Commencing on 1 March 2017 are some of the changes to Australia’s corporate insolvency legislation that were approved when the Insolvency Law Reform Act was passed in 2016. The Australian Securities and Investments Commission (ASIC), the regulator of the Corporations Act, has issued a table listing and summarizing what it says are the key changes. Set out below is a copy of that table. (The original is available to view at ASIC).
For a convenient list of NEW ASIC FORMS and AMENDED ASIC FORMS go to this EMAIL extract from ASIC to registered liquidators on 6 March 2017. NOTE: Some of the new and amended forms have not yet been released by ASIC (7/3/2017).
Corporate Insolvency Law Reform – key changes effective from 1 March 2017
- Registration Process
- Industry wide conditions
- Applying to vary or remove a condition or to lift or shorten a suspension
- Renewal of registration
- The Liquidator Register
- Annual liquidator return
- Notice of significant, and other, events
- ASIC power to direct registered liquidator to lodge documents or give information or correct inaccuracies
- ASIC power to cancel or suspend a person’s registration
- Disciplinary action by a committee
- Notice by industry body of possible grounds for disciplinary action
- Court oversight of registered liquidators
- Registration and disciplinary committees
- Administrator’s notice to owner or lessor of property
- Notice – material contravention of deed of company arrangement
- Company’s former name
- Relation back day
- Lodging declarations of relevant relationships and indemnities
- Lodgement requirements relating to pooled groups
Insolvency Practice Schedule
Summary of key amendments commencing on 1 March 2017
Table produced by the Australian Securities and Investments Commission (ASIC) in March 2017
Insolvency Practice Schedule
Summary of key amendments commencing on 1 March 2017
|Registration Process||Subdivision B of Division 20 of the Schedule and Division 20 of the Rules
New Form 903B released from 1 March 2017
|An individual may apply to ASIC for registration as a liquidator. The individual may apply to be registered to practice as:
* an external administrator of companies, receiver and receiver and manager; or
The application must be in the approved form; that is, Form 903B – and include all the information, statements, explanations or other matters/material the form requires. A lodgement fee of $2,200 (subject to annual indexation) applies (see item 4B of Schedule 1 to the Corporations (Fees) Regulations 2001).
If the application is in the approved form, ASIC must refer it to a registration committee to consider. The committee must interview the applicant and may require the applicant to sit for an exam.
Section 20-20(4) sets out factors the committee must consider. The Rules provide further details about the required qualifications, experience, knowledge and abilities. The Committee may decide the applicant should be registered subject to conditions.
If the Committee decides the applicant should be registered, ASIC must register the applicant when they produce written evidence of adequate and appropriate professional indemnity and fidelity insurance against the liabilities they may incur working as a registered liquidator.
A fee of $1,300 (subject to annual indexation) applies for the registration by ASIC of a person as a registered liquidator (see item 4C of Schedule 1 to the Corporations (Fees) Regulations 2001).
NOTE: Where a person applied for registration as a liquidator before 1 March 2017, ASIC had not refused that application and the person was not registered by 1 March 2017, the application is taken never to have been made and that person must then apply under the new regime. ASIC will refund any application fee paid (see s1552 of the Corporations Act).
|Industry wide conditions||Section 20-35 of the Schedule and Rule 20-5 of the Rules
No ASIC Form
|These conditions require registered liquidators to:
* undertake at least 40 hours of continuing professional education during each year the person is registered (10 hours of which must be capable of objective verification by a competent source); and
These ‘industry wide’ conditions apply to all currently registered liquidators from 1 March 2017.
|Applying to vary or remove a condition or to lift or shorten a suspension||Subdivision C of Division 20 and Subdivision F of Division 40 of the Schedule. New paper Form RL06 to be released early March 2017||A registered liquidator may apply to vary or remove a condition a committee imposed on their registration.
A registered liquidator may also apply to lift or shorten the period of a suspension of their registration as a liquidator.
ASIC must convene a committee to consider these applications.
|Renewal of registration||Subdivision D of Division 20 of the Schedule and Part 10.25 of the Corporations Act. New Form RL05 to be available on liquidator portal from 1 March 2017. Paper renewal form sent to all RLs due to renew in March and April 2017.||An individual may apply to ASIC to renew their registration as a liquidator. The application must be in the approved form; that is Form RL05, and include the information, statements, explanations or other matters/materials the form requires. A lodgement fee (subject to annual indexation) applies depending on when the applicant lodges the renewal application:
* if lodged more than 1 month before the renewal date $1,700
(see item 4D of Schedule 1 to the Corporations (Fees) Regulations 2001).
ASIC must renew the registration if the applicant:
* produces evidence in writing that the applicant maintains adequate and appropriate professional indemnity and fidelity insurance against liabilities they may incur working as a registered liquidator; and
The registration of liquidators, registered immediately before 1 March 2017, expire on the first anniversary of their original registration that occurs on or after 1 March 2017. If the registered liquidator does not apply for renewal of his or her registration before the expiry day, the registered liquidator will continue to be registered subject to a condition that he or she must not accept any further appointments as external administrator of a company. This ‘transitional registration’ ends automatically on the day immediately after the end of all of the registered liquidator’s existing external administrations.
