House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Small Business, Assistant Treasurer, the Hon Kelly O'Dwyer MP and the Attorney-General, the Hon Senator George Brandis)

Chapter 3 - Remuneration and regulation of trustees

Outline of chapter

3.1 This chapter relates to rules regarding the remuneration of trustees, interactions between trustees and creditors and the review of a trustee's actions. These rules will be common (with some exceptions) with the corresponding rules in relation to registered trustees which are introduced by the Insolvency Practice Schedule (Bankruptcy).

3.2 Many of the rules are based on the existing framework that exists for registered trustees.

Context of amendments

3.3 The interaction between trustees and creditors was the subject of a significant amount of attention in the Senate Inquiry. Concerns were raised that creditors lacked the ability to influence the actions taken by insolvency practitioners and to monitor the actions taken by insolvency practitioners.

3.4 A fundamental issue with regards to the regulation of insolvency practitioners is that generally creditors are disinterested in the details of the administration. This creditor disinterest can sometimes encourage bad behaviour by rogue insolvency practitioners. The rules detailed in this chapter seek to empower creditors to seek information with regards to an administration, should they so wish.

Summary of new law

3.5 The parts of the Schedule that this chapter is concerned with will provide for:

•

a maximum default amount of remuneration for trustees;

•

the making of remuneration determinations by the creditors and/or the Inspector-General;

•

rules relating to the receipt of benefits by trustees;

•

requirements relating to fund handling by trustees;

•

requirements relating to record keeping by trustees;

•

rules relating to the provision of information;

•

rules relating to meetings;

•

rules relating to committees;

•

rules relating to the review of the administration of regulated debtor's estates; and

•

rules relating to committees of inspection.

Comparison of key features of new law and current law

Detailed explanation of new law

3.6 A trustee's remuneration will be determined on the basis of whether a remuneration determination has been made or not. If a remuneration determination is made (there may be more than one) the trustee of a regulated debtor is entitled to receive remuneration for the necessary and work properly performed by the trustee in relation to the administration of the regulated debtor's estate in accordance with the remuneration determination [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision B, subsection 60-5(1)].

3.7 The qualifier 'necessary work properly performed' seeks to ensure that (if asked to) trustees can justify the work undertaken in relation to the administration of a regulated debtor's estate for which they are seeking remuneration.

3.8 If no remuneration determination is made the trustee is entitled to receive reasonable remuneration for the work undertaken by the trustee in relation to the administration of the regulated debtor's estate. However that remuneration must not exceed the maximum default amount (that is, $5,000 plus any indexation). [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision B, subsection 60-5(2)]

3.9 For example if a trustee carries out work in relation to the administration of a regulated debtor's estate and the reasonable remuneration the trustee would be entitled to is less than the maximum default amount then they are not entitled to the maximum default amount. They may however claim reasonable remuneration for the work they have carried out on the regulated debtor's estate even if the amount they would be entitled to is less than the maximum default amount.

3.10 The remuneration is to be paid from the funds in the regulated debtor's estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision B, subsection 60-5(3)]

3.11 A remuneration determination may be made by resolution of the creditors or (if no resolution has been made by the creditors) by the committee of inspection [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision B, section 60-10]

3.12 In circumstances as prescribed by the Insolvency Practice Rules, the Inspector-General may make a determination specifying the remuneration that a trustee is entitled to receive for necessary work properly performed in relation to the administration of the estate. This provision replaces repealed subsection 162(4) of the Bankruptcy Act. Regulation 8.09 provides the circumstances under which subsection 162(4) applies and will be replicated in the rules. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision B, subsection 60-11(1)]

3.13 When making a remuneration determination the Inspector-General must have regard to any matter prescribed by the Insolvency Practice Rules. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision B, subsections 60-11(2) and (3)]

3.14 A remuneration determination may specify the remuneration that the trustee is entitled to receive by: providing an amount of remuneration; or a method of calculating an amount of remuneration; or a combination of these two approaches. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision B, subsection 60-12(1)]

3.15 If a remuneration determination specifies that the trustee is entitled to receive remuneration worked out wholly or partly on a time-cost basis, the determination must include a cap on the amount of remuneration worked out on a time-cost basis that the trustee is entitled to receive. [Schedule 1, Insolvency Practice Schedule Bankruptcy, Part 3, Division 60, Subdivision B, subsection 60-12(2)]

3.16 If a remuneration determination specifies that the trustee is entitled to receive remuneration worked out wholly or partly on the basis of a specified percentage of money received by the trustee in respect of the regulated debtor's estate the determination must specify the money to which the specified percentage applies and the specified percentage must not be greater than the prescribed percentage. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision B, subsection 60-12(3)]

3.17 A remuneration determination may, for example, specify that a trustee is entitled to receive part of his or her remuneration on the basis of a specified percentage of money received from the sale of an asset that forms part of the regulated debtor's estate.

3.18 More than one remuneration determination may be made in relation to a particular trustee and a particular regulated debtor's estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 22, Subdivision B, subsection 60-12(4)]

3.19 The maximum default amount does not seek to establish an industry average for remuneration in an insolvency. Rather, this provision seeks to facilitate a trustee being able to draw a base amount of remuneration without incurring the expense of convening a meeting to obtain creditor approval. This provision is expected to be particularly valuable for a no (or low) asset administration. The maximum default amount for a trustee is an amount (exclusive of GST) worked out as follows:

•

$5,000, if the trustee is appointed as the trustee of the regulated debtor's estate during the financial year beginning on 1 July 2016; otherwise,

•

if the trustee is appointed as the trustee of the regulated debtor's estate during a financial year beginning on or after 1 July 2017 the greater of:

(i)

the amount worked out by multiplying the indexation factor for the financial year (worked out in accordance with subsections 60-15(3) and (4)) by the maximum default amount for a trustee appointed as the trustee of a regulated debtor's estate during the previous financial year; and

(ii)

the amount (if any) prescribed for the purposes of subparagraph 60-15(1)(b)(ii).

The $5,000 figure reflects the current statutory minimum for trustee remuneration under paragraph 161B(1)(a) of the Bankruptcy Act, which will be preserved for the first financial year after the commencement of the Bill. From that financial year onwards, the amount will be indexed against this $5,000 figure. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 22, Subdivision B, subsection 60-15(1)]

3.20 Amounts worked out under the formula for the maximum default amount must be rounded to the nearest whole dollar. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 22, Subdivision B, subsection 60-15(2)]

3.21 Subject to subsection 60-15(4), the indexation factor for a financial year is the number worked out by dividing the index number for the March quarter immediately preceding that financial year by the index number of the March quarter immediately preceding that first mentioned March quarter. Where the indexation factor would be less than 1 it is to be increased to 1. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision B. subsection 60-15(3) and (4)]

3.22 When working out the indexation factor for section 60-15:

•

use only the index numbers published in terms of the most recently published index reference period for the Consumer Price Index; and

•

disregard index numbers published in substitution for previously published index numbers (except where the substituted numbers are published to take account of changes in the index reference period). [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision B, subsection 60-15(5)]

3.23 With regards to a reference in section 60-15 to the 'index number', the 'index number' in relation to a quarter means the All Groups Consumer Price Index, being the weighted average of the 8 capital cities, published by the Australian statistician in respect of that quarter. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision B, subsection 60-15(6)]

