CHAPTER 3 - THE SCHEME IN MORE DETAIL

 3.1       INSOLVENCY ADMINISTRATIONS: COMPANIES                                                             

 3.1.1     Winding up / Liquidation

           As its name implies, winding up means turning the assets of the company into cash and distributing the net proceeds to creditors [and, if sufficient, to shareholders]. There are two distinct modes of having a company wound up. One is voluntary, which means the owners of the company [the shareholders] decide to have it wound up. Conversely, the other is forced upon the company by an order of the court. Usually the order is obtained by creditors but sometimes application is made by the company itself or some of its shareholders.

 3.1.2     Provisional liquidation

           Provisional liquidation is closely related to winding up. After an application to wind up a company is made the court may, if requested, decide to appoint an administrator as a stop-gap measure. The device is used mainly to safeguard and preserve a company's assets until the petition to wind up is heard and a decision made. As a rule the administrator has no power to pay creditors and his/her power to sell assets is limited.

 3.1.3     Official management and scheme of arrangement

           In contrast to winding up, the feature of both Official Management and a Scheme of Arrangement is compromise. Both exist to accommodate a desire by an insolvent company and its creditors to keep the company going in the hope that it will survive and that eventually creditors will receive more than they would in a liquidation.

3.1.4     Receivership

           Receivership can take a number of forms. Generally it comes about when a secured creditor with a mortgage or charge over company property appoints a person to take possession of that property. The person so appointed sells or otherwise realizes the property and remits the net proceeds, less amounts due to certain preferential creditors, to the secured creditor.

 3.1.5     Mortgagee in possession

           The device of corporate receivership evolved as a means of protecting mortgagees from the hazards and potential liabilities they faced when entering into possession of a mortgagee's property. But in recent years more and more mortgagees are - for reasons explained later in this book - voluntarily discarding this protection and going back to the old method of taking possession. As the mortgagee almost invariably gives the actual job of taking possession of and realizing the property to an agent, this born-again artifice is called "mortgagee in possession [through an agent]" and the administrator is called "agent for the mortgagee in possession". For the sake of brevity the phrase used in this book is "mortgagee in possession".

           Although the shift from receivership to mortgagee in possession has been occurring for several years, the legislature has not responded with changes to corporate law. Hence the Companies Code has almost nothing to say about the duties and responsibilities of mortgagees and their agents. This is why, when reference was made earlier in this chapter to administrations permitted and governed by insolvency laws, no mention was made of the mortgagee in possession.

           Even so, in many ways the effects on unsecured creditors of a mortgagee entering into possession of a company's assets are no different than those resulting from the appointment [privately, or out of court] of a receiver. For one thing, preferential creditors must be paid and the debts of ordinary unsecured creditors will be "frozen" and paid only if assets remain after the mortgagee relinquishes possession.

           But in the area of rights the position is quite different. For example, unsecured creditors are not given the right to know what the mortgagee in possession is doing. Whilst a receiver must submit to the Corporate Affairs Commission an account of his/her activities [which is then available to the public], a mortgagee in possession is not required to do so. In fact there is not even an obligation on a mortgagee in possession to notify the Commission that he/she or it has taken possession of a company's property.

 3.2       INSOLVENCY ADMINISTRATIONS: INDIVIDUALS

           As stated earlier, individuals who become insolvent can be subjected to legislation embodied in the Bankruptcy Act and Bankruptcy Rules. The types of administrations permitted by bankruptcy laws fall into two categories:

             * Bankruptcy; and

            * Arrangements with creditors.

 3.2.1     Bankruptcy

           The essential components of bankruptcy are confiscation of the debtor's property, vesting of that property in an administrator [a trustee], realization of that property and distribution of the net proceeds to creditors. A debtor can become a bankrupt voluntarily -by presenting his/her own petition to the court - or he/she can be forced into bankruptcy by an order of the court made in response to a petition by a creditor.

           As an alternative the law allows the debtor and his/her creditors to enter into one of three types of arrangements:

             * Deed of Assignment;

            * Deed of Arrangement; or

            * Composition.

 3.2.3     Deed of Assignment

           Under a deed of assignment the debtor transfers all his or her divisible property to a trustee appointed by the creditors. The property is sold or otherwise realized and the net proceeds distributed to creditors of the debtor's estate.

