I have created – in Microsoft Excel format – the current Australian statutory companies Report as to Affairs form. It is free to download and/or view from my website. Click HERE for the forms page and look for Form 507, MS Excel version.
The Advanced Medical Institute Pty Ltd [ACN 117 372 915] and AMI Australia Holdings Pty Ltd [ACN 095 238 645] are under external administration. Trent Hancock and Michael Hird, of accounting firm, BDO, Sydney, were appointed Joint Voluntary Administrators by Life Science Group Pty Ltd, a secured creditor of both companies, in December 2010.
The Australian Competition and Consumer Commission (ACCC) issued a media release on 15 June 2011 stating:
“Today, the Australian Competition and Consumer Commission obtained interim orders by consent against Advanced Medical Institute Pty Limited (administrators appointed) and AMI Australia Holdings Pty Ltd (administrators appointed) – collectively referred to as AMI. In proceedings filed on Wednesday, the ACCC alleged that AMI failed to advise existing and potential clients that it is in administration, is insolvent and may not be able to provide goods and services after determination of the administration period. The ACCC also claimed that AMI had wrongly accepted payments in advance for treatments when there is a real risk that AMI will not be able to continue to supply its treatments, and that clients will not receive refunds claimed by them, after the conclusion of its administration.
Today the ACCC obtained orders by consent that AMI will disclose to clients that:
“In these circumstances, the ACCC considered it vital to ensure that potential customers of AMI were clearly informed about the situation the company is in before they bought into any agreements,” ACCC chairman Graeme Samuel said.”
“This case underlines the fact that companies under administration are not exempt from their obligations under the Competition and Consumer Act.”
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Speaking of statutory duties, section 450E(1) of the Corporations Act 2001 (“the Act”) stipulates that:
“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”)”.
[There are virtually identical requirements in the Act that apply to companies where a receiver or controller has been appointed (section 428), or the company is in liquidation (section 541), or the company is subject to a deed of company arrangement (section 450E(2).]
Section 88A of the Act gives the meaning of the phrase “public document” of a corporation. It appears to me to be wide enough to include an advertisement published on the internet by the corporation; and a website or blog published by the corporation.
Breaches of sections 450E(1), 428 or 541 are strict liability offences, meaning there is no requirement that the prosecution prove intention, knowledge, recklessness, negligence or any other variety of fault.
So it would be prudent for insolvency practitioners to ensure that the internet advertisements, websites and blogs of companies they control carry the required notice.
The Australian Securities and Investments Commission (ASIC) has found that “the large majority” of registered liquidators are complying with their statutory duty to lodge six-monthly accounts of receipts and payments (Companies Form 524) (“financial statements”) in respect of external administrations they are conducting.
In a special compliance program the ASIC analysed its database of approximately 24,800 companies in external administration at March 2010. It identified 517 external administrations where a Form 524/financial statement had been outstanding for a period of more than six months; and 171 registered liquidators who appeared to be at fault.
Preliminary results of the program were published in the December 2010 issue of “ASIC Insolvency Update – an update for registered liquidators”.
Final results have just been published in an article by the ASIC in the June 2011 edition of “Australian Insolvency Journal”, the journal for members of the Insolvency Practitioners Association of Australia (IPA). The article and the chart accompanying it show that:
There are some other findings and explanations reported in the article. ASIC Commissioner, Michael Dwyer, says: “It was pleasing to see that the large majority of practitioners complied with their obligation to lodge accounts”.
[Undoubtedly the ASIC’s final report will appear in a form available to non-members of the IPA shortly. As soon as a link becomes available I will insert it in this blog.]
A controversial ASIC-approved short cut to deregistration in a creditors’ voluntary liquidation seems to be at odds with sentiments expressed in a decision of the Federal Court of Australia.
In my post headed “Obscure short cut through insolvency law on company deregistration” (24/11/2010) I questioned whether this officially sanctioned short cut or escape mechanism – which allows liquidators to bypass sections 509(1) to (5) of the Corporations Act 2001 (the Act) in loosely defined and very common circumstances – was warranted.
Now it stikes me that it might actually be unlawful.
His Honour, Jacobsen J, examined section 509 of the Act in considering the case of Emergen X Pty Ltd (In Liquidation) ACN 114 579 510 [2010] FCA 487.
