Bankruptcy & Insolvency - Proposed amendments to Insolvency Law Reforms

Amendments to ensure that indigenous companies may utilise the new debt restructuring and simplified liquidation processes, under a new Pt 11-4A and by applying the Corporations Act Pt 5.3B and Sch 2 to the CATSI Act. This ensures that the specially designed powers of the CATSI Act are maintained and that the Corporations Act restructuring provisions are tailored to the specific requirements and risks inherent in the indigenous corporate sector.

The amendments to the CATSI Act also include:

• Eligible indigenous companies can enter the simplified liquidation process by passing a special resolution under s 526-20 of the CATSI Act.
• If a special administrator is appointed while an indigenous company is under restructuring, and where a restructuring plan is not yet in place, the restructuring process ends.
• If an indigenous company is under special administration, a small business restructuring practitioner cannot:
  • Be appointed
  • Exercise any powers or functions, or deal with the company’s property, unless they obtain approval from the special administrator or unless notice of the special administration has not yet been received.

• The Registrar can determine that an indigenous company be put under special administration, which (for indigenous companies) takes priority over the debt restructuring process.
• A person aggrieved by a decision, act or omission of a small business restructuring practitioner, either during restructuring or while a restructuring plan is in place, can appeal to the court.
• Any action taken by the director of an indigenous company in appointing a small business restructuring practitioner, may be a factor in determining that director’s liability for insolvent trading.
• Extension of the definition of “exempt document” to include liquidator reports made under reg 5.5.05 of the Corporations Regulations. A s 5.5.05 report is a new report under the simplified liquidation process, which replaces the more detailed s 533 report under the full liquidation process. A liquidator must submit a s 5.5.05 report to ASIC if the liquidator has reasonable grounds to believe that offences have been committed. The amendments mean that a person cannot inspect a document, made by the liquidator of an indigenous company which is subject to the simplified liquidation process, if that document contains information about offences or breaches related to the company.

Consequential amendments to clarify operation of the new debt restructuring and simplified liquidation processes and ensure that the processes work as intended. This includes clarifying that:

• A corporate restructuring practitioner has qualified privilege for statements made in the performance of their functions.
• Any person dealing with a restructuring practitioner, who is acting as an agent of the company, is afforded the same protections as if they were dealing with the company itself.
• ASIC may investigate offences in a s 5.5.05 report but the report itself is exempt from public disclosure.
• In the simplified liquidation process, a resolution can be passed by way of a proposal to creditors and contributories, without the need for a meeting of creditors.
• The appointment of a restructuring practitioner and the making of a restructuring plan is a circumstance which entitles a bidder to withdraw an unaccepted corporate takeover offer.
• The appointment of a restructuring practitioner is an insolvency event which triggers the disqualification of a corporate trustee, custodian or investment manager of a superannuation entity.
• Electronic communication is taken to have been sent or received from the principle place of business.

• Remove references to insurance companies in relation to the debt restructuring process. These provisions are no longer required, as entities regulated under the Insurance Act 1973 and Life Insurance Act 1995 are not eligible to access the debt restructuring process.
• Permit a small business restructuring practitioner to act as a company’s agent when acting in accordance with the restructuring plan.
• Clarify that a s 5.5.05 report is exempt from public disclosure.

• Modify the Corporations Act restructuring provisions so that they are tailored to the specific requirements and risks inherent in the indigenous corporate sector/
• Allow an eligible indigenous company to adopt the simplified liquidation process by passing a special resolution under s 526-20 of the CATSI Act. This is in addition to other triggering events for the simplified liquidation process, as detailed under s 489F of the Corporations Act, including:
  • Passing a special resolution under s 491 of the Corporations Act to wind up a company, or
  • Terminating a voluntary administration process.
• Sch 1 of the Regulations allows indigenous companies to avail of the debt restructuring process. This is achieved by applying the Corporations Act restructuring provisions (Pt 5.3B and Sch 2) and other relevant provisions to the CATSI Act.