 3.2.4     Deed of Arrangement

           A deed of arrangement can be any type of arrangement other than a deed of assignment or a composition. Naturally this freedom of choice means there is no such thing as a typical deed of arrangement. Some transfer part of the debtor's property to a trustee. Others transfer some property and some of the debtor's income. Others transfer a debtor's business but allow the debtor to carry on the business under a trustee's supervision.

 3.2.5     Composition

           In a composition creditors agree to accept either full payment of their debts by instalments or, in full satisfaction of their debts, part-payment by instalments or otherwise in the form of money or other property. Whether a certain arrangement is a composition or a deed of arrangement is sometimes difficult to decide. But an agreement that only requires the debtor to make payments is clearly a composition, and this type is the most common.

 3.3       OTHER DEBTOR ENTITIES

 3.3.1     Partnerships

           A partnership of natural persons can become liable to the bankruptcy laws if it becomes insolvent. In other words, an insolvent partnership may become bankrupt or may, as an alternative, enter into an arrangement with its creditors.

           As with individuals, bankruptcy for partnerships may be voluntary - resulting from a petition to the court presented by all, or a majority of, the members of the partnership - or may be imposed by the court after hearing a creditor's petition. A creditor owed money by a partnership has the choice of either applying for an order declaring the partnership bankrupt or applying for such an order in relation to one or more of the partners.

 3.3.2     Trusts

           A trust is an arrangement in which one person [the trustee] holds property but is obliged to use or keep that property for the benefit of another person [the beneficiary]. The trustee is liable for all debts incurred in his/her or its capacity as trustee.

           The trust most commonly encountered by trade creditors is a trading trust: one that is used as the vehicle for carrying on a business. Usually the trustee of a trading trust is a company. In such a case, if the trust becomes insolvent action may be taken to wind up the company, appoint an official manager, enter a scheme of arrangement or put the company in receivership [as explained earlier]. In cases where the trustee is an individual, creditors have recourse to the bankruptcy laws.

 However, it appears that in bankruptcy, and under a deed of assignment, the property of a trust does not vest in the debtor's trustee.[3]

           Another type of trust frequently encountered is a unit trust. The beneficiaries of a unit trust acquire their interest by purchasing units in much the same way as persons buy shares in a company. Common examples of unit trusts are property trusts, equity trusts and cash management trusts.

           Even though there are some differences between unit trusts and what might be called ordinary trusts, from the creditor's point of view the principles in relation to insolvency are the same. The trustee [usually a company] is liable to pay the debts it has incurred on behalf of the trust; and if it cannot pay those debts it may be wound up [or put under a scheme of arrangement, etc.].

           A few years ago it looked like creditors of trustees of insolvent unit trusts had struck gold. The excitement resulted from the discovery that unit holders were liable to indemnify the trustee against liabilities incurred. This meant, in effect, that if a trustee was unable to pay all creditors out of the trust's assets, the unit holders would have to make up the deficiency. However, the excitement soon ended when it was also held a little while later that this right to indemnity could be excluded by a clause in the trust deed to that effect. Naturally, those deeds which did not have such an exclusion at the time were quickly amended, although there may still be a few around.

 3.3.3     Co-operative societies

           A co-operative society is a registered organisation owned and controlled by the people it serves who join together for the purpose of promoting their economic or social interests. The most common kinds are community advancement societies [rental housing, child care, sport, etc.], trading societies, credit societies, housing societies and producers societies [agricultural products and livestock].

           They are incorporated under and governed by legislation which varies in content and name from State to State, but may be referred to as the Co-operative Societies legislation. [5] Usually in each State the official responsible for general administration is called the Registrar and typically he/she is a Deputy Commissioner of the local Corporate Affairs Commission. [As a rule the same is true of the other types of societies mentioned below under other headings.]

           The laws described in the following paragraphs under this heading are those applicable in Victoria.

           Like companies, co-operative societies may be wound up voluntarily or by the court. In addition the Registrar of Co-operative Societies may, if he/she finds that certain events have occurred, issue a certificate, whereupon the society will be wound up. After the society is placed in liquidation the provisions of the Companies Code apply with some adaptations, restrictions and variations.

           In the case of co-operative societies other than housing societies, there are also provisions, similar to those in the Companies Code, for Schemes of Arrangement, Official Management and Receivership.

