inspect at any reasonable time any books of the company and a person who refuses or fails to allow the liquidator to inspect such books at such a time is guilty of an offence.

             (5)  For the purpose of enabling the liquidator to take out letters of administration or recover money as mentioned in paragraph (2)(h), the money due shall be deemed to be due to the liquidator.

             (6)  The exercise by the liquidator of the powers conferred by this section is subject to the control of the Court, and any creditor or contributory, or the Commission, may apply to the Court with respect to any exercise or proposed exercise of any of those powers.

             (7)  This section does not apply to calls on shares in a no liability company.

478  Application of property; list of contributories

             (1)  As soon as practicable after the Court orders that a company be wound up, the liquidator must:

                     (a)  cause the company’s property to be collected and applied in discharging the company’s liabilities; and

                     (b)  consider whether subsection (1A) requires him or her to settle a list of contributories.

          (1A)  A liquidator of a company that is being wound up in insolvency or by the Court must settle a list of contributories if it appears to him or her likely that:

                     (a)  either:

                              (i)  there are persons liable as members or past members to contribute to the company’s property on the winding up; or

                             (ii)  there will be a surplus available for distribution; and

                     (b)  it will be necessary:

                              (i)  to make calls on contributories; or

                             (ii)  to adjust the rights of the contributories among themselves.

          (1B)  A liquidator of such a company may rectify the register of members so far as required under this Part.

             (3)  In settling the list of contributories the liquidator shall distinguish between persons who are contributories in their own right and persons who are contributories by virtue of representing, or being liable for the debts of, other persons.

             (4)  The list of contributories, when settled in accordance with the regulations, is prima facie evidence of the liabilities of the persons named in the list as contributories.

             (5)  Paragraph (1)(b) and subsections (1A), (1B), (3) and (4) do not apply to a no liability company.

479  Exercise and control of liquidator’s powers

             (1)  Subject to this Part, the liquidator shall, in the administration of the property of the company and in the distribution of the property among its creditors, have regard to any directions given by resolution of the creditors or contributories at any general meeting or by the committee of inspection, and, in case of conflict, any directions so given by the creditors or contributories override any directions given by the committee of inspection.

             (2)  The liquidator may convene general meetings of the creditors or contributories for the purpose of ascertaining their wishes, and he or she shall convene meetings at such times as the creditors or contributories by resolution direct or whenever requested in writing to do so by at least one-tenth in value of the creditors or contributories.

             (3)  The liquidator may apply to the Court for directions in relation to any particular matter arising under the winding up.

             (4)  Subject to this Part, the liquidator shall use his or her own discretion in the management of affairs and property of the company and the distribution of its property.

480  Release of liquidator and deregistration of company

                   When the liquidator:

                     (a)  has realised all the property of the company or so much of that property as can in his or her opinion be realised without needlessly protracting the winding up, and has distributed a final dividend (if any) to the creditors and adjusted the rights of the contributories among themselves and made a final return (if any) to the contributories; or

                     (b)  has resigned or has been removed from office;

he or she may apply to the Court:

                     (c)  for an order that he or she be released; or

                     (d)  for an order that he or she be released and that ASIC deregister the company.

481  Orders for release or deregistration

             (1)  The Court:

                     (a)  may cause a report on the accounts of the liquidator to be prepared by the auditor appointed by the Commission under section 539 or by some other registered company auditor appointed by the Court;

                     (b)  on the liquidator complying with all the requirements of the Court—shall take into consideration the report and any objection against the release of the liquidator that is made by the auditor or by any creditor, contributory or other person interested; and

                     (c)  shall either grant or withhold the release accordingly.

             (2)  Where the release of a liquidator is withheld and the Court is satisfied that the liquidator has been guilty of default, negligence, breach of trust or breach of duty, the Court may order the liquidator to make good any loss that the company has sustained by reason of the default, negligence, breach of trust or breach of duty and may make such other order as it thinks fit.

             (3)  An order of the Court releasing the liquidator discharges him or her from all liability in respect of any act done or default made by him or her in the administration of the affairs of the company or otherwise in relation to his or her conduct as liquidator, but any such order may be revoked on proof that it was obtained by fraud or by suppression or concealment of any material fact.

             (4)  Where the liquidator has not previously resigned or been removed, his or her release operates as a removal from office.

             (5)  Where the Court has made:

                     (a)  an order that the liquidator be released; or

                     (b)  an order that the liquidator be released and that ASIC deregister the company;

the liquidator shall, within 14 days after the making of the order, lodge an office copy of the order.


 

Division 3General powers of Court

482  Power to stay or terminate winding up

             (1)  At any time during the winding up of a company, the Court may, on application, make an order staying the winding up either indefinitely or for a limited time or terminating the winding up on a day specified in the order.

          (1A)  An application may be made by:

                     (a)  in any case—the liquidator, or a creditor or contributory, of the company; or

                     (b)  in the case of a company registered under the Life Insurance Act 1995—APRA.

             (2)  On such an application, the Court may, before making an order, direct the liquidator to furnish a report with respect to a relevant fact or matter.

             (3)  Where the Court has made an order terminating the winding up, the Court may give such directions as it thinks fit for the resumption of the management and control of the company by its officers, including directions for the convening of a general meeting of members of the company to elect directors of the company to take office upon the termination of the winding up.

             (4)  The costs of proceedings before the Court under this section and the costs incurred in convening a meeting of members of the company in accordance with an order of the Court under this section shall, if the Court so directs, form part of the costs, charges and expenses of the winding up.

             (5)  Where an order is made under this section, the company shall lodge an office copy of the order within 14 days after the making of the order.

483  Delivery of property to liquidator

             (1)  The Court may require a person who is a contributory, trustee, receiver, banker, agent or officer of the company to pay, deliver, convey, surrender or transfer to the liquidator or provisional liquidator, as soon as practicable or within a specified period, any money, property or books in the person’s hands to which the company is prima facie entitled.