Duties of trustees relating to remuneration and benefits etcetera

3.24 A trustee of a regulated debtor's estate must not directly or indirectly derive any profit or advantage from a transaction, sale or purchase for or on account of the estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision E, subsection 60-20(1)]

3.25 To avoid doubt, a trustee of a regulated debtor's estate is taken to derive a profit or advantage from the administration of the estate if:

•

the trustee directly or indirectly derives a profit or advantage from a transaction (including a sale or purchase) entered into for, or on account of, the estate;

•

the trustee directly or indirectly derives a profit or advantage from a creditor of the estate; or

•

a related entity of the trustee directly or indirectly derives a profit or advantage from the administration of the estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision E, subsection 60-20(2)]

3.26 Subsection 60-20(1) does not apply to the extent that another provision of the Bankruptcy Act, or of another law, requires or permits the trustee to derive the profit or advantage or the Court gives leave to the trustee to derive the profit or advantage [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision E, subsection 60-20(3)]

3.27 Subsection 60-20(4) provides a further exception where the profit or advantage arises because the trustee employs or engages a related entity of the trustee to provide services in relation to the administration. In these circumstances, subsection 60-20(1) does not apply if one of the following is satisfied:

(i)

the trustee does not know, and could not reasonably be expected to know, that the person employed or engaged is a related entity of the trustee-this provides an exception where the trustee is unaware that the person is a related entity;

(ii)

the creditors, by resolution, agree to the related entity being employed or engaged-this provides a mechanism for creditors to agree to engagement or employment of a related entity; or

(iii)

it is not reasonably practicable in all the circumstances to obtain the agreement, by resolution, of the creditors to the related entity being employed or engaged and the cost of employing the related entity is reasonable in all the circumstances-this provision anticipates that there may be circumstances where a trustee is unable or prevented from seeking creditors' agreement to the engagement or employment of a related entity. It limits this exception to circumstances where the costs paid to the related entity are reasonable.

3.28 In many cases a trustee may structure their business so that they have a service company that provides services relating to their practice. Trustees will be able to engage their service firms (as a related entity) to provide services in relation to the administration of a regulated debtor's estate provided creditors consent, by resolution, to that arrangement or, where it is not reasonably practicable to obtain creditors' consent, the costs of that employment or engagement are reasonable in all the circumstances. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision E, subsection 60-20(4)]

3.29 Subsection 60-20(1) does not apply to the extent that the profit or advantage is a payment that is made to the trustee by or on behalf of the Commonwealth, or an agency or authority of the Commonwealth, and is of a kind prescribed. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision E, subsection 60-20(5)]

3.30 A trustee commits an offence of strict liability and incurs a penalty of 50 penalty units if they fail to comply with the requirements of subsection 60-20(1). [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision E, subsection 60-20(6)]

3.31 A transaction, sale or purchase or any other arrangement entered into in contravention of the requirements under section 60-20 may be set aside by the Court. This allows the Court discretion to determine the effect of a contravention of section 60-20 in consideration of the circumstances surrounding that contravention. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision E, subsection 60-20(7)]

3.32 A person commits an offence of strict liability with a penalty of 50 penalty units, or 3 months imprisonment, or both if they offer an inducement for the purposes of securing their appointment or nomination as trustee of the debtor's estate, or for the purpose of securing or preventing the appointment or nomination of another person as a trustee of the debtor's estate. This provision, and its corresponding penalty, is modelled after section 595 of the Corporations Act. The severity of the penalty recognises the importance of appointing an impartial trustee who would have significant power to determine the outcome of an estate for creditors and for the regulated debtor. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision E, subsections 60-21(1) and (2)]

3.33 Section 60-26 provides that if another person performs the trustee's ordinary duties, they must not be paid unless the creditors or committee of inspection authorise that payment. A person who fails to comply with this requirement commits an offence of strict liability with a penalty of 50 penalty units. This provision replaces and reflects section 166 of the Bankruptcy Act, which was created in 2010 as part of the new remuneration notice regime to replace the taxation of costs requirements. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 60, Subdivision E, subsections 60-26(1), (2) and (3)]

Funds handling

3.34 An administration account is a bank account in relation to a regulated debtor's estate where it is maintained in relation to that estate and complies with prescribed requirements, if any. This provision replaces section 169 of the Bankruptcy Act, which will be repealed under item 55 of Schedule 1, Part 2. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, section 65-10]

3.35 The trustee must pay all money received by the trustee on behalf of, or in relation to, the estate into an administration account for the estate within five business days after receipt. This provision replaces section 168 of the Bankruptcy Act. It provides greater certainty by specifying that the trustee must pay all administration funds into the administration account and provides greater clarity around the offence by creating a timeframe of 5 business days for compliance with the requirement. [Schedule 1, Part 3, Division 65, subsection 65-5(1)]

3.36 There is an exception to this requirement where the Court gives an inconsistent direction, in which case the Court direction prevails to the extent of the inconsistency. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, subsection 65-5(2)]

3.37 A trustee commits an offence of strict liability with a penalty of 50 penalty units if they fail to meet this requirement. This penalty is higher than the section 168 penalty of 10 penalty units as this penalty better reflects the importance of account keeping practices in the handling of funds for bankruptcy administrations. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, subsection 65-5(3)]

3.38 Further to the requirement of section 65-10, section 65-15 provides that the trustee of a regulated debtor's estate must not pay any money into the administration account for the estate if it is not received by the trustee on behalf of, or in relation to, the estate or where the trustee maintains the account in relation to the relevant estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, subsection 65-15(1)]

3.39 There is an exception to this requirement where the Court gives an inconsistent direction, in which case the Court direction prevails to the extent of the inconsistency. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, subsection 65-15(2)]

3.40 A trustee commits an offence of strict liability with a penalty of 50 penalty units if they pay any money into the administration account for the estate if it is not received in relation to the estate. As with the penalty under subsection 65-10(3), this penalty reflects the importance of account keeping practices in the handling of funds for bankruptcy administrations. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, subsection 65-15(3)]

3.41 If the trustee fails to pay any money into an administration account as per section 65-10 and the amount exceeds $50 (or another prescribed amount) and an exception does not apply, the trustee must pay an interest penalty on the excess. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, subsections 65-20(1) and (2)]

3.42 The penalty must be paid to the Commonwealth at the rate of 20% a year (or a prescribed rate if applicable) for the period during which the trustee fails to comply with the requirement. The trustee is personally liable for, and is not entitled to be reimbursed by the estate in relation to, the payment of that interest. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, subsections 65-20(3) and (4)]

3.43 The trustee of a regulated debtor's estate must not pay any money out of the administration account for the estate otherwise than for purposes related to the administration of the estate; or in accordance with the Bankruptcy Act or in accordance with a direction of the Court. A person who fails to comply with this requirement will be committing an offence of strict liability with a penalty of 50 penalty units. As with the penalty under subsection 65-10(3), this penalty reflects the importance of account keeping practices in the handling of funds for bankruptcy administrations. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, subsections 65-25(1) and (2)]

3.44 The trustee of a regulated debtor's estate is entitled, in his or her personal capacity, to each payment of interest on the administration account for the estate, less an amount equal to the bank fees or charges (if any) paid or payable on the account during the period to which the interest relates. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, subsection 65-31(1)]

3.45 If the trustee is only entitled to part of a payment of interest, the rest of that payment:

•

forms part of that estate where the administration account contains money from only one estate of a regulated debtor; or