           In certain circumstances, including where it appears desirable for the protection of creditors of a particular society, the Minister whose portfolio embraces co-operative societies [currently the Attorney-General] may appoint an inspector to investigate the affairs of that society. This power does not, however, exist in relation to credit societies [commonly referred to as credit unions] or housing societies. But housing societies are monitored by the Registrar of Co-operative Housing Societies, who may inspect a society's books and hold an inquiry into the affairs of a society. And credit unions may be put under official control [see next heading].

 3.3.4     Credit unions [or credit societies]

           Credit unions are co-operative societies formed primarily to serve the needs of members for savings and loans. Various State Acts, in most cases the Co-operative Societies legislation already mentioned, govern the operation of credit unions. [5]

           However, in addition, a voluntary code exists to complement the legislation and establish prudent standards in financial management, risk control [loan choice, liquidity, etc.] and asset management throughout the industry. [6] Because credit unions are co-operative societies the insolvency provisions mentioned under that heading apply.

           Also, credit unions are subject to the scrutiny of the Credit Co-operatives Reserve Board, which has extensive powers, including the power to subject a credit union to its directions, to inspect its books and to appoint an administrator to conduct its affairs.

 3.3.5     Building societies

           The modern building society, especially in Victoria, is not much different than a public company. The main difference is that the building society is subject to a number of restrictions on its activities. The day when they were like co-operative societies – i.e., owned and controlled by the people they served and operated for the purpose of satisfying the need of the owners for savings and housing loans - has almost gone. Or it had until the collapse in mid-1990 of Victoria's Pyramid Building Society. That disaster has led the Victorian Government to propose legislation reimposing some restrictions and upgrading government supervision, and has prompted renewed attempts to have uniform legislation throughout Australia.

           At present building societies are incorporated under and governed by legislation which varies in content and name from State to State. [ ]

           In Victoria a building society may be wound up voluntarily, or by the Supreme Court or on the certificate of the Registrar of Building Societies. Once a society is placed in liquidation the Companies Code applies to the winding up in the same way as it applies to companies. Also, like a company, a building society may go into receivership or be put under the control of an official manager appointed by creditors.

           In addition, the Registrar may appoint a special administrator to conduct the affairs of a building society, or appoint a person or persons to investigate the affairs of a building society. The investigator may question a receiver, an official manager and a liquidator and examine his/her records.

 3.3.6     Friendly societies

           Friendly societies are organisations formed to provide facilities, services and benefits for members and their dependents in the areas of health, welfare, education, life insurance, superannuation, sickness, accident, retirement, etc. As with other types of societies, each State has its own friendly societies legislation and it is not uniform. [ ]

           In Victoria the Friendly Societies Act provides that a society may be wound up voluntarily, or by the Supreme Court or on the certificate of the Registrar of Friendly Societies. Once in liquidation the Companies Code applies as if the society was a company. Also, friendly societies may go into receivership or be put under the control of an official manager appointed by creditors. Again, the law regulating these administrations is that contained in the Companies Code.

           Investigations into the affairs of a friendly society may be carried out in certain circumstances, such as where the Registrar thinks it necessary for the protection of creditors. The Registrar may also appoint an administrator to conduct the affairs of a society.

 3.3.7     Associations

           The word "association" can be used to describe many different types of entities. For example, companies, partnerships, co-operative societies and clubs are all alliances of persons who have come together to pursue or promote some interest or purpose. However, in this book the word "association" is used to denote those alliances which do not have as one of their objects or purposes the making of pecuniary [or monetary] gains for themselves or the alliance. In other words, an "association" is a non-profit alliance or group. This restrictive definition excludes companies, partnerships, co-operative societies and building societies, for example. Typically play groups, church bodies, kindergartens, environment groups and clubs are associations.

           Associations are either incorporated or unincorporated. Whether an association is incorporated or unincorporated has an important bearing on the effects of its winding up.

 3.3.8     Incorporated associations

           Each State and Territory has Associations Incorporations legislation which varies from State to State.[7] Except for Western Australia, the legislation of all States and the Territories places the creditors [and members] of an association in a position similar to that occupied by creditors [and members] of a company as far as its winding up is concerned. Hence, insolvent associations incorporated in these States and Territories may be put into liquidation voluntarily or compulsorily [8] and, thereafter, the winding up process is regulated by the provisions of the Companies Code. In Western Australia there are no statutory provisions for the winding up of associations.