             (2)  The Court may make an order directing any contributory for the time being on the list of contributories to pay to the company in the manner directed by the order any money due from the contributory or from the estate of the person whom the contributory represents, exclusive of any money payable by the contributory or the estate by virtue of any call pursuant to this Law, and may:

                     (a)  in the case of an unlimited company—allow to the contributory by way of set-off any money due to the contributory or to the estate that the contributory represents from the company on any independent dealing or contract but not any money due to the contributory as a member of the company in respect of any dividend or profit; and

                     (b)  in the case of a limited company—make to any director whose liability is unlimited or to such a director’s estate the like allowance;

and, in the case of any company whether limited or unlimited, when all the creditors are paid in full, any money due on any account whatever to a contributory from the company may be allowed to him, her or it by way of set-off against any subsequent call.

             (3)  The Court may, either before or after it has ascertained the sufficiency of the property of the company:

                     (a)  make calls on all or any of the contributories for the time being on the list of contributories, to the extent of their liability, for payment of any money that the Court considers necessary to satisfy the debts and liabilities of the company and the costs, charges and expenses of winding up and for the adjustment of the rights of the contributories among themselves; and

                     (b)  make an order for payment of any calls made by the Court or the company’s liquidator;

and, in making a call, may take into consideration the probability that some of the contributories may partly or wholly fail to pay the call.

          (3A)  Subsection (3) does not apply to a no liability company.

             (4)  The Court may order any contributory, purchaser or other person from whom money is due to the company to pay the amount due into a bank named in the order to the account of the liquidator instead of to the liquidator, and any such order may be enforced in the same manner as if it had directed payment to the liquidator.

             (5)  All money and securities paid or delivered into any bank under this Division are subject in all respects to orders of the Court.

             (6)  An order made by the Court under this section is, subject to any right of appeal, conclusive evidence that the money (if any) thereby appearing to be due or ordered to be paid is due, and all other pertinent matters stated in the order shall be taken to be truly stated as against all persons and in all proceedings.

484  Appointment of special manager

             (1)  The liquidator may, if satisfied that the nature of the property or business of the company, or the interests of the creditors or contributories generally, requires or require the appointment of a special manager of the property or business of the company other than himself or herself, apply to the Court, and the Court may appoint a special manager of the property or business to act during such time as the Court directs with such powers, including any of the powers of a receiver or manager, as are entrusted to him or her by the Court.

             (2)  The special manager:

                     (a)  shall give such security and account in such manner as the Court directs;

                     (b)  shall receive such remuneration as is fixed by the Court; and

                     (c)  may at any time resign by notice in writing addressed to the liquidator or may, on cause shown, be removed by the Court.

485  Claims of creditors and distribution of property

             (1)  The Court may fix a day on or before which creditors are to prove their debts or claims or after which they will be excluded from the benefit of any distribution made before those debts are proved.

             (2)  The Court shall adjust the rights of the contributories among themselves and distribute any surplus among the persons entitled to it.

             (3)  The Court may, in the event of the property being insufficient to satisfy the liabilities, make an order as to the payment out of the property of the costs, charges and expenses incurred in the winding up in such order of priority as the Court thinks just.

486  Inspection of books by creditors and contributories

                   The Court may make such order for inspection of the books of the company by creditors and contributories as the Court thinks just, and any books in the possession of the company may be inspected by creditors or contributories accordingly, but not further or otherwise.

486A  Court may make order to prevent officer or related entity from avoiding liability to company

             (1)  On the application of a liquidator or provisional liquidator of a company, the Court may make one or more of the following:

                     (a)  an order prohibiting, either absolutely or subject to conditions, an officer or related entity of the company from taking or sending out of this jurisdiction or out of Australia money or other property of the company or of the officer or related entity;

                     (b)  an order appointing:

                              (i)  a receiver or trustee, with specified powers, of property of an officer of the company, or of property of a related entity of the company that is a natural person; or

                             (ii)  a receiver, or a receiver and manager, with specified powers, of property of a related entity of the company that is not a natural person;

                     (c)  an order requiring an officer of the company, or a related entity of the company that is a natural person, to surrender to the Court his or her passport and any other specified documents;

                     (d)  an order prohibiting an officer of the company, or a related entity of the company that is a natural person, from leaving Australia without the Court’s consent.

             (2)  The Court may only make an order under subsection (1) if:

                     (a)  the company is being wound up in insolvency or by the Court, or an application has been made for the company to be so wound up; and

                     (b)  the Court is satisfied that there is at least a prima facie case that the officer or related entity is or will become liable:

                              (i)  to pay money to the company, whether in respect of a debt, by way of damages or compensation or otherwise; or

                             (ii)  to account for property of the company; and

                     (c)  the Court is also satisfied that there is substantial evidence that the officer or related entity:

                              (i)  has concealed or removed money or other property, has tried to do so, or intends to do so; or

                             (ii)  has tried to leave Australia, or intends to do so;

                            in order to avoid that liability or its consequences; and

                     (d)  the Court thinks it necessary or desirable to make the order in order to protect the company’s rights against the officer or related entity.

             (3)  On hearing an application under subsection (1), the Court must have regard to any relevant application under section 1323.

             (4)  Before considering an application under subsection (1), the Court may, if in the Court’s opinion it is desirable to do so, grant an interim order of the kind applied for that is expressed to have effect until the application is determined.

             (5)  The Court must not require an applicant under subsection (1) or any other person, as a condition of granting an interim order under subsection (4), to give an undertaking as to damages.

             (6)  On the application of a person who applied for, or is affected by, an order under this section, the Court may make a further order discharging or varying the first-mentioned order.

             (7)  An order under subsection (1) may be expressed to operate for a specified period or until it is discharged by a further order.

             (8)  A person must not contravene an order under this section that is applicable to the person.

             (9)  This section has effect subject to the Bankruptcy Act 1966.

           (10)  Nothing in this section affects any other powers of the Court.