•

forms part of those estates in proportion to the respective amounts of money held in the administration account on account of each of those estates where the administration account contains money from more than one estate of a regulated debtor or regulated debtors. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, subsection 65-31(2])

3.46 Interest on money in the administration account for a regulated debtor's estate is not subject to taxation under a law of the Commonwealth, a State, or a Territory except as provided for in Part 2 of the Bankruptcy (Estate Charges) Act 1997. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, subsection 65-31(3)]

3.47 If a trustee maintains a single bank account for more than one estate of a regulated debtor or regulated debtors the trustee must maintain separate records for each of these estates of:

•

money received by the trustee from the regulated debtor in relation to the estate;

•

payments made by the trustee in relation to the estate;

•

the balance of money held by the trustee in relation to the estate; and

•

at least once every 25 business days the trustee must reconcile the balance relating to each estate held in the account with the corresponding separate record. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, subsections 65-32(1) and (2)]

3.48 The trustee of a regulated debtor's estate must deposit in a bank: bills of exchange, promissory notes and any other negotiable instrument or security payable to the regulated debtor or the trustee as soon as practicable after they are received by the trustee. If a Court gives a direction that is inconsistent with this requirement then that requirement does not apply. A person commits an offence of strict liability with a penalty of 5 penalty units if they are required to comply with this requirement and they fail to do so. The bills, notes or other instruments must be delivered out on the signed request of the trustee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, subsections 65-40(1), (2), (3) and (4)]

3.49 The Court may, on application, give directions regarding the payment, deposit or custody of money and securities that are payable to, or held by, the trustee of a regulated debtor's estate. [Schedule 1, Part 3, Division 65, subsection 65-45(1)]

3.50 The Court may, on application, give directions authorising the trustee of a regulated debtor's estate to make payments into and out of a special bank account. Without limiting the scope of the directions the Court may:

•

authorise the payments for the time and on the terms it thinks fit; and

•

if the Court thinks the account is no longer required-at any time order it to be closed. An order to close an account must be served by the trustee on the relevant bank. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, subsections 65-45(2) and (3)]

3.51 A copy of a Court direction authorising the trustee of a regulated debtor's estate to make payments into and out of a special bank account must be served by the trustee on the bank with which the special account was opened. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, subsection 65-45(4)]

3.52 An application for the Court to give directions may be made by a person with a financial interest in the administration of the debtor's estate. This is defined by section 5-30 to include:

•

a creditor;

•

the regulated debtor;

•

the trustee; or

•

any other person in circumstances as prescribed. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, subsection 65-45(5)]

3.53 The Insolvency Practice Rules may provide for the review by the Inspector-General of a bill of costs for services provided by a person in relation to the administration of a regulated debtor's estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, subsection 65-46(1)

3.54 Without limiting the scope of what the Insolvency Practice Rules may provide for and in relation to the review of payments to third parties the Insolvency Practice Rules may provide for:

•

the application for the review (including who may apply);

•

the powers available to the Inspector-General in relation to the review;

•

the provision of information or documents to the Inspector-General for the purposes of the review;

•

the decisions that may be made by the Inspector-General in relation to the review;

•

the notification of decisions made by the Inspector-General; and

•

the consideration of the decisions made by the Inspector-General in relation to the review by the Court. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, section 65-46(2)]

3.55 The Insolvency Practice Rules may provide for rules in relation to consequences for failure to comply with Division 65. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 65, section 65-50]

Annual Administration Return

3.56 If a person is the trustee of a regulated debtor's estate during all or part of a financial year the person must lodge a return in relation to the person's administration of that estate during that year (or part year). [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Subdivision B, Division 70, subsections 70-5(1) and (2)]

3.57 The return must be in the approved form; and be lodged with the Inspector-General within 25 business days after the end of the financial year. If the person does not lodge the return within this time period the person must pay a late lodgement fee determined by the Minister by legislative instrument. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Subdivision B, Division 70, subsections 70-5(3) and (4)]

Record-keeping

3.58 Subdivision C of Division 70 (Record-keeping) applies to the Official Trustee in the same way as it applies to the trustee of a regulated debtor's estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, section 70-6]

3.59 The trustee of a regulated debtor's estate must keep proper books in which the trustee must cause to be made:

•

entries of minutes of proceedings at meetings relating to the administration of the estate; and

•

such other entries as are necessary to give a complete and correct record of the trustee's administration of the estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy). Part 3, Division 70, Subdivision C, subsection 70-10(1)]

3.60 The trustee must:

•

ensure that the books are available at the trustee's office for inspection; and

•

permit a creditor, or another person acting on the creditor's behalf, to inspect the books at all reasonable times. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsection 70-10(2)]

3.61 The requirements to keep proper books and to allow for the books to be inspected do not apply if the trustee has a reasonable excuse. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Subdivision C, Division 70, subsection 70-10(3)].

3.62 A person commits an offence of strict liability with a penalty of five penalty units if they are subject to the requirement to keep proper books or to allow for the books to be inspected and they do not comply with the requirement. This reflects the penalty in the previous equivalent provision under section 173 of the Bankruptcy Act. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsection 70-10(4)]

3.63 If the trustee of a regulated debtor's estate carries on a business previously carried on by the regulated debtor, the trustee must:

•

keep such books as are usually kept in relation to the carrying on of a business of that kind; and

•

permit a creditor or another person acting on the creditor's behalf, to inspect the books at all reasonable times. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsection 70-11(1)]

3.64 A person commits an offence with a penalty of five penalty units if they are subject to the requirements in subsection 70-11(1) regarding the keeping of books while trading and they fail to comply with it. [Schedule 1, Insolvency Practice Schedule (Bankruptcy) , Part 3, Division 70, Subdivision C, subsection 70-11(2)]

3.65 The Inspector-General may audit, or cause to be audited administration books, administration returns or books kept when trading. The auditor must prepare a report and the audit may be conducted:

•

on the Inspector-General's own initiative;

•

at the request of the regulated debtor; or

•

at the request of a creditor [Schedule 1, Insolvency Practice Schedule (Bankruptcy). Part 3, Division 70, Subdivision C, subsections 70-15(1) and (2)]

3.66 The person carrying out the audit must prepare a report of the audit. The Inspector-General must give a copy of the report to the trustee of the estate and the person who requested the report (if any). The costs of an audit must be determined by the Inspector-General and are to be borne by the estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsections 70-15(3), (4) and (5)]

3.67 A person who conducts an audit under section 70-15 has qualified privilege (within the meaning of the Corporations Act) in respect of any report prepared that is given to the trustee of the estate or the person who requested the report (if any). [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsection 70-15(6)]

3.68 Qualified privilege is defined in section 89 of the Corporations Act. If the person who conducts an audit did not have qualified privilege they may be unable to present all the facts of the case candidly without risk of breaching defamation laws.