The registered liquidator must continue to comply with all of his or her obligations as a registered liquidator (including maintaining adequate and appropriate professional indemnity and fidelity insurance and lodging an annual liquidator return) during the period of any such ‘transitional registration’.
|The Liquidator Register||Section 15-1 of the Schedule and section 15-1 of the Rules. No ASIC Form.||ASIC establishes and maintains the Register of Liquidators. The Register of Liquidators must include certain publicly available information about each registered liquidator such as the person’s name and date of registration and the addresses of the places where the person practises as a registered liquidator. The information on the Register also includes particulars of any disciplinary action taken against the registered liquidator and a summary of all current conditions imposed on their registration.
‘Disciplinary action’ includes any action taken by ASIC in relation to the registered liquidator under Division 40 of the Schedule (subject to limited exceptions), and therefore includes the referral by ASIC of a registered liquidator to a committee that will decide whether the registered liquidator should be subject to disciplinary action, and any disciplinary action taken by that committee.
|Insurance||Sections 20-75, 25-1,30-1, 40-25 and 40-30 of the Schedule. No ASIC Form.||A registered liquidator must maintain adequate and appropriate professional indemnity and fidelity insurance against the liabilities they may incur working as a registered liquidator. A person commits an offence if they fail to comply with the insurance requirements. In addition, ASIC may cancel or suspend a registered liquidator’s registration where they cease to have adequate and appropriate professional indemnity or fidelity insurance. A registered liquidator must provide evidence of their insurance at the time of lodging their annual liquidator return and on applying to renew their registration.|
|Annual liquidator return||Section 30-1 of the Schedule and section 1561 of the Corporations Act. ASIC Form 908||A person who is a registered liquidator during all or part of a liquidator return year for the person, must, within one month after the end of that year, lodge with ASIC an annual liquidator return.
The annual liquidator return must be in the approved form and include written evidence that the registered liquidator, during the whole of any period of the year during which the person was registered as a liquidator, maintained adequate and appropriate professional indemnity and fidelity insurance against the liabilities they may incur working as a registered liquidator.
The liquidator return year for a person is the period of 12 months beginning on the day on which the person’s registration first began, and each subsequent 12-month period.
If a person’s registration as a registered liquidator ceases during the liquidator return year, the person must still lodge an annual liquidator return relating to the part of the year for which they were registered, within one month after the end of the liquidator return year.
The requirement to lodge annual liquidator returns under s30-1 of the Schedule applies in relation to liquidator return years that begin on or after 1 March 2017. However, s1288 of the Corporations Act as in force immediately before 1 March 2017, continues to apply to liquidator return years beginning before that date.
Therefore, if you are a registered liquidator that was registered before 1 March 2017:
* your first return on or after 1 March 2017 will be the Form 908 that was in use before 1 March 2017;
|Notice of significant, and other, events||Division 35 of the Schedule, Division 35 of the Rules and section 1562 of the Corporations Act. New paper Form RL 30 released from 1 March 2017 for notification of significant events. Existing Form 905A for notification of ‘other’ events.||A registered liquidator must notify ASIC in the approved form of specified events, including if the liquidator:
*becomes an insolvent under administration
Existing registered liquidators as at 1 March 2017 are required to notify ASIC if any of the prescribed ‘significant’ events have occurred within the previous two years (unless the registered liquidator has already informed ASIC in writing of the event). A registered liquidator commits an offence if the registered liquidator intentionally or recklessly fails to comply with these notice requirements.
|ASIC power to direct registered liquidator to lodge documents or give information or correct inaccuracies||Subdivision B of Division 40 of the Schedule. No ASIC Form.||ASIC may, in writing, direct a registered liquidator to comply with a requirement to lodge any document, or give any information or document, that the Corporations Act requires the liquidator to lodge with or give to ASIC. ASIC may also direct a registered liquidator to correct or complete information that the Corporations Act requires the liquidator to give to ASIC, if ASIC reasonably suspects that the information is incomplete or inaccurate in any particular. If a registered liquidator fails to comply with either of these types of directions, ASIC may give a written direction that the registered liquidator not accept further appointments under Chapter 5 of the Corporations Act. It will be a condition on the person’s registration as a liquidator that they comply with the direction. That condition is removed if ASIC withdraws the direction.|
|ASIC power to cancel or suspend a person’s registration||Subdivision D of Division 40 of the Schedule. No ASIC Form.||The reforms give ASIC the power to either suspend or cancel a person’s registration on specified grounds, such as, the person:
* is disqualified from managing corporations under Part 2D.6 of the Corporations Act; ceases to have adequate and appropriate professional indemnity or fidelity insurance, or
ASIC must provide written notice of its decision to suspend or cancel the registration of a person as a liquidator, and the reasons for that decision, within 10 business days after making the decision.
|Disciplinary action by a committee||Subdivision E of Division 40 of the Schedule. No ASIC Form.||From 1 March 2017, the Companies Auditors and Liquidators Disciplinary Board ceased its function of disciplining liquidators. A disciplinary committee, convened under the Schedule, assumes this function.