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

             (1)  The Court may issue a warrant for a person to be arrested and brought before the Court if:

                     (a)  a company is being wound up in insolvency or by the Court, or an application has been made for a company to be so wound up; and

                     (b)  the Court is satisfied that the person:

                              (i)  is about to leave Australia in order to avoid:

                                        (A)  paying money payable to the company; or

                                        (B)  being examined about the company’s affairs; or

                                        (C)  complying with an order of the Court, or some other obligation, under this Chapter in connection with the winding up; or

                             (ii)  has concealed or removed property of the company in order to prevent or delay the taking of the property into the liquidator’s custody or control; or

                            (iii)  has destroyed, concealed or removed books of the company or is about to do so.

             (2)  A warrant under subsection (1) may also provide for property or books of the company in the person’s possession to be seized and delivered into the custody of a specified person.

             (3)  A warrant under subsection (1) may only be issued on the application of:

                     (a)  a liquidator or provisional liquidator of the company; or

                     (b)  the Commission.

487  Power to arrest absconding contributory

                   The Court, at any time before or after making a winding up order, on proof of probable cause for believing that a contributory is about to leave Australia or otherwise to abscond or to remove or conceal any of his or her property for the purpose of evading payment of calls or of avoiding examination respecting affairs of the company, may cause the contributory to be arrested and held in custody and the books and movable personal property of the contributory to be seized and safely kept until such time as the Court orders.

488  Delegation to liquidator of certain powers of Court

             (1)  Provision may be made by rules or regulations for enabling or requiring all or any of the powers and duties conferred and imposed on the Court by this Part in respect of:

                     (a)  the holding and conducting of meetings to ascertain the wishes of creditors and contributories;

                     (b)  the paying, delivery, conveyance, surrender or transfer of money, property or books to the liquidator;

                     (c)  the adjusting of the rights of contributories among themselves and the distribution of any surplus among the persons entitled to it; and

                     (d)  the fixing of a time within which debts and claims must be proved;

to be exercised or performed by the liquidator as an officer of the Court and subject to the control of the Court.

             (2)  Despite anything in rules or regulations made for the purposes of subsection (1), a liquidator may distribute a surplus only with the Court’s special leave.

489  Powers of Court cumulative

                   Any powers conferred on the Court by this Law are in addition to, and not in derogation of, any existing powers of instituting proceedings against any contributory or debtor of the company or the property of any contributory or debtor for the recovery of any call or other sums.


 

Part 5.5Voluntary winding up

Division 1Resolution for winding up

490  When company cannot wind up voluntarily

                   Except with the leave of the Court, a company cannot resolve that it be wound up voluntarily if:

                     (a)  an application for the company to be wound up in insolvency has been filed; or

                     (b)  the Court has ordered that the company be wound up in insolvency, whether or not the order was made on such an application.

491  Circumstances in which company may be wound up voluntarily

             (1)  Subject to section 490, a company may be wound up voluntarily if the company so resolves by special resolution.

             (2)  A company shall:

                     (a)  within 7 days after the passing of a resolution for voluntary winding up, lodge a printed copy of the resolution; and

                     (b)  within 21 days after the passing of the resolution, cause notice of the resolution to be published in the Gazette.

493  Effect of voluntary winding up

             (1)  The company shall, from the passing of the resolution, cease to carry on its business except so far as is in the opinion of the liquidator required for the beneficial disposal or winding up of that business, but the corporate state and corporate powers of the company, notwithstanding anything to the contrary in its constitution, continue until it is deregistered.

             (2)  Any transfer of shares, not being a transfer made to or with the sanction of the liquidator, and any alteration in the status of the members, made after the passing of the resolution are void.

494  Declaration of solvency

             (1)  Where it is proposed to wind up a company voluntarily, a majority of the directors may, before the date on which the notices of the meeting at which the resolution for the winding up of the company is to be proposed are sent out, make a written declaration to the effect that they have made an inquiry into the affairs of the company and that, at a meeting of directors, they have formed the opinion that the company will be able to pay its debts in full within a period not exceeding 12 months after the commencement of the winding up.

             (2)  There shall be attached to the declaration a statement of affairs of the company showing, in the prescribed form:

                     (a)  the property of the company, and the total amount expected to be realised from that property;

                     (b)  the liabilities of the company; and

                     (c)  the estimated expenses of winding up;

made up to the latest practicable date before the making of the declaration.

             (3)  A declaration so made has no effect for the purposes of this Law unless:

                     (a)  the declaration is made at the meeting of directors referred to in subsection (1);

                     (b)  the declaration is lodged before the date on which the notices of the meeting at which the resolution for the winding up of the company is to be proposed are sent out or such later date as the Commission, whether before, on or after the first-mentioned date, allows; and

                     (c)  the resolution for voluntary winding up is passed within the period of 5 weeks after the making of the declaration or within such further period after the making of that declaration as the Commission, whether before or after the end of that period of 5 weeks, allows.

             (4)  A director who makes a declaration under this section (including a declaration that has no effect for the purposes of this Law by reason of subsection (3)) without having reasonable grounds for his or her opinion that the company will be able to pay its debts in full within the period stated in the declaration is guilty of an offence.

             (5)  If the company is wound up pursuant to a resolution for voluntary winding up passed within the period of 5 weeks after the making of the declaration or, if pursuant to paragraph (3)(c) the Commission has allowed a further period after the end of that period of 5 weeks, within that further period, but its debts are not paid or provided for in full within the period stated in the declaration, it shall be presumed, unless the contrary is shown, that a director who made the declaration did not have reasonable grounds for his or her opinion.


 

Division 2Members’ voluntary winding up

495  Liquidators

             (1)  The company in general meeting shall appoint a liquidator or liquidators for the purpose of winding up the affairs and distributing the property of the company and may fix the remuneration to be paid to him, her or them.

             (2)  On the appointment of a liquidator, all the powers of the directors cease except so far as the liquidator, or the company in general meeting with the consent of the liquidator, approves the continuance of any of those powers.