3.69 The Court may order that the Inspector-General audit, or cause to be audited, the administration books or books kept when trading. The order may be made on application of any person with a financial interest in the administration of the regulated debtor's estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsections 70-20(1) and (2)]

3.70 The Court may make such orders in relation to the audit as it thinks fit, including:

•

the preparation and provision of a report on the audit; and

•

orders as to the costs of the audit. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsection 70-20(3)]

3.71 If books of an estate are being audited the trustee must give to the person carrying out the audit such books, information and assistance as the person reasonably requires (unless the trustee has a reasonable excuse). A trustee commits an offence with a penalty of five penalty units if they fail to comply with this requirement. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsections 70-25(1), (2), (3) and (4)]

3.72 In cases where a trustee succeeds another trustee the former trustee must transfer to the new trustee, within the handover period, any books relating to the administration of the estate that are in the former trustee's possession or control. The handover period being defined as 10 business days from the day after the appointment of the new trustee, or another period agreed between the former trustee and the new trustee. The former trustee may take a copy of any part of the books before transferring them to the new trustee. The new trustee must take possession or accept control of any books; that is, the obligation rests with the new trustee to accept the books. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsections 70-30(1), (2), (3) and (4)]

3.73 The new trustee must take possession or accept control of any books. That is, the obligation rests with the new trustee to accept the books. The words possession and control allow for circumstances where the books are physical, electronic or a combination of both. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsection 70-30(5)]

3.74 After possession or control of the books is transferred, the new trustee must allow the former trustee to inspect them at any reasonable time and take a copy of any part of the books. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsection 70-30(6)]

3.75 A person commits an offence with a penalty of 50 penalty units if a former trustee intentionally or recklessly fails to transfer the books or a new trustee intentionally or recklessly fails to allow the former trustee to inspect the books and the trustee does either of these things. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsection 70-30(7)]

3.76 If the new trustee is entitled to take possession of the books under section 70-30 a person is not entitled, as against the new trustee, to claim a lien on the books and such a lien is not otherwise prejudiced. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsection 70-30(8)]

3.77 Unless the trustee has a reasonable excuse, the last trustee to administer a regulated debtor's estate must retain all books that:

•

relate to the administration of the estate; and

•

are in the last trustee's possession or control at the end of the administration;

for a period of 7 years from the end of the administration. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsections 70-35(1) and (2)]

3.78 Despite the requirement to retain books, the books that the regulated debtor has given to the trustee of the estate may be returned to the regulated debtor within the retention period as directed by a committee of inspection (if any) and, otherwise, by a creditors' resolution. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsection 70-35(3)]

3.79 The trustee may return the books to the regulated debtor, or destroy the books at the end of the retention period. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsection 70-35(4)].

3.80 A person commits an offence with a penalty of 50 penalty units if the person is subject to this requirement and the person intentionally or recklessly fails to comply with the requirements regarding the retention and return or destruction of books. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsection 70-35(5)]

3.81 If the trustee is obligated to retain the books, or part of the books, under another provision of the Bankruptcy Act or under any other law, then the trustee must retain the relevant books despite the operation of subsections 70-35(3) and (4). For example laws relating to taxation may prohibit the destruction of some records. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsection 70-35(6)]

3.82 The trustee of a regulated debtor's estate may, at any time during the administration of the estate, return to the regulated debtor, or destroy, any books that:

•

the regulated debtor has given to any trustee of the estate; and

•

the trustee considers will not help the administration of the estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, subsection 70-36(1)]

3.83 Despite subsection 70-36(1) the trustee is not permitted to return the books to the regulated debtor, or destroy them, if the trustee knows, or reasonably ought to know, that:

•

another person had a lien over the books before the trustee took possession of them;

•

another person has a legal right to possession of the books; or

•

the trustee is not permitted to return the books to the regulated debtor or destroy them (as the case requires) because of another provision of the Bankruptcy Act, or a provision of any other law. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision C, section 70-36(2)]

Giving information etc. to creditors

3.84 Subdivision D of Division 70 applies to the Official Trustee in the same way as it applies to the trustee of a regulated debtor's estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision D, section 70-37]

3.85 The creditors may by resolution request the trustee of a regulated debtor's estate to give information, provide a report, or produce a document to the creditors. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision D, subsection 70-40(1)]

3.86 The trustee must comply with a request made under section 70-40 unless:

•

the information, report or document is not relevant to the administration of the regulated debtor's estate; or

•

the trustee would breach his or her duties in relation to the administration of the regulated debtor's estate if the trustee complied with the request; or

•

it is otherwise not reasonable for the trustee to comply with the request. [Schedule 1, Insolvency Practice Schedule, Part 3, Division 70, Subdivision D, section 70-40(2)]

3.87 The Insolvency Practice Rules may prescribe circumstances in which it is, or is not, reasonable for a trustee to comply with a request of a kind mentioned in subsection 70-40(1). [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision D, section 70-40(3)]

3.88 A creditor may request the trustee of a regulated debtor's estate to give information, provide a report or produce a document to the creditor. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision D, subsection 70-45(1)]

3.89 The trustee must comply with the request under subsection 70-45(1) unless:

•

the information, report or document is not relevant to the administration of the regulated debtor's estate;

•

the trustee would breach his or her duties in relation to the administration of the regulated debtor's estate if the trustee complied with the request; or

•

it is otherwise not reasonable for the trustee to comply with the request. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision D, section 70-45(2)]

3.90 The Insolvency Practice Rules may prescribe circumstances in which it is, or is not, reasonable for the trustee of a regulated debtor's estate to comply with a request of a kind mentioned in subsection 70-45(1). [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision D, section 70-45(3)]

3.91 The Insolvency Practice Rules may provide for and in relation to the obligations of trustees of regulated debtors' estate to give information, provide reports and produce documents to the creditors. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision D, subsection 70-50(1)]

3.92 Without limiting subsection 70-50(1) the Insolvency Practice Rules may provide for and in relation to:

•

other circumstances in which the trustee of a regulated debtor's estate must give information, provide a report, or produce a document to a creditor or a regulated debtor;

•

the manner and form in which the information is to be given, a report provided or a document produced;

•

the timeframes in which information is to be given, a report provided or a document produced; and

•

who is to bear the cost of giving information, providing a report or producing a document. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision D, subsection 70-50(2)]

3.93 The Insolvency Practice Rules may:

•

make different provisions in relation to different kinds of estate administration; and

•

provide that specified requirements imposed under the Insolvency Practice Rules may be replaced or modified, by resolution, by:

(i)

the creditors; or

(ii)

if there is a committee of inspection-the committee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision D, subsection 70-50(3)]

Other requests for information

3.94 Subdivision E of Division 70 (Other requests for information etc.) applies to the Official Trustee in the same way as it applies to the trustee of a regulated debtor's estate.