 3.3.9     Unincorporated associations

           As the term suggests, an unincorporated association is one which is not incorporated under any statute. Its legal status is of a lawful but unrecognised body: a non-entity. Nevertheless the courts can and will step in and regulate the affairs of an unincorporated association if a dispute is brought to their attention.

           The law relating to the recovery of debts due by unincorporated associations is complex and uncertain. For example, because an unincorporated association cannot be sued in its own name, contracts entered into by officers of the association usually bind the members of the association's governing committee personally. But in some cases the creditor may be held to have agreed that the committee shall not be personally liable beyond the extent of the association's funds. Because of these complexities the interested reader should either peruse a reference book on this special subject [see the Bibliography at the end of this book] or consult a solicitor.

 3.3.10    Exhibit: Societies and Incorporated Associations

           A chart showing the types of insolvency administrations that are available to societies and incorporated associations is at Exhibit ???.

 3.4       EXTERNAL ADMINISTRATORS

 3.4.1     Liquidator

           As mentioned earlier in this book, there are liquidators and there are official liquidators. Although the word "official" is often dropped from the appellation, this does not mean there are no differences between the two. One is in the area of qualification. Although both must be registered as liquidators, an official liquidator must also be registered as such with a Corporate Affairs Commission. Another difference relates to responsibility. A liquidator appointed by the court is, while occupying that position, an officer of the court, whereas a liquidator in a voluntary winding up [who is appointed by creditors] is an officer of the company he/she controls.

           A list of the names and addresses of registered liquidators and official liquidators is kept by each Corporate Affairs Commission and may be inspected by any member of the public.

 3.4.2     Provisional liquidator

           A provisional liquidator is an official liquidator who, as the name suggests, has been appointed as a temporary or interim measure.

 3.4.3     Receiver or receiver and manager

           The Companies Code contains no definition of the term "receiver" or "receiver and manager". But general law holds that a receiver is a person appointed to collect and receive property belonging to another, whilst a receiver and manager not only receives property but also is entitled to manage and run the business in which that property is employed.

           To keep matters simple, the word "receiver" will be used throughout this book as a compendious word encompassing a receiver and manager. On the few occasions where it needs to be given its literal meaning this will be made clear.

           To qualify for appointment as a receiver a person must be a registered liquidator. Also he/she must not be involved or associated with the company in certain ways [for example, as a mortgagee of company property, a director or an auditor].

           There are some technical differences between a court appointed receiver and a receiver appointed by a secured creditor [often referred to as a privately appointed receiver]. But for unsecured creditors the most relevant difference - for reasons explained later in this book - is that the court appointee is an officer of the court whereas the private appointee is, if he/she is a receiver and manager, an officer of the company.

 3.4.4     Official manager

           Anyone - apart from the company's auditor, an officer of a mortgagee of company property, a bankrupt or a person under a deed of arrangement or composition - may be appointed official manager of a company. He/she does not have to be a registered liquidator, although usually creditors choose someone who is. Even a director of the company qualifies for appointment, although such an appointment rarely occurs. The Companies Code deems an official manager of a company to be an officer of that company.

 3.4.5     Scheme administrator

           Before a scheme of arrangement can commence it must obtain the sanction of the court. Normally the appointee will have the attributes listed in the Companies Code: he/she will be a registered liquidator, and not a mortgagee of company property, an officer of a mortgagee of company property, an officer of the company, or an auditor of the company. However the court has the power to approve the appointment of someone who is not so qualified.

 3.5       CREDITORS - SECURED

 3.5.1     General

           A secured creditor is a person [natural or artificial] who has a charge, mortgage, lien, bill of sale or debenture on or over property of a debtor for a debt due to that person from the debtor. The charge, mortgage, lien, etc. is often referred to as "the security", although, of course, it is the property - land, machinery, book debts, etc. - pledged or charged by the debtor that gives the creditor protection if the debtor defaults on his/her or its obligation to the creditor. A secured creditor may be fully secured or partly secured, depending on whether the debt is equal to or less than the value of the security ["fully secured"] or greater than it ["partly secured"].