             (3)  If a vacancy occurs by death, resignation or otherwise in the office of a liquidator, the company in general meeting may fill the vacancy by the appointment of a liquidator and fix the remuneration to be paid to him or her, and for that purpose a general meeting may be convened by any contributory or, if there were 2 or more liquidators, by the continuing liquidators.

             (4)  The meeting shall be held in the manner provided by this Law or by the company’s constitution or in such manner as is, on application by any contributory or by the continuing liquidators, determined by the Court.

496  Duty of liquidator where company turns out to be insolvent

             (1)  Where a declaration has been made under section 494 and the liquidator is at any time of the opinion that the company will not be able to pay or provide for the payment of its debts in full within the period stated in the declaration, he or she must do one of the following as soon as practicable:

                     (a)  apply under section 459P for the company to be wound up in insolvency;

                     (b)  appoint an administrator of the company under section 436B;

                     (c)  convene a meeting of the company’s creditors;

and if he or she convenes such a meeting, the following subsections apply.

             (2)  The liquidator shall send to each creditor with the notice convening the meeting a list setting out the names of all creditors, the addresses of those creditors and the estimated amounts of their claims, as shown in the records of the company.

             (3)  Unless the Court otherwise orders, nothing in subsection (2) requires the liquidator to send, to a creditor whose debt does not exceed $200, a list of creditors referred to in that subsection, but the notice convening the meeting that is sent to a creditor to whom the liquidator is not required to send such a list shall specify a place at which copies of the list referred to in that subsection can be obtained on request made orally or in writing and, where such a creditor so requests, the liquidator shall as soon as practicable comply with the request.

             (4)  The liquidator shall lay before the meeting a statement of the assets and liabilities of the company and the notice convening the meeting shall draw the attention of the creditors to the right conferred upon them by subsection (5).

             (5)  The creditors may, at the meeting convened under subsection (1), appoint some other person to be liquidator for the purpose of winding up the affairs and distributing the property of the company instead of the liquidator appointed by the company.

             (6)  If the creditors appoint some other person under subsection (5), the winding up shall thereafter proceed as if the winding up were a creditors’ voluntary winding up.

             (7)  The liquidator or, if another person is appointed by the creditors to be liquidator, the person so appointed shall, within 7 days after a meeting has been held pursuant to subsection (1), lodge a notice in the prescribed form.

             (8)  Where the liquidator has convened a meeting under subsection (1) and the creditors do not appoint a liquidator instead of the liquidator appointed by the company, the winding up shall thereafter proceed as if the winding up were a creditors’ voluntary winding up, but the liquidator is not required to convene an annual meeting of creditors at the end of the first year from the commencement of the winding up if the meeting held under subsection (1) was held less than 3 months before the end of that year.


 

Division 3Creditors’ voluntary winding up

497  Meeting of creditors

             (1)  The company shall cause a meeting of the creditors of the company to be convened for the day, or the day next following the day, on which there is to be held the meeting at which the resolution for voluntary winding up is to be proposed, and shall cause the notices of the meeting of creditors to be sent by post to the creditors simultaneously with the sending of the notices of the meeting of the company.

             (2)  The company shall convene a meeting at a date, time and place convenient to the majority in value of the creditors and shall:

                     (a)  give to the creditors at least 7 days notice by post of the meeting;

                     (b)  send to each creditor with the notice:

                              (i)  a summary of the affairs of the company in the prescribed form; and

                             (ii)  a list setting out the names of all creditors, the addresses of those creditors and the estimated amounts of their claims, as shown in the records of the company;

                     (c)  lodge, not less than 7 days before the day fixed for the holding of the meeting, a copy of the notice given under paragraph (a) and of the documents that accompanied that notice in accordance with paragraph (b); and

                     (d)  publish, not less than 7 days, nor more than 14 days, before the day fixed for the holding of the meeting, a copy of the notice given or to be given under paragraph (a) in each State, Territory or excluded Territory in which the company carries on business or has carried on business at any time during the 2 years immediately preceding that day in a daily newspaper circulating generally in that State, Territory or excluded Territory.

             (3)  Unless the Court otherwise orders, nothing in subsection (2) requires the company to send, to a creditor whose debt does not exceed $200, a list of creditors referred to in subparagraph (2)(b)(ii), but the notice convening the meeting that is sent to a creditor to whom the company is not required to send such a list shall specify a place at which copies of the list referred to in that subparagraph can be obtained on request made orally or in writing and, where such a creditor so requests, the company shall as soon as practicable comply with the request.

             (4)  If the company contravenes subsection (1) or (2):

                     (a)  the company is not guilty of an offence by virtue of this section or section 1311; and

                     (b)  a person involved in the contravention contravenes this subsection.

             (5)  The directors of the company shall:

                     (a)  cause to be laid before the meeting of creditors a report in the prescribed form, and verified by all the directors, as to the affairs of the company, made up to the latest practicable date before the notices of the meeting were sent; and

                     (b)  appoint one of their number to attend the meeting.

             (6)  The director so appointed and a secretary (if the company has one) shall attend the meeting and disclose to the meeting the affairs of the company and the circumstances leading up to the proposed winding up. If the company has 2 or more directors, the director so appointed must not also attend in the capacity of a secretary.

             (7)  The directors of the company shall, not later than 7 days after the report referred to in paragraph (5)(a) is laid before the meeting of creditors as mentioned in that paragraph, lodge a copy of the report with the Commission.

             (8)  The creditors may appoint one of their number or the director appointed under subsection (5) to preside at the meeting.

             (9)  The chairman shall, at the meeting, determine whether the meeting has been held at a date, time and place convenient to the majority in value of the creditors and his or her decision is final.

           (10)  At a meeting of creditors held under this section the creditors may determine the matters referred to in paragraphs 548(1)(a) and (b) and, where the creditors so determine those matters, a meeting of the creditors for the purposes of section 548 shall be deemed to have been held and the determinations shall be deemed to have been made under that section.