3.95 Employees who are owed certain employee entitlements after the insolvency of their employer may be able to have some or all of their entitlements paid by the Commonwealth under the operation of the Fair Entitlements Guarantee Act 2012 and the General Employment Entitlements and Redundancy Scheme. Section 70-55 is designed to facilitate the operation of this Act and Scheme. It empowers the Commonwealth to request information from a trustee where a former employee of a regulated debtor has made, or is likely to make, a claim for financial assistance in relation to unpaid employment entitlements. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision E, subsections 70-55(1), (2) and (3)]

3.96 The Insolvency Practice Rules may provide for and in relation to who is to bear the cost of providing the information, reports or documents. This will provide flexibility for the Commonwealth to bear the costs of providing the information, where appropriate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision E, subsection 70-55(4)]

3.97 Under section 70-56 the trustee must provide information to the regulated debtor if requested to do so. The trustee is not required to comply with the request if:

•

the information, report or document is not relevant to the administration of the regulated debtor's estate;

•

the trustee would breach his or her duties in relation to the administration of the regulated debtor's estate if the trustee complied with the request; or

•

it is otherwise not reasonable for the trustee to comply with the request. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision E, subsection 70-56(1) and (2)]

3.98 The Insolvency Practice Rules may prescribe circumstances in which it is, or is not, reasonable for a trustee of a regulated debtor's estate to comply with a request of a kind mentioned in subsection 70-56(1). This will allow the provision of further detail on the application of the provision and factors that may be considered by the trustee to determine whether or not to provide the information. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision E, subsection 70-56(3)]

Reporting to the Inspector-General

3.99 The Insolvency Practice Rules may provide for reporting to the Inspector-General in relation to the obligations of trustees of regulated debtors' estates. This may include a requirement to provide information, reports and/or to produce documents to the Inspector-General. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision F, subsection 70-60(1)]

3.100 Subsection 70-60(2) specifies that the Insolvency Practice Rules may specify how the report is to be given, timeframes for the provision of the report to the Inspector-General and who will bear the costs. This may include rules around reporting that are specific to a particular kind of estate administration. For clarity, the note after subsection 70-60(3) links a failure to comply with this provision to the disciplinary regime under Subdivision B of Division 40 of Part 2 of the Schedule. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision F, Subsections 70-60(2) and (3)]

Trustee may be compelled to comply with requests for information etc.

3.101 This subdivision (Subdivision G of Division 70) applies if the trustee of a regulated debtor's estate refuses a request made for information, a report or a document by a creditor or creditors, a regulated debtor, the Commonwealth and a committee of inspection. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision G, subsection 70-65(1)]

3.102 For clarity, subsection 70-65(2) specifies the meaning of the terms relevant material, request for relevant material, and giving the relevant material in this subdivision. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision G, subsection 70-65(2)]

3.103 The Inspector-General may direct a trustee to comply with the request for information within 5 business days after the direction is given. The direction can specify that all or part of the relevant material must be provided. A direction is not a legislative instrument. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision F, subsection 70-70(1) and (2)]

3.104 Before giving the trustee a direction under section 70-70, the Inspector-General must give the trustee notice in writing and allow the trustee a right of reply. Specifically the notice must:

•

state that the Inspector-General proposes to give the trustee a direction under section 70-70;

•

identify the relevant material and who the relevant material is to be provided to; and

•

invite the trustee to make a written submission to the Inspector-General within 10 business days after the notice is given, stating:

(i)

whether the trustee has any objection to giving the relevant material, or that part of the relevant material, to a person or persons as proposed; and

(ii)

the reasons for that objection, if any. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 26, Subdivision F, subsection 70-75(1)]

3.105 If the trustee objects then the Inspector-General must take into account the reasons for that objection when deciding whether to direct that the relevant material be given to the person. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision G, subsection 70-75(2)]

3.106 A notice under subsection 70-75(1) is not a legislative instrument. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision G, subsection 70-75(3)]

3.107 The Inspector-General must not give a direction under section 70-70 to give the relevant material or part of the relevant material, to a person if the Inspector-General is satisfied that the trustee was entitled, under a provision of the Bankruptcy Act, or any other law, not to comply with the request for the relevant material. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision G, subsection 70-80]

3.108 The Inspector-General may, by notice in writing to the person or persons to whom the relevant material is to be given, impose conditions on the use and disclosure of the relevant material, or part of the relevant material, by the person or persons [Schedule 1, Insolvency Practice Schedule, Part 3, Division 70, Subdivision G subsection 70-85(1)]

3.109 A person commits an offence with a penalty of 10 penalty units or 3 months in prison, or both if:

•

the Inspector-General directs that the relevant material, or part of the relevant material, be given to the person;

•

the Inspector-General has given the person notice under subsection 70-85(1) imposing a condition in relation to the use or disclosure of the that material by the person; and

•

the person does not comply with the condition. [Schedule 1, Insolvency Practice Schedule, Part 3, Division 70, Subdivision G. Subsection 70-85(2)]

3.110 A notice under subsection 70-85(1) is not a legislative instrument. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision G, subsection 70-85(3)]

3.111 The person or persons who made the request for the relevant material may apply to the Court for an order that the trustee give the person all or part of the relevant material. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision G, subsection 70-90(1)]

3.112 If:

•

the Inspector-General gives the trustee a direction under section 70-70 in relation to all or part of the relevant material; and

•

the trustee does not comply with the direction;

the Inspector-General may apply to the Court for an order that the trustee comply with the direction. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision G, subsection 70-90(2)]

3.113 On application under subsection70-90(1) or 70-90(2) the Court may:

•

order the trustee to give the person, or any or all of the persons, who made the request for the relevant material all or part of that material; and

•

make such other orders, including orders as to costs, as it thinks fit. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 70, Subdivision G, subsection 70-90(3)]

Meetings of creditors

3.114 Division 75 applies to the Official Trustee in the same way as it applies to the trustee of a regulated debtor's estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 75, Subsection 75-2]

3.115 Nothing in Division 75 limits the operation of any other provision of the Bankruptcy Act or any other law, imposing an obligation to convene a meeting in relation to a regulated debtor, of the administration of a regulated debtor's estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 75, subsection 75-5]

3.116 The trustee of a regulated debtor's estate may convene a meeting of the creditors at any time. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 75, Subsection 75-10]

3.117 The trustee of a regulated debtor's estate must convene a meeting of the creditors if:

•

the committee of inspection, if there is one, requests the trustee to do so;

•

the creditors direct the trustee to do so by resolution;

•

at least 25% in value of the creditors (based on the value of creditors' claims that are known at the time of the direction) direct the trustee to do so in writing; or

•

both of the following are satisfied:

(i)

less than 25% but more than 10% in value of the creditors (based on the value of creditors' claims that are known at the time of the direction) direct the trustee to do so in writing;

(ii)

security for the cost of holding the meeting is given to the trustee before the meeting is convened. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 75, subsections 75-15)(1) and (4)]

3.118 However, the trustee of a regulated debtor's estate need not comply with the request or direction if the request or direction is not reasonable. The Insolvency Practice Rules may prescribe circumstances in which a request or direction is, or is not, reasonable. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 75, subsection 75-15(2) and (3)]

3.119 The Inspector-General may, in writing, direct the trustee of a regulated debtor's estate to convene a meeting of the creditors. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 75, subsection 75-20(1)]

3.120 The Inspector-General may include in the direction requirements to be complied with by the trustee in notifying the creditors of the meeting and conducting the meeting. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 75, subsection 75-20(2)]

3.121 The trustee must comply with a direction given subsection 75-20(1), and any requirements included in the direction under subsection 75-20(2). [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 75, subsection 75-20(3)]

3.122 A direction given under subsection 75-20(1) is not a legislative instrument. [Schedule 1, Part 3, Division 75, subsection 75-20(4)]

3.123 The trustee may appoint a person to represent them at a meeting other than meetings of a prescribed kind. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 75, subsection 75-25(1) and (2)]

3.124 If the trustee is not personally present at a meeting, then a reference in a provision of the Bankruptcy Act to a trustee, in relation to the meeting, is a reference to the appointed representative. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 75, subsection 75-25(3)]

3.125 The Inspector-General is entitled to attend creditors' meetings but may only participate subject to the provisions of the Bankruptcy Act (for example, the limitations on who may cast votes). For example, the Inspector-General could put forward a view on a proposed resolution or on the conduct of a meeting. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 75, section 75-30]