           As indicated earlier, insolvency laws do not, as a rule, interfere with the rights of secured creditors to take whatever action they are entitled to under their charge, mortgage, lien, etc. For example, if a company that has given a mortgage of its plant to a bank is placed in liquidation, the bank may still take possession of that plant. And if an insolvent individual who has a mortgage over his home makes an arrangement with his unsecured creditors, the mortgagor may still evict him from the home and sell it. These two examples assume that the creditor has a statutory or common law power of sale, or such power under the contract with the debtor; because the bankruptcy, liquidation, etc. of a debtor does not in itself give the creditor such a power.

           In most types of insolvency administrations there are four courses of action open to secured creditors:

               1. Rely on their security and not claim in the estate.

               2. Give up their security and claim in the estate for the debt.

               3. Realize their security and claim in the estate for any amount still owing [the shortfall].

               4. Estimate the value of their security and claim for the estimated shortfall.

           Usually a secured creditor cannot vote at a meeting of creditors unless he/she gives up the security. But a secured creditor who is prepared to estimate the value of the security may vote if there is an estimated shortfall.

 3.5.2     Leases and hire purchase agreements

           Under a hire-purchase agreement the person hiring the goods does not become the owner until the last instalment has been paid. So in a strict legal sense a hire-purchase agreement is not a security because the hirer [debtor] does not own the subject property. However, because the owner [creditor] is entitled to repossess the property if the hirer [debtor] breaches the hire-purchase contract, the effect is the same as traditional security arrangements.

           Agreements for the lease of goods are, for these purposes, the same as hire-purchase agreements. The lessor [creditor] is "secured" because ownership of the goods has not passed to the lessee [debtor].

           When an owner or lessor repossesses property, he/she or it claims as a creditor for the amount still owing, calculated by deducting the net value of the property from the net amount owing at the date of repossession.

 3.5.3     Retention of title

           Today it is not unusual for suppliers of goods on credit to include in the contract of sale a clause whereby ownership of [title to] the goods sold is retained by the supplier [creditor] until the debtor pays for them. Such clauses are sometimes called Romalpa clauses, after a famous court case that looked at the procedure in some detail.

           As that case and others have shown, the validity of a Romalpa clause depends not only on its wording but also on the surrounding circumstances. But if the clause is valid, the goods in question belong to the creditor, who is commonly regarded as being a "secured creditor".

 3.5.4     Guarantees

           A promise by a person to meet a debt of another person (the debtor) upon the debtor failing to pay is called a guarantee. The creditor to whom the promise is made feels more secure, because two parties - the debtor and the guarantor - are committed to paying the debt. But under insolvency law that creditor is not a secured creditor of the debtor.

 3.6       CREDITORS - UNSECURED

 3.6.1     Preferential creditors

           Insolvency laws [and some other statutes] give certain classes of unsecured creditors the right to receive payment of their debts ahead of other classes of unsecured creditors. The following list is a guide to the most common types of unsecured creditor's claims that are entitled to receive preferential treatment:

                * Costs of the petition [to wind up or bankrupt].

               * Employee tax instalment deductions.

               * Wages or salary.

               * Injury compensation.

               * Employee leave entitlements

               * Employee retrenchment pay.

               * Municipal rates.

               * Payroll tax.

           Some of these creditors not only have priority over other unsecured creditors but also, in certain situations, priority over secured creditors. This ground is covered in the chapter 12, "Special Subjects and Issues".

           Also, opportunities exist for creditors to agree amongst themselves to the payment of some claims ahead of others.

 3.6.2     Ordinary unsecured creditors

           Unsecured creditors who do not have any entitlement to preferential treatment are commonly referred to as ordinary unsecured creditors. As a class in an insolvency administration they are usually the largest both in number and debt.  But when the administrator is distributing funds they are last in the queue. Almost invariably the funds left after paying secured and preferential creditors will be insufficient to meet their claims in full, so they are paid proportionately. Such a payment is referred to as a dividend of [a number of] cents in the dollar.

 3.6.3     Employees

           Employees owed money by insolvent individuals, partnerships, trusts and companies are unsecured creditors.

           Usually their claims are preferential. But there are several qualifications to this rule. Exactly where such a claim ranks amongst other preferential creditors, and to what extent, depends on the statute that applies, the make-up of the amount owing and, in the case of a corporate employee, the employee's relationship with that company. For example, currently under the Companies Code the amount which a director [or relative of a director] can receive as a priority payment for "wages" owing is limited to $2,000, whereas there is no such limit on other employees' claims. Currently in bankruptcy law there is a limit of $1,500 on all wage claims.