498  Power to adjourn meeting

             (1)  A meeting convened under section 497 may by resolution be adjourned from time to time to a time and day specified in the resolution but shall not be adjourned to a day later than 21 days after the day for which the meeting was originally convened.

             (2)  Where a meeting is adjourned, the adjourned meeting shall, unless it is otherwise provided by the resolution by which it is adjourned, be held at the same place as the original meeting.

             (3)  Where a meeting is adjourned to a day more than 8 days after the passing of the resolution by which it is adjourned, the company shall cause notice of the day, time and place of the resumption of the meeting to be published, in a daily newspaper circulating generally in the State or Territory in which the resumed meeting is to be held, at least 7 days before that day.

             (4)  If the meeting of the company is adjourned and the resolution for winding up is passed at an adjourned meeting, any resolution passed at the meeting of the creditors has effect as if it had been passed immediately after the passing of the resolution for winding up.

499  Liquidators

             (1)  The company shall, and the creditors may, at their respective meetings nominate a person to be liquidator for the purpose of winding up the affairs and distributing the property of the company and, if the creditors and the company nominate different persons, the person nominated by the creditors shall be liquidator but, if no person is nominated by the creditors, the person nominated by the company shall be liquidator.

             (2)  Notwithstanding the provisions of subsection (1), where different persons are nominated, any director or member may, within 7 days after the date on which the nomination was made by the creditors, apply to the Court for an order directing that the person nominated as liquidator by the company shall be liquidator instead of or jointly with the person nominated by the creditors.

             (3)  The committee of inspection, or, if there is no such committee, the creditors, may fix the remuneration to be paid to the liquidator.

             (4)  On the appointment of a liquidator, the powers of the directors cease except so far as the committee of inspection, or, if there is no such committee, the creditors, approve the continuance of any of those powers.

             (5)  If a liquidator, other than a liquidator appointed by or by the direction of the Court, dies, resigns or otherwise vacates his or her office, the creditors may fill the vacancy and, for the purpose of so doing, a meeting of the creditors may be convened by any 2 of their number.

500  Execution and civil proceedings

             (1)  Any attachment, sequestration, distress or execution put in force against the property of the company after the passing of the resolution for voluntary winding up is void.

             (2)  After the passing of the resolution for voluntary winding up, no action or other civil proceeding shall be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.

             (3)  The Court may require any contributory, trustee, receiver, banker, agent or officer of the company to pay, deliver, convey, surrender or transfer forthwith or within such time as the Court directs to the liquidator any money, property or books in his, her or its hands to which the company is prima facie entitled.


 

Division 4Voluntary winding up generally

501  Distribution of property of company

                   Subject to the provisions of this Law as to preferential payments, the property of a company shall, on its winding up, be applied in satisfaction of its liabilities equally and, subject to that application, shall, unless the company’s constitution otherwise provides, be distributed among the members according to their rights and interests in the company.

502  Appointment of liquidator

                   If from any cause there is no liquidator acting, the Court may appoint a liquidator.

503  Removal of liquidator

                   The Court may, on cause shown, remove a liquidator and appoint another liquidator.

504  Review of liquidator’s remuneration

                   Any member or creditor, or the liquidator, may at any time before the deregistration of the company apply to the Court to review the amount of the remuneration of the liquidator, and the decision of the Court is final and conclusive.

505  Acts of liquidator valid etc.

             (1)  The acts of a liquidator are valid notwithstanding any defects that may afterwards be discovered in his or her appointment or qualification.

             (2)  A conveyance, assignment, transfer, mortgage, charge or other disposition of a company’s property made by a liquidator is, notwithstanding any defect or irregularity affecting the validity of the winding up or the appointment of the liquidator, valid in favour of any person taking such property in good faith and for value and without actual knowledge of the defect or irregularity.

             (3)  A person making or permitting a disposition of property to a liquidator shall be protected and indemnified in so doing notwithstanding any defect or irregularity affecting the validity of the winding up or the appointment of the liquidator that is not then known to that person.

             (4)  For the purposes of this section, a disposition of property shall be taken as including a payment of money.

506  Powers and duties of liquidator

             (1)  The liquidator may:

                     (b)  exercise any of the powers that this Law confers on a liquidator in a winding up in insolvency or by the Court;

                     (c)  exercise the power under section 478 of a liquidator appointed by the Court to settle a list of contributors;

                     (d)  exercise the Court’s powers under subsection 483(3) (except paragraph 483(3)(b)) in relation to calls on contributories;

                     (e)  exercise the power of the Court of fixing a time within which debts and claims must be proved; or

                      (f)  convene a general meeting of the company for the purpose of obtaining the sanction of the company by special resolution in respect of any matter or for any other purpose he or she thinks fit.

          (1A)  Subsections 477(2A) and (2B) apply in relation to the liquidator as if:

                     (a)  he or she were a liquidator in a winding up in insolvency or by the Court; and

                     (b)  in the case of a members’ voluntary winding up—a reference in those subsections to an approval were a reference to the approval of a special resolution of the company.

          (1B)  The company must lodge a copy of a special resolution referred to in paragraph (1A)(b) with ASIC within 14 days after the resolution is passed.

             (2)  A list of contributories settled in accordance with paragraph (1)(c) is prima facie evidence of the liability of the persons named in the list to be contributories.

             (3)  The liquidator shall pay the debts of the company and adjust the rights of the contributories among themselves.

             (4)  When several liquidators are appointed, any power given by this Law may be exercised by such one or more of them as is determined at the time of their appointment, or in default of such determination, by any number not less than 2.

507  Power of liquidator to accept shares etc. as consideration for sale of property of company

             (1)  This section applies where it is proposed to transfer or sell to a body corporate the whole or a part of the business or property of a company.