3.126 The Commonwealth is entitled to nominate a representative to attend any creditors' meeting in relation to administrations where a former employee has made, or is likely to make, a claim for financial assistance from the Commonwealth in relation to unpaid employee entitlements. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 75, section 75-35]

3.127 Section 75-40 allows a trustee to put written proposals to creditors without a creditors' meeting. The trustee of a regulated debtor's estate may at any time put a written proposal to the creditors by giving notice under section 75-40 of the Bankruptcy Act. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 75, subsection 75-40(1)]

3.128 The notice given under section 75-40 must:

•

contain a single proposal;

•

include a statement of the reasons for the proposal and the likely impact it will have on creditors (if it is passed);

•

be given to each creditor who would be entitled to receive notice of a meeting of creditors; and

•

invite the creditors to either:

(i)

vote Yes or No on the proposal; or

(ii)

object to the proposal being resolved without a meeting of creditors; and

•

specify a reasonable time by which replies must be received by the trustee (in order to be counted). [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 75, Subsection 75-40(2)]

3.129 A certificate signed by the trustee of the regulated debtor's estate stating any matter relating to a proposal under this section is prima facie evidence of the matter. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 75, Subsection 75-40(3)]

3.130 The Insolvency Practice Rules may provide for and in relation to proposals under section 70-40, including:

•

the circumstances in which a proposal is taken to be passed; and

•

whether a proposal, if passed, is taken to have been passed as a resolution or a special resolution; and

•

costs and security for those costs in relation to a proposal. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 75, subsections 75-40(4) and (5)]

3.131 Currently, Division 5 of Part IV of the Bankruptcy Act sets out rules for procedures at creditors' meetings. This Division has been repealed, see explanation of item 24. The Bill allows the Insolvency Practice Rules to provide for and in relation to meetings of creditors, including:

•

the circumstances in which meetings must or may be convened; and

•

notice for convening meetings; and

•

agenda; and

•

information to be given to creditors; and

•

who is to preside at meetings; and

•

the number of creditors required to constitute a quorum; and

•

proxies and attorneys; and

•

motions; and

•

voting (including casting votes); and

•

the circumstances in which a resolution (or a special resolution) must or may be put to creditors in a meeting; and

•

the circumstances in which a resolution or a special resolution put to creditors in a meeting is passed; and

•

facilities, including electronic communication facilities, to be available at meetings; and

•

minutes; and

•

costs in relation to meetings and security for those costs. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 75, subsections 75-50(1) and (2)]

Committees of inspection

3.132 Division 80 (Committees of inspection) applies to the Official Trustee in the same way as it applies to the trustee of a regulated debtor's estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, section 80-2]

3.133 Rules under sections 80-10 and 80-25 apply if the trustee of a regulated debtor's estate convenes creditors' meeting for the purpose of:

•

determining whether there is to be a committee of inspection for the regulated debtor's estate; and/or

•

if there is, or is to be, a committee of inspection-determining who are to be appointed as committee members. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, section 80-5]

3.134 The creditors of a regulated debtor's estate may, by resolution, determine that there is to be a committee of inspection in relation to the administration of the estate. That is, in order to establish a committee of inspection, the creditors must agree by resolution to its establishment. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, section 80-10]

3.135 In summary, creditors may appoint a member of the committee of inspection in their capacity as a creditor (under section 80-15), as a large creditor or group of creditors (under section 80-20), or as an employee or group of employees (under section 80-25). That is, a creditor can exercise their right to appoint a member for more than one committee member. The creditors who successfully appoint a member may remove and replace that member. This is explained in further detail in the following paragraphs.

3.136 Under section 80-15, the creditors of a regulated debtor's estate may, by resolution, appoint members of a committee of inspection. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-15(1)] The creditors may also remove a person appointed to be a member under this section and appoint a replacement. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-15(2)]

3.137 Subsections 80-15(3), 80-20(3) and 80-25(3) operate to ensure that once a person exercises a right in one capacity to appoint a member, the person cannot exercise a right in another capacity. Further, a person can only exercise the right in a particular capacity to appoint one person (unless the person is filling a vacancy in that appointment). [Schedule 1, Part 3, Division 30, subsection 80-15(3)]

3.138 Section 80-20 allows a creditor representing at least 10% in value of the creditors, or a group of creditors who together represent at least 10% in value of the creditors, of a regulated debtor's estate to appoint a person as a member of a committee of inspection. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-20(1)]. This creditor or creditors may also remove a person appointed to be a member under this section and appoint a replacement. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-20(2)]

3.139 Subsections 80-15(3), 80-20(3) and 80-25(3) operate to ensure that once a person exercises a right in one capacity to appoint a member, the person cannot exercise a right in another capacity. Further, a person can exercise the right in a particular capacity to appoint only one person (unless the person is filling a vacancy in that appointment). [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-20(3)]

3.140 Section 80-25 allows an employee or employees of the regulated debtor who hold a majority of the value owed to the employee(s) to appoint a person as a member of a committee of inspection to represent the employees. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, Subsection 80-25(1)] This creditor or creditors may also remove a person appointed to be a member under this section and appoint a replacement. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-25(2)]

3.141 Subsections 80-15(3), 80-20(3) and 80-25(3) operate to ensure that once a person exercises a right in one capacity to appoint a member, the person cannot exercise a right in another capacity. Further, a person can exercise the right in a particular capacity to appoint only one person (unless the person is filling a vacancy in that appointment). [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-25(3)]

3.142 A committee of inspection may determine its own rules subject to any Insolvency Practice Rules that provide for and in relation to committees of inspection. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsections 80-30(1) and (2))]

3.143 Without limiting subsection 80-30(2) the Insolvency Practice Rules may provide for and in relation to:

•

eligibility to be appointed as a member of a committee of inspection;

•

the convening of, conduct of, and procedure and voting at, meetings;

•

resignation and removal of members; and

•

vacancies in membership. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80. subsection 80-30(2)]

3.144 A committee of inspection has the following functions:

•

to advise and assist the trustee of the regulated debtor's estate;

•

to give directions to the trustee of the regulated debtor's estate;

•

to monitor the conduct of the administration of the estate;

•

such other functions as are conferred on the committee by the Bankruptcy Act;

•

to do anything incidental or conducive to the performance of any of the above functions. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-35(1)]

3.145 The trustee of a regulated debtor's estate must have regard to any directions given to the trustee by the committee of inspection, but the trustee is not required to comply with such directions. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-35(2)]

3.146 If the trustee of a regulated debtor's estate does not comply with a direction, the trustee must make a written record of that fact, along with the trustee's reasons for not complying with the direction. This will ensure that trustees keep proper records of the reasons behind any decision not to comply with a direction and will generally ensure that directions of this kind are not disregarded without consideration by the trustee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-35(3)]

3.147 A committee of inspection may request the trustee of a regulated debtor's estate to give information or provide a report or produce a document to the committee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-40(1)]

3.148 The trustee must comply with the request unless:

•

the information, report or document is not relevant to the administration of the regulated debtor's estate; or

•

the trustee would breach his or her duties in relation to the administration of the regulated debtor's estate if the trustee complied with the request; or

•

it is otherwise not reasonable for the trustee to comply with the request. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-40(2)]

3.149 The Insolvency Practice Rules may prescribe circumstances in which it is, or is not, reasonable for a trustee to comply with a request of a kind mentioned in subsection 80-40(3). [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-40(3)]

3.150 The Insolvency Practice Rules may provide for and in relation to the obligations of trustees of regulated debtors' estates to give information and to provide reports and to produce documents to committees of inspection. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-45(1)]

3.151 Without limiting subsection 80-45(1) the Insolvency Practice Rules may provide for and in relation to:

•

other circumstances in which the trustee must give information, provide a report or produce a document to a committee of inspection; and

•

the manner and form in which information is to be given, a report provided or a document produced; and

•

the timeframes in which information is to be given, a report provided or a document produced; and

•

who is to bear the cost of giving information, providing a report or producing a document. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-45(2)]

3.152 The Insolvency Practice Rules may:

•

Make different provisions in relation to different classes of regulated debtor, or regulated debtors' estates; and

•

Provide that specified requirements imposed under the Insolvency Practice Rules may be replaced or modified through resolution by

(i)

the creditors; or

(ii)

the committee of inspection [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-45(3)].