           For details of these laws, and an examination of the meaning of "employee", see chapter 12, "Special Subjects and Issues".

 3.7       POWERS OF COURTS

 3.7.1     Bankruptcy

           The main powers given to the court by the Bankruptcy Act are power to decide all questions, of law or fact, arising under the Act, and power to make such orders as it considers necessary for the purposes of carrying out or giving effect to the Act. It also has power to send certain offenders to prison. As a rule all the court's hearings are open to the public.

 3.7.2     Companies

           The court has extensive powers over corporate insolvency administrators, particularly liquidators. It also has powers to put companies into liquidation, stay or terminate a winding up, direct that meetings be held and so forth. These powers, most of which may be activated by creditors - and for that reason are an important element of their rights - are detailed throughout this book.

 3.8       GOVERNING OFFICIALS AND INSTITUTIONS: COMPANIES

 3.8.1     Ministerial Council for Companies and Securities.

           Under a formal scheme of co-operation the various State Governments, the Northern Territory Government and the Commonwealth Government [whose company laws apply to the Australian Capital Territory] have agreed to uniform company legislation throughout Australia. To supervise this scheme and to consider and keep under review the formulation and operation of company legislation, a Ministerial Council made up of the Minister administering company [and security] law in each State and Territory has been established. The State or Territory Minister is usually the Attorney-General.

           [The words "security" and "securities" used in this context have a different meaning than the one used in relation to secured creditors. Generally speaking securities legislation governs the business of buying and selling shares, stocks, debentures, bonds or notes in corporations.]

 3.8.2     National Companies and Securities Commission

           As part of the agreement on co-operation a National Companies and Securities Commission [NCSC] was established and given responsibility for the general administration of company law throughout Australia. The NCSC is accountable to the Ministerial Council. Its overriding function is to exercise responsibility for the entire area of policy and administration. It also has power to make recommendations to the Ministerial Council for new laws, or changes to laws, relating to companies.

           In the insolvency area the NCSC's objectives include ensuring that liquidators of companies observe high standards of professional competence and personal integrity in performing their duties. Its powers are wide ranging and include the following rights:

           * Inquire into the performance and/or actions of a liquidator or receiver.

          * Have the accounts of a receiver audited.

          * Challenge the amount of a receiver's remuneration.

          * Apply for termination of an official management.

          * Apply for the public examination of a person.

          * Inspect any book required to be keep.

          * Prosecute persons who may have committed offences.

          * Order certain persons not to manage companies.

           In practice the NCSC only exercises most of its rights if persuaded of the need to do so by "outsiders" - for example, creditors, shareholders, liquidators or politicians.

 3.8.3     Corporate Affairs Commissions

           Each State and Territory has its own Corporate Affairs Commission [CAC] controlled by the government minister responsible for corporate affairs in that State [usually the Attorney-General].

           Before the NCSC was formed the CAC's administered and enforced company law. Although that function has been transferred to the NCSC, the NCSC has delegated back to the CACs most of the functions and powers conferred on it, including the power to institute proceedings for any contravention of company law. So it is usually the CAC that creditors and the public must go to about corporate insolvency administrations.

3.9       GOVERNING OFFICIALS AND INSTITUTIONS:  INDIVIDUALS

3.9.1     The Minister for Consumer Affairs

          Ultimate responsibility for general administration of the Bankruptcy Act rests with the Federal Government Minister in charge of the portfolio, which at present is the Minister for Consumer Affairs. Under him are:

             Inspector-General in Bankruptcy;

             Registrars [and Deputy Registrars] in Bankruptcy;

             Official Trustee in Bankruptcy; and

             Official Receivers.

3.9.2    Inspector-General in Bankruptcy

          The Inspector-General is, in effect, the permanent public service department head in charge of bankruptcy under the general supervision of the Minister.

          The powers of the Inspector-General are extensive. For example, he/she may make such inquiries and investigations as he/she thinks fit into administration of a bankruptcy [or Part X arrangement], the conduct of the trustee and the conduct and examinable affairs of a bankrupt [or debtor]. And he/she has a duty to make such inquiries and investigations as the Minister directs. To help him discharge these functions he/she has power to obtain the books of a Registrar, Official Receiver or trustee, to question a trustee and to investigate the books of a trustee.