             (2)  The liquidator of the company may, with the sanction of a special resolution of the company conferring on the liquidator either a general authority or an authority in respect of a particular arrangement, enter into an arrangement under which, in compensation or part compensation for the transfer or sale:

                     (a)  the liquidator is to receive shares, debentures, policies or other like interests in the body corporate for distribution among the members of the company; or

                     (b)  the members of the company may, instead of, or as well as, receiving cash, shares, debentures, policies or other like interests in the body corporate, participate in the profits of, or receive any other benefit from, the body corporate.

             (3)  A transfer, sale or arrangement under this section is binding on the members of the company.

             (4)  If a member of the company who did not vote in favour of a special resolution expresses dissent from the resolution in writing addressed to the liquidator and left at the office of the liquidator within 7 days after the passing of the resolution, the member may require the liquidator either to abstain from carrying the resolution into effect or to purchase the member’s interest at a price to be determined by agreement or by arbitration under this section.

             (5)  If the liquidator elects to purchase the member’s interest, the purchase money shall be paid before the company is deregistered and be raised by the liquidator in such manner as is determined by special resolution.

             (6)  A special resolution is not invalid for the purposes of this section because it is passed before, or concurrently with, a resolution for voluntary winding up or for appointing liquidators but, if an order for winding up the company by the Court is made within 1 year after the passing of the resolution, the resolution is not valid unless sanctioned by the Court.

             (7)  For the purposes of an arbitration under this section, the law of this jurisdiction relating to commercial arbitration applies as if there were a submission for reference to 2 arbitrators, one to be appointed by each party.

             (8)  The appointment of an arbitrator may be made in writing signed by:

                     (a)  if there is only one liquidator—the liquidator; or

                     (b)  if there is more than one liquidator—any 2 or more of the liquidators.

             (9)  The Court may give any directions necessary for the initiation and conduct of the arbitration and any such direction is binding on the parties.

           (10)  In the case of a creditors’ voluntary winding up, the powers of the liquidator under this section shall not be exercised except with the approval of the Court or the committee of inspection.

           (11)  The company must lodge a copy of a special resolution referred to in subsection (2) or (5) with ASIC within 14 days after the resolution is passed.

508  Annual meeting of creditors

             (1)  If the winding up continues for more than 1 year, the liquidator shall:

                     (a)  in the case of a members’ voluntary winding up—convene a general meeting of the company; or

                     (b)  in the case of a creditors’ voluntary winding up—convene a general meeting of the company and a meeting of the creditors;

within 3 months after the end of the first year from the commencement of the winding up and the end of each succeeding year, and shall lay before the meeting or each meeting an account of his or her acts and dealings and of the conduct of the winding up during that first year or that succeeding year, as the case may be.

             (2)  The liquidator shall cause the notices of the meeting of creditors to be sent by post to the creditors simultaneously with the sending of the notices of the meeting of the company.

509  Final meeting and deregistration

             (1)  As soon as the affairs of the company are fully wound up, the liquidator shall make up an account showing how the winding up has been conducted and the property of the company has been disposed of and, when the account is so made up, he or she shall convene a general meeting of the company, or, in the case of a creditors’ voluntary winding up, a meeting of the creditors and members of the company, for the purpose of laying before it the account and giving any explanation of the account.

             (2)  The meeting shall be convened by an advertisement published in the Gazette at least 1 month before the meeting specifying the date, time, place and purpose of the meeting.

             (3)  The liquidator shall, within 7 days after the meeting, lodge a return of the holding of the meeting and of its date with a copy of the account attached to the return.

             (4)  At a meeting of the company, 2 members constitute a quorum and, at a meeting of the creditors and members of the company, 2 creditors and 2 members constitute a quorum and, if a quorum is not present at the meeting, the liquidator shall, in place of the return mentioned in subsection (3), lodge a return (with account attached) stating that the meeting was duly convened and that no quorum was present and, upon such a return being lodged, the provisions of that subsection as to the lodging of the return shall be deemed to have been complied with.

ASIC must deregister at the end of 3 month period

             (5)  ASIC must deregister the company at the end of the 3 month period after the return was lodged.

ASIC must deregister on a day specified by the Court

             (6)  On application by the liquidator or any other interested party, the Court may make an order that ASIC deregister the company on a specified day. The Court must make the order before the end of the 3 month period after the return was lodged.

             (7)  The person on whose application an order of the Court under this section is made shall, within 14 days after the making of the order, lodge an office copy of the order.

510  Arrangement: when binding on creditors

             (1)  An arrangement entered into between a company about to be, or in the course of being, wound up and its creditors is, subject to subsection (4):

                     (a)  binding on the company if sanctioned by a special resolution; and

                     (b)  binding on the creditors if sanctioned by a resolution of the creditors.

          (1A)  The company must lodge a copy of a special resolution referred to in paragraph (1)(a) with ASIC within 14 days after the resolution is passed.

             (2)  A creditor shall be accounted a creditor for value for such sum as upon an account fairly stated, after allowing the value of security or liens held by the creditor and the amount of any debt or set-off owing by the creditor to the company, appears to be the balance due to the creditor.

             (3)  A dispute about the value of any such security or lien or the amount of any such debt or set-off may be settled by the Court on the application of the company, the liquidator or the creditor.

             (4)  A creditor or contributory may, within 3 weeks after the completion of the arrangement, appeal to the Court in respect of the arrangement, and the Court may confirm, set aside or modify the arrangement and make such further order as it thinks just.

 511  Application to Court to have questions determined or powers exercised

             (1)  The liquidator, or any contributory or creditor, may apply to the Court:

                     (a)  to determine any question arising in the winding up of a company; or

                     (b)  to exercise all or any of the powers that the Court might exercise if the company were being wound up by the Court.

          (1A)  APRA may apply to the Court under subsection (1) in relation to a company that is a friendly society within the meaning of the Life Insurance Act 1995 and which may be wound up voluntarily under subsection 180(2) of that Act.

             (2)  The Court, if satisfied that the determination of the question or the exercise of power will be just and beneficial, may accede wholly or partially to any such application on such terms and conditions as it thinks fit or may make such other order on the application as it thinks just.