ASIC may issue to a registered liquidator a ‘show cause’ notice asking the liquidator to give ASIC a written explanation why the liquidator should continue to be registered if ASIC believes that certain circumstances exist, such as that the liquidator no longer has the qualifications, experience, knowledge and abilities required, has breached a current condition of their registration or has contravened a provision of the Act.
ASIC may refer the matter to a committee if ASIC does not receive a written explanation within 20 business days after the notice is given or is not satisfied by the explanation it receives. The committee may decide to:
* cancel or suspend the person’s registration as a liquidator;
The committee may also impose a condition on all other registered liquidators that they must not allow the liquidator to carry out any of the functions or duties, or exercise any of the powers of a registered liquidator, on their behalf (whether as employee, agent, consultant or otherwise).
The committee may also decide that ASIC should publish specified information about the decision and the reasons for the decision.
|Notice by industry body of possible grounds for disciplinary action||Subdivision G of Division 40 of the Schedule. New paper Form RL35 to be released early March 2017.||A prescribed industry body may lodge with ASIC a notice in the approved form stating that the body reasonably suspects grounds exist for ASIC to suspend or cancel the registration of a liquidator, give the registered liquidator a ‘show cause’ notice or impose a condition on the liquidator under another provision of the Schedule. This notice must include the information and copies of any documents on which the suspicion is founded. An industry body is not liable civilly, criminally or under any administrative process for giving such a notice if the body acted in good faith in giving the notice and the suspicion that is the subject of the notice is a reasonable suspicion.|
|Court oversight of registered liquidators||Division 45 of the Schedule||The Court may make such orders as it thinks fit in relation to a registered liquidator. In making such orders, the Court may take into account a range of matters, including whether the registered liquidator has faithfully performed, or is faithfully performing, their duties.|
|Registration and disciplinary committees||Division 50 of the Schedule and Division 50 of the Rules||The committees convened to make decisions under the Schedule will consist of ASIC, a registered liquidator chosen by ARITA and a person appointed by the Minister. The Rules provide for how the committee is to perform its functions. The committee may determine its own procedures and must observe natural justice. Rules of evidence do not bind the committee but the committee may inform itself on any matter as it sees fit. Decisions of the committee will be made by majority vote.|
|Administrator’s notice to owner or lessor of property||Section 443B(3). No ASIC Form.||The reforms repeal and substitute subsection 443B(3) of the Corporations Act. The subsection provides that, when notifying the owner or lessor of property that the administrator does not propose to exercise rights in relation to property, the administrator must specify the property and also the location of the property (if the administrator knows the location or could know the location, by exercising reasonable diligence).|
|Notice – material contravention of deed of company arrangement||Section 445HA. ASIC intends to make available a document that may be used for this purpose.||The reform introduces section 445HA of the Corporations Act to require:
* a director of a company subject to a deed of company arrangement to notify the deed administrator in the prescribed form as soon as practicable after becoming aware that there has been, or is likely to be, a material contravention of the deed by a person who is bound by the deed (who may be the director);
* a deed administrator to notify creditors in the prescribed form as soon as practicable after becoming aware that there has been, or is likely to be, a material contravention of the deed by a person who is bound by the deed (who may be the deed administrator).
|Company’s former name||Section 161A. New paper form released from 1 March 2017.||The reforms amend section 161A of the Corporations Act so that an external administrator, managing controller or receiver that applies to the Court for leave to omit the company’s former name on all of its public documents and negotiable instruments, must lodge with ASIC a notice in the prescribed form stating that the application has been made.|
|Relation back day||Sections 9 and 91. No ASIC Form.||The reforms introduce section 91 of the Corporations Act to provide a more expansive definition of ‘relation-back day’ in relation to the winding up of a company or Part 5.7 body. This change addresses a number of difficulties with the existing definition.|
|Lodging declarations of relevant relationships and indemnities||Sections 436DA, 449CA. New Form 531 available from 1 March 2017 on liquidator portal.||The reforms amend sections 436DA and 449CA so that an external administrator must lodge a copy of their declaration of relevant relationships and declaration of indemnities (or replacement declarations) with ASIC as soon as practicable after making the declaration.
NOTE: The changes to s506A regarding declarations of relevant relationships and declarations of indemnities for a liquidator in a creditors’ voluntary liquidation do not commence until 1 September 2017.
|Lodgement requirements relating to pooled groups||Sections 579A, 579B and 579C. ASIC Form: Continue to use existing Form 1502 on liquidator portal.||The reforms amend sections 579A, 579B and 579C so that, if the Court makes an order varying or terminating a pooling determination, cancelling or confirming a variation to a pooling determination or declaring a pooling determination to be void, not void or valid, the applicant must lodge with ASIC a notice, in the prescribed form, setting out the text of the order within two business days after the making of the order.|