His Honour’s written judgment (May 2010) illustrates the importance attached to the requirements to convene a final meeting and to let 3 months elapse after that date.
A shareholder of the company applied to the Court for an order under section 509(6) to bring forward the date of deregistration by shortening the 3 month period that is otherwise required to elapse. (The shareholder wanted deregistration to occur on the earlier date so that it (the shareholder) could obtain a tax benefit, under CGT rules, by being able to claim a loss on the shares in the current tax year.)
His Honour took the view from examining legal authorities that the 3 month period is a “period of grace”, designed to allow “for claims by creditors or other aggrieved parties so as to ensure that they can make a claim against a company without having to go through the process of seeking an order reinstating it.”
I find it difficult to see how the sentiments expressed by His Honour sit in harmony with the short cut – as ASIC has approved with companies Form 578 – which allows liquidators to bypass giving notice of a final meeting of creditors and also removes the 3 month period of grace.
Let’s have a debate.
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Note: The following quote is from His Honour’s judgment in Emergen X Pty Ltd (In Liquidation) ACN 114 579 510 [2010] FCA 487:
“The reason why there is a period of grace of three months allowed after the filing of the return seems to be explained in a Victorian authority from the nineteenth century. The decision, which is relevant, is John Birch & Co. Limited v The Patent Cork Asphalt Co. Limited (1894) 20 VLR 471 (“John Birch”). In that case Madden CJ said at 472 that the suspension of a dissolution for three months in the then relevant section of the legislation means that a purpose is to be served. His Honour said the only easily understandable purpose is to enable persons who are affected to come in and make a claim. Thus the period of grace is allowed for claims by creditors or other aggrieved parties so as to ensure that they can make a claim against a company without having to go through the process of seeking an order reinstating it.
Although the decision of Madden CJ in John Birch was reversed on appeal, the discussion of the Full Court does not affect the primary judge’s explanation for the rationale of the three month period, see John Birch & Co. Limited v The Patent Cork Asphalt Co. Limited (1985) 21 VLR 268.”
Note: For the full text of this judgment, issued in May 2010, click HERE.
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With the necessary approval, a liquidator may legally destroy his or her records of a winding up soon after it is finalised. The same is true of books and records of the liquidated company. (See section 542 of the Corporations Act 2001 “the Act”.)
In the case of a creditors’ voluntary winding up approval must be obtained from creditors and then the Australian Securities and Investments Commission (ASIC). In a winding up by the Court approval must be obtained from the Court.
The provisions in the Act for early destruction make sense. Or at least they do in so far as they pertain to the books and records of the liquidated company that exist at the commencement of the winding up. At that stage a company may have a vast collection of books and records. Without special laws a liquidator would be required to store them for 5 years after the company ceased to exist. Multiply this cost by the many administrations that a liquidator may have and the sum becomes exorbitant, and needlessly so.
But in the case of books and records created subsequent to commencement of the winding up, the argument for early destruction is much weaker, particularly now that society seems to be demanding that liquidators be more accountable and more closely supervised. (For example, see the Australian Senate Committee Report: “The regulation, registration and remuneration of insolvency practitioners in Australia: the case for a new framework“, September 2010.)
(This aspect of the law in relation to retaining books is discussed in my earlier article headed: “Retaining books and records post liquidation”.)
Nonetheless, the main purpose of this article is to draw the attention of liquidators to an application form that I have prepared for use in applying for early destruction of books in a creditors’ voluntary liquidation. (There is no statutory form for an application.)
My standard form may be found at:
www.insolvencyresources.com.au/CvoliqPractPack.htm
Before applying to ASIC a resolution approving/directing the early destruction must be passed by creditors, either through the committee of inspection – if there is one – or at a meeting of creditors. This is usually a standard item on the agenda at the first or second meeting.
ASIC’s Regulatory Guide 81 (RG 81) sets out what information the application must contain. A little less information is required if the application is made after the company is deregistered. But an application can be made before deregistration and even up to 2 months before the final meeting of members and creditors.
Essentially the application requires the liquidator to supply a copy of the committee or creditors’ resolution and to state that:
Presumably if there are circumstances which exist in relation to the company or an associate which may result in the books being required within 5 years of the company’s deregistration, a liquidator who, nevertheless, wants permission to destroy the books would have to present a submission to ASIC for its consideration.