512  Costs

                   All proper costs, charges and expenses of and incidental to the winding up (including the remuneration of the liquidator) are payable out of the property of the company in priority to all other claims.


 

Part 5.6Winding up generally

Division 1Preliminary

513  Application of Part

                   Except so far as the contrary intention appears, the provisions of this Law about winding up apply in relation to the winding up of a company whether in insolvency, by the Court or voluntarily.


 

Division 1AWhen winding up taken to begin

513A  Winding up ordered by the Court

                   If the Court orders under section 233, 459A, 459B or 461 that a company be wound up, the winding up is taken to have begun or commenced:

                     (a)  if, when the order was made, a winding up of the company was already in progress—when the last-mentioned winding up is taken because of this Division to have begun or commenced; or

                     (b)  if, immediately before the order was made, the company was under administration—on the section 513C day in relation to the administration; or

                     (c)  if:

                              (i)  when the order was made, a provisional liquidator of the company was acting; and

                             (ii)  immediately before the provisional liquidator was appointed, the company was under administration;

                            on the section 513C day in relation to the administration; or

                     (d)  if, immediately before the order was made, a deed of company arrangement had been executed by the company and had not yet terminated—on the section 513C day in relation to the administration that ended when the deed was executed; or

                     (e)  otherwise—on the day when the order was made.

513B  Voluntary winding up

                   Where a company resolves by special resolution that it be wound up voluntarily, the winding up is taken to have begun or commenced:

                     (a)  if, when the resolution was passed, a winding up of the company was already in progress—when the last-mentioned winding up is taken because of this Division to have begun or commenced; or

                     (b)  if, immediately before the resolution was passed, the company was under administration—on the section 513C day in relation to the administration; or

                     (c)  if, immediately before the resolution was passed, a deed of company arrangement had been executed by the company but had not yet terminated—on the section 513C day in relation to the administration that ended when the deed was executed; or

                     (d)  if the resolution is taken to have been passed because, at a meeting convened under section 445F, the company’s creditors:

                              (i)  passed a resolution terminating a deed of company arrangement executed by the company; and

                             (ii)  also resolved under section 445E that the company be wound up;

                            on the section 513C day in relation to the administration that ended when the deed was executed;

                     (e)  otherwise—on the day on which the resolution was passed.

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

                   The section 513C day in relation to the administration of a company is:

                     (a)  if, when the administration began, a winding up of the company was in progress—the day on which the winding up is taken because of this Division to have begun; or

                     (b)  otherwise—the day on which the administration began.

513D  Validity of proceedings in earlier winding up

                   Where, at the time when:

                     (a)  the Court orders under section 233, 459A, 459B or 461 that a company be wound up; or

                     (b)  a company resolves by special resolution that it be wound up voluntarily;

a winding up of the company is already in progress, all proceedings in the last-mentioned winding up are taken to have been valid, except so far as the Court otherwise orders because fraud or mistake has been proved.


 

Division 2Contributories

514  Where Division applies

             (1)  This Division applies where a company is wound up.

             (2)  This Division does not apply to the winding up of a no liability company.

515  General liability of contributory

                   Subject to this Division, a present or past member is liable to contribute to the company’s property to an amount sufficient:

                     (a)  to pay the company’s debts and liabilities and the costs, charges and expenses of the winding up; and

                     (b)  to adjust the rights of the contributories among themselves.

516  Company limited by shares

                   Subject to section 519, if the company is a company limited by shares, a member need not contribute more than the amount (if any) unpaid on the shares in respect of which the member is liable as a present or past member.

517  Company limited by guarantee

                   Subject to section 519, if the company is a company limited by guarantee, a member need not contribute more than the amount the member has undertaken to contribute to the company’s property if the company is wound up.

519  Exceptions for former unlimited company

                   Despite sections 516 and 517, if the company is a limited company and became a limited company by virtue of a change of status, the amount that a member at the time of the change of status, or a person who at that time was a past member, is liable to contribute in respect of the company’s debts and liabilities contracted before that time is unlimited.

520  Past member: later debts

                   A past member need not contribute in respect of a debt or liability of the company contracted after the past member ceased to be a member.

521  Person ceasing to be a member a year or more before winding up

                   Subject to section 523, a past member need not contribute if he, she or it was a member at no time during the year ending on the day of the commencement of the winding up.

522  Present members to contribute first

                   Subject to paragraph 523(b), a past member need not contribute unless it appears to the Court that the existing members are unable to satisfy the contributions they are liable to make under this Law.

523  Past member of former unlimited company

                   If an unlimited company changes to a limited company under section 164, a past member who was a member at the time of the change is liable:

                     (a)  despite section 521; and

                     (b)  if no person who was a member at that time is a member at the commencement of the winding up—despite section 522;

to contribute in respect of the company’s debts and liabilities contracted before that time.

524  Past member of former limited company

                   If a limited company changes to an unlimited company under section 164, a person who, at the time when the company applied for the change, was a past member and did not again become a member after that time need not contribute more than they would have been liable to contribute if the company had not changed type.

526  Liability on certain contracts

                   Nothing in this Law invalidates a provision, in a policy of insurance or other contract, whereby the liability of individual members on the policy or contract is restricted or whereby the funds of the company are alone made liable in respect of the policy or contract.

527  Nature of contributory’s liability

                   A contributory’s liability is of the nature of a specialty debt according to the law of the Capital Territory accruing due from the contributory when the contributory’s liability commenced but payable at the times when calls are made for enforcing the liability.

528  Death of contributory

                   If a contributory dies, whether before or after being placed on the list of contributories:

                     (a)  his or her personal representatives are liable in due course of administration to contribute to the company’s property in discharge of his or her liability to contribute and are contributories accordingly; and

                     (b)  if his or her personal representatives default in paying any money that they are ordered to pay—proceedings may be taken for administering his or her estate and for compelling payment, out of the assets of that estate, of the money due.