          The Inspector-General may - and often does - delegate his/her powers of inquiry and investigation to Official Receivers and Registrars in Bankruptcy.

          The Inspector-General's powers provide a mechanism for administrative review of estates. The mechanism can be triggered by creditors [or debtors] aggrieved by the acts, omissions or decisions of a trustee. Also, one of the inspector-general's aims in exercising these powers is to promote uniformly high standards of bankruptcy administration.

3.9.3     Registrar in Bankruptcy

          There is a Registrar in Bankruptcy in each bankruptcy district. [By proclamation under the Bankruptcy Act Australia has been divided into eight Bankruptcy Districts, comprising the six States, the Northern Territory and the Australian Capital Territory.] The Registrar is appointed by the Minister. Each Registrar has a staff but many of his/her functions, particularly those of a judicial nature, must be carried out personally or by a Deputy Registrar.

          A Registrar [and Deputy Registrar] may, if a Judge of the Court so directs, exercise certain powers of the Court. This means that in certain applications that come before the Court the Registrar acts as judge. Those applications are, by and large, of a routine administrative nature rather than ones which involve important questions of law.

          As his title suggests, one of the Registrar's main functions is to act as custodian of documents filed with the Court. Other important duties and functions include:

          Duties

               * Conduct and preside at the public examinations of bankrupts and other persons.

               * Keep a register of the names and addresses of trustees.

          Rights

               * Review, then confirm, reduce or increase the fees of a trustee.

               * Cause an audit of a trustee's account and records to be done.

               * Apply to the court for an inquiry into the conduct of a controlling trustee.

               * Require a controlling trustee to answer questions about the property or affairs of a                 debtor.

               Also, Registrars are often appointed by the Inspector-General to carry out his powers of inquiry and investigation.

 3.9.4     Deputy Registrars in Bankruptcy

           Each bankruptcy district has as many Deputy Registrars as the Minister deems necessary. Their powers and functions are almost identical to those of a Registrar.

 3.9.5     Official Trustee in Bankruptcy

           Although the title suggests that this is a natural person, it is actually a body corporate made up of the Official Receivers from each bankruptcy district.

           The Official Trustee is, in most respects, like a registered trustee, and has the same powers and duties. It becomes trustee of an insolvent estate when no registered trustee has been appointed or is acting, in particular when a registered trustee has not consented to act prior to the date of bankruptcy. It may be replaced as trustee by a registered trustee if creditors so resolve. It is paid for its services as trustee of an estate on a commission basis, with the commission it receives being paid into Consolidated Revenue.

 3.9.6     Official Receiver

           As with the Registrar in Bankruptcy there is an Official Receiver in each bankruptcy district. The Official Receiver in each district is a public official under the control of the Court. Each one employs staff to assist with the duties of office.

           An Official Receiver's powers and functions may be divided into three types:

                1. Those conferred or imposed by the Act.

               2. Those which the Inspector-General in Bankruptcy may pass on by appointing the Official Receiver to carry out some of his functions.

               3. Those which are conferred or imposed by the Act on the Official Trustee in Bankruptcy.

           Those conferred or imposed directly by the Act include:

                Rights  * Apply to the Court to enforce an order or direction with which a bankrupt, a debtor, or trustee or other person has failed to comply.

                       * Take part in the public examination of a bankrupt or other person.

                       * Investigate a bankrupt's conduct, examinable affairs and books and records [to the extent that the trustee does not propose to do so].

                       * Obtain such information from a trustee as is necessary to enable the Official Receiver to perform his/her duties.

                Duties  * Examine, inquire into and report to the Court on all applications by persons wanting to become registered trustees.

                       * If requested by a creditor, summon a meeting of creditors to fill a vacancy in the office of trustee.

                       * If he conducts an investigation into a bankrupt's conduct, etc., [see above], make a report on that investigation to the Registrar.

           The function often passed on to Official Receivers by the Inspector-General in Bankruptcy is that of making the wide ranging inquiries and investigations referred to above under the heading "Inspector-General in Bankruptcy" [3.9.2].

           As to the functions of the Official Trustee in Bankruptcy - which may be considered for practical purposes to be carried out by Official Receivers -refer to the above text under the heading "Official Trustee in Bankruptcy" [3.9.5].

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