529  Bankruptcy of contributory

                   If a contributory becomes an insolvent under administration, or assigns his or her estate for the benefit of his or her creditors, whether before or after being placed on the list of contributories:

                     (a)  his or her trustee shall represent him or her for the purposes of the winding up and shall be a contributory accordingly; and

                     (b)  calls already made, and the estimated value of his or her liability to future calls, may be proved against his or her estate.


 

Division 3Liquidators

530A  Officers to help liquidator

             (1)  As soon as practicable after the Court orders that a company be wound up or appoints a provisional liquidator of a company, or a company resolves that it be wound up, each officer of the company must:

                     (a)  deliver to the liquidator appointed for the purposes of the winding up, or to the provisional liquidator, as the case may be, all books in the officer’s possession that relate to the company, other than books possession of which the officer is entitled, as against the company and the liquidator or provisional liquidator, to retain; and

                     (b)  if the officer knows where other books relating to the company are—tell the liquidator or provisional liquidator where those books are.

             (2)  Where a company is being wound up, or a provisional liquidator of a company is acting, an officer of the company must:

                     (a)  attend on the liquidator or provisional liquidator at such times; and

                     (b)  give the liquidator or provisional liquidator such information about the company’s business, property, affairs and financial circumstances; and

                     (c)  attend such meetings of the company’s creditors or members;

as the liquidator or provisional liquidator reasonably requires.

             (3)  An officer of a company that is being wound up must do whatever the liquidator reasonably requires the officer to do to help in the winding up.

             (4)  An officer of a company must do whatever a provisional liquidator of the company reasonably requires the officer to do to help in the performance or exercise of any of the provisional liquidator’s functions and powers.

             (5)  The liquidator or provisional liquidator of a company may require an officer of the company:

                     (a)  to tell the liquidator the officer’s residential address and work or business address; or

                     (b)  to keep the liquidator informed of any change in either of those addresses that happens during the winding up.

             (6)  A person must not, without reasonable excuse, fail to comply with subsection (1), (2), (3) or (4), or with a requirement under subsection (5).

             (7)  In this section:

officer, in relation to a company, means a person who is, or has been but is no longer, an officer (as defined by section 82A) of the company.

             (8)  However, a person is not an officer of a company for the purposes of this section merely because he or she is or has been an employee of the company.

             (9)  Nothing in this section limits the generality of anything else in it.

530B  Liquidator’s rights to company’s books

             (1)  A person is not entitled, as against the liquidator of a company:

                     (a)  to retain possession of books of the company; or

                     (b)  to claim or enforce a lien on such books;

but such a lien is not otherwise prejudiced.

             (2)  Paragraph (1)(a) does not apply in relation to books of which a secured creditor of the company is entitled to possession otherwise than because of a lien, but the liquidator is entitled to inspect, and make copies of, such books at any reasonable time.

             (3)  A person must not hinder or obstruct a liquidator of a company in obtaining possession of books of the company, unless the person is entitled, as against the company and the liquidator, to retain possession of the books.

             (4)  The liquidator of a company may give to a person a written notice requiring the person to deliver to the liquidator, as specified in the notice, books so specified that are in the person’s possession.

             (5)  A notice under subsection (4) must specify a period of at least 3 days as the period within which the notice must be complied with.

             (6)  A person must comply with a notice under subsection (4) except so far as the person is entitled, as against the company and the liquidator, to retain possession of the books.

             (7)  In this section:

liquidator includes a provisional liquidator.

530C  Warrant to search for, and seize, company’s property or books

             (1)  The Court may issue a warrant under subsection (2) if:

                     (a)  a company is being wound up or a provisional liquidator of a company is acting; and

                     (b)  on application by the liquidator or provisional liquidator, as the case may be, by the Commission, the Court is satisfied that a person:

                              (i)  has concealed or removed property of the company with the result that the taking of the property into the custody or control of the liquidator or provisional liquidator will be prevented or delayed; or

                             (ii)  has concealed, destroyed or removed books of the company or is about to do so.

             (2)  The warrant may authorise a specified person, with such help as is reasonably necessary:

                     (a)  to search for and seize property or books of the company in the possession of the person referred to in subsection (1); and

                     (b)  to deliver, as specified in the warrant, property or books seized under it.

             (3)  In order to seize property or books under the warrant, the specified person may break open a building, room or receptacle where the property is or the books are, or where the person reasonably believes the property or books to be.

             (4)  A person who has custody of property or a book because of the execution of the warrant must retain it until the Court makes an order for its disposal.

531  Books to be kept by liquidator

                   A liquidator or provisional liquidator shall keep proper books in which he or she shall cause to be made entries or minutes of proceedings at meetings and of such other matters as are prescribed, and any creditor or contributory may, unless the Court otherwise orders, personally or by an agent inspect them.

532  Disqualification of liquidator

          (1A)  In this section:

liquidator includes a provisional liquidator.

             (1)  Subject to this section, a person shall not consent to be appointed, and shall not act, as liquidator of a company unless he or she is:

                     (a)  a registered liquidator; or

                     (b)  registered as a liquidator of that company under subsection 1282(3).

             (2)  Subject to this section, a person shall not, except with the leave of the Court, seek to be appointed, or act, as liquidator of a company:

                     (a)  if the person, or a body corporate in which the person has a substantial holding, is indebted in an amount exceeding $5,000 to the company or a body corporate related to the company;

                     (b)  if the person is, otherwise than in his or her capacity as liquidator, a creditor of the company or of a related body corporate in an amount exceeding $5,000; or

                     (c)  if:

                              (i)  the person is an officer of the company (otherwise than by reason of being a liquidator of the company or of a related body corporate);

                             (ii)  the person is an officer of any body corporate that is a mortgagee of property of the company;

                            (iii)  the person is an auditor of the company;

                            (iv)  the person is a partner or employee of an auditor of the company;

                             (v)  the person is a partner, employer or employee of an officer of the company; or

                            (vi)  the person is a partner or employee of an employee of an officer of the company.