3.153 A committee of inspection may resolve that a member of the committee obtain, on behalf of the committee, such advice or assistance as the committee considers desirable in relation to the conduct of the administration of the regulated debtor's estate. This provision seeks to facilitate the committee to obtain specialist advice (such as legal advice) or assistance. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-50(1)]

3.154 The committee of inspection must obtain the approval of the trustee of the regulated debtor's estate or the Court before expenses are incurred in obtaining the advice or assistance. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-50(2)]

3.155 To avoid doubt, an expense incurred under subsection 80-50(2) is to be taken to be an expense of the administration of the estate. This is appropriate as the committee, acting with the approval of the trustee or the Court, should not be out of pocket for expenses that are incurred for the benefit of the estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-50(3)]

3.156 A member of a committee of inspection must not directly or indirectly derive any profit or advantage from the administration of the regulated debtor's estate. To avoid doubt, a member of a committee of inspection is taken to derive a profit or advantage from the administration of the regulated debtor's estate if:

•

the member directly or indirectly derives a profit or advantage from a transaction (including a sale or purchase) entered into on account of the estate;

•

the member directly or indirectly derives a profit or advantage from a creditor of the estate; or

•

a related entity of the member directly or indirectly derives a profit or advantage from the administration of the estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-55(1) and (2)]

3.157 Subsection 80-55(1) does not apply if the creditors resolve otherwise. A member of the committee who is seeking to profit or gain an advantage from the estate is not entitled to vote on a resolution that seeks to have the profit or advantage approved by the creditors. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-55(3) and (4)]

3.158 Subsection 80-55(1) does not apply to the extent that another provision of the Bankruptcy Act, or of another law, requires or permits the member of the committee of inspection to derive the profit or advantage; or the Court gives leave to the member of the committee to derive the profit or advantage. For example, Division 2 of Part VI permits creditors to recover debts proved in bankruptcy and this permission is not affected by a creditor's appointment as a committee member. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-55(5)].

3.159 Subsection 80-55(6) provides a further exception where the profit or advantage arises because the trustee employs or engages a related entity of a committee member to provide services in relation to the administration. In these circumstances, subsection 80-55(1) does not apply if one of the following is satisfied:

(i)

the member does not know, and could not reasonably be expected to know, that the trustee has employed or engaged a related entity of the member; or

(ii)

the creditors, by resolution, agree to the related entity being employed or engaged. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-55(6)]

3.160 A person commits an offence of strict liability with a penalty of 50 penalty units if the person is subject to a requirement not to derive any profit or advantage from the administration of the estate (under subsection 80-55(1)) and the person fails to comply with the requirement. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Division 80, subsection 80-55(7)]

3.161 A transaction, sale, purchase or any other arrangement entered into in contravention of section 80-55 may be set aside by the Court on the application of a creditor. This empowers the Court to set aside transactions that were made to benefit a member of a committee of inspect, either directly or indirectly. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-55(8)]

3.162 Creditors who appoint a member of a committee of inspection as a large creditor or as a group of creditors (under section 80-20) are subject to further obligations. A creditor who falls into this category must not directly or indirectly become the purchaser of any part of the regulated debtor's estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsections 80-60(1)and (2)]

3.163 Subsection 80-60(2) does not apply if the creditors resolve otherwise. The creditor in question is not entitled to vote on a resolution that seeks to approve their purchase of part of the regulated debtor's estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsections 80-60(3) and (4)]

3.164 Subsection 80-60 does not apply to the extent that another provision of the Bankruptcy Act, or of another law, requires or permits the creditor to purchase the property or the Court gives leave to the creditor to purchase the property. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-60(5)]

3.165 A person commits an offence of strict liability with a penalty of 50 penalty units if the person is subject to a requirement under subsection 80-60(2) and the person fails to comply with the requirement. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-60(6)]

3.166 A transaction or any other arrangement entered into in contravention of this section may be set aside by the Court. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80 subsection 80-60(7)]

3.167 The Inspector-General is entitled to attend any meeting of a committee of inspection. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-65]

3.168 The Court may inquire into the conduct of a committee of inspection and make such orders as it thinks fit to ensure the proper conduct of the committee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 80, subsection 80-70]

3.169 Division 85 (Directions by creditors) applies to the Official Trustee in the same way as it applies to the trustee of a regulated debtor's estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 85, section 85-2]

3.170 The creditors may, by resolution, give directions to the trustee of a regulated debtor's estate in relation to the administration of the estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 85, subsection 85-5(1)]

3.171 The trustee must have regard to any directions mentioned in subsection 80-10(1), but the trustee is not required to comply with such directions. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 85, subsection 85-5(2)]

3.172 If the trustee does not comply with a direction, the trustee must make a written record of that fact, along with the trustee's reasons for not complying with the direction. This will ensure that trustees keep proper records of the reasons for any decision not to comply with a direction and will generally ensure that directions of this kind are not disregarded without consideration by the trustee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 85, subsection 85-5(3)]

3.173 If there is a conflict between directions given by the creditors under subsection 85-5(1) and by the committee of inspection under section 80-35, directions given by the creditors override any directions given by the committee. However, the application of this subsection does not override the trustee's discretion not to comply with a direction under either section 85-5 or section 80-35. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 85, subsection 85-5(4)]

Review of the administration of a regulated debtor's estate

3.174 Subdivision B of Division 90 (Court powers to inquire and make orders) applies to the Official Trustee in the same way as it applies to the trustee of a regulated debtor's estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision B, subsection 90-2]

3.175 The Court may, on its own initiative during proceedings before the Court, inquire into the administration of a regulated debtor's estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision B, subsection 90-5(1)]

3.176 The Court may, for the purposes of such an inquiry, require a person who is or has at any time been the trustee of the regulated debtor's estate to give information, provide a report, or produce a document to the Court in relation to the administration of the estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision B, subsection 90-5(2)]

3.177 Section 90-5 does not limit the Court's powers under any other provision of the Bankruptcy Act, or under any other law. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision B, subsection 90-5(3)]

3.178 The Court may on the application of the following persons inquire into the administration of the estate:

•

if the committee of inspection (if any) so resolves-a creditor, on behalf of the committee;

•

the Inspector-General; and

•

any person with a financial interest in the regulated debtor's estate, which is defined by section 5-30 to include:

-

a creditor; or

-

the regulated debtor; or

-

he trustee; or

-

any other person in circumstances as prescribed.

[Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision B, subsection 90-10(1) and (2)]

3.179 The Court may, for the purposes of such an inquiry, require a person who is or has at any time been the trustee of the regulated debtor's estate to give information or provide a report or produce a document to the Court in relation to the administration of the estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision B, subsection 90-10(3)]

3.180 If a committee of inspection resolves to allow a creditor to make an application to the Court, the reasonable expenses associated with the application are to be taken to be expenses of the administration of the estate unless otherwise ordered by the Court. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision B, subsection 90-10(4)]

3.181 Section 90-10 does not limit the Court's powers under any other provision of the Bankruptcy Act, or under any other law. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision B, subsection 90-10(5)]

3.182 The Court also has a general power to make such orders as it thinks fit in relation to the administration of a regulated debtor's estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision B, subsection 90-15(1)]

3.183 The Court may exercise the power under subsection 90-15(1):

•

on its own initiative; or

•

on application under section 90-20. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision B, subsection 90-15(2)]

3.184 Without limiting subsection 90-15(1), those orders may include any one or more of the following:

•

an order determining any question arising in the administration of the estate;

•

an order that a person cease to be the trustee of the estate;

•

an order that another person be appointed as trustee of the estate;

•

an order in relation to the costs of an action (including court action) taken by the trustee of the estate or another person in relation to the administration of the estate;

•

an order in relation to any loss that the estate has sustained because of a breach of duty by the trustee;

•

an order in relation to remuneration, including an order requiring a person to repay to the estate of a regulated debtor, or the creditors of a regulated debtor, remuneration paid to the person as a trustee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision B, subsection 90-15(3)]

3.185 Without limiting the matters which the Court may take into account when making order, the Court may take into account:

•

whether the trustee has faithfully performed, or is faithfully performing the trustee's duties;

•

whether an action or failure to act by the trustee is in compliance with the Bankruptcy Act and the Insolvency Practice Rules;

•

whether an action or failure to act by the trustee is in compliance with an order of the Court;

•

whether the regulated debtor's estate or any person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the trustee; and

•

the seriousness of the consequences of any action or failure to act by the trustee, including the effect of that action or failure to act on public confidence in registered trustees as a group. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision B, subsection 90-15(4)]

3.186 Without limiting subsection 90-15(1), an order in relation to the costs of an action (including court action) taken by the trustee of the estate or another person in relation to the administration of the estate may include an order that:

•

The trustee or another person is personally liable for some or all of those costs; and

•

The trustee or another person is not entitled to be reimbursed by the regulated debtor's estate or creditors in relation to some or all of those costs. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision B, subsection 90-15(5)]

3.187 Without limiting subsection 90-15(1), an order in relation to any loss that the estate has sustained because of a breach of duty by the trustee may include an order that:

•

the trustee is personally liable to make good some or all of the loss; and

•

the trustee is not entitled to be reimbursed in relation to this amount. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision B, subsection 90-15(6)]

3.188 Section 90-15(1) does not limit the Court's under any other provision of the Bankruptcy Act, or under any other law. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision B, subsection 90-15(7)]

3.189 Each of the following persons may apply for an order under section 90-15:

•

if the committee of inspection (if any) so resolves-a creditor, on behalf of the committee;

•

the Inspector-General; and

•

any person with a financial interest in the regulated debtor's estate, which is defined by section 5-30 to include:

-

a creditor; or

-

the regulated debtor; or

-

the trustee; or

-

any other person in circumstances as prescribed.

[Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision B, subsection 90-20(1)]

3.190 If a committee of inspection resolves to allow a creditor to make an application to the Court, the reasonable expenses associated with the application are to be taken to be expenses of the administration of the estate unless otherwise ordered by the Court. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision B, subsection 90-20(2)]

Review of remuneration by the Inspector-General

3.191 The Inspector-General may carry out a review (on his or her own initiative or on application by the regulated debtor or a creditor) of the remuneration received by the trustee of a regulated debtor's estate for services performed by the trustee in relation to the administration of the estate. The trustee, the regulated debtor or a creditor may apply to the Court for a review of the Inspector-General's decision under this section. The provision also provides guidance on matters to which the Court must have regard. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 32, Subdivision C, sections 90-21]

3.192 The Insolvency Practice Rules may provide for and in relation to reviews under Subdivision C of Division 90. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision C, subsection 90-22(1)]

3.193 Without limiting subsection 90-22(1), the Insolvency Practice Rules may provide for and in relation to any or all of the following matters:

•

the giving of notice to the trustee before beginning a review, or making an application under Subdivision C of Division 90;

•

the powers and duties of the Inspector-General in carrying out a review;

•

the decisions that may be made by the Inspector-General in relation to the review;

•

the repayment of remuneration by the trustee as a consequence of a review under subdivision C of Division 90. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision C, subsection 90-22 (2)]

Removal by creditors

3.194 Subdivision D of Division 90 (Removal of a trustee by creditors) applies to the Official Trustee in the same way is it applies to the trustee of a regulated debtor's estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision D, section 90-30]

The creditors may, by resolution at a meeting, remove the trustee of a regulated debtor's estate. At the same or a later meeting, the creditors may appoint a trustee to replace the former trustee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision D, subsection 90-35(1)] However the creditors may not remove a trustee unless at least 5 business days' notice of the meeting is given to all persons who are entitled to receive notice of creditors' meetings. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision D, subsection 90-35(2)]

3.195 A person (the former trustee) who has been removed as trustee of the regulated debtor's estate by resolution of the creditors may apply to the Court to be reappointed as trustee of the regulated debtor's estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 90, Subdivision D, subsection 90-35(3)]

3.196 If the former trustee makes such an application, the former trustee must:

•

record all costs incurred by the former trustee and the debtor's estate in relation to the application; and

•

do so in a way that separates those costs from the costs incurred by the former trustee and the regulated debtor's estate in relation to other matters. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 32, Subdivision D, subsection 90-35(4)]

3.197 The Court may order that the former trustee be reappointed as trustee of the regulated debtor's estate if the Court is satisfied that the removal of the former trustee was an improper use of the powers of one or more creditors. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 32, Subdivision D, subsection 90-35(5)]

3.198 An example of an 'improper use' would be if one or more creditors removed the former trustee to prevent him or her from investigating the regulated debtor and/or their financial relationship with the regulated debtor.

3.199 The Court may make such other orders in relation to the application as it thinks fit: including orders in relation to the costs of the application and the remuneration of the former trustee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 3, Division 32, Subdivision D, subsection 90-35(6)]

Other matters

3.200 Applications may be made to the Administrative Appeals Tribunal for review of any of the following decisions:

•

a decision of a committee under section 20-20 in relation to an application for registration as a trustee;

•

a decision of a committee under section 20-55 in relation to an application for the variation or removal of a condition of registration;

•

a decision of the Inspector-General to suspend the registration of a person as a trustee under section 40-25;

•

a decision of the Inspector-General to cancel the registration of a person as a trustee under section 40-30;

•

a decision of a committee under section 40-55 (disciplinary action by a committee);

•

a decision of a committee under section 40-85 in relation to an application to lift or shorten a suspension of a person's registration as a trustee [Schedule 1, Insolvency Practice Schedule (Bankruptcy) , Part 4, Division 96, section 96-1]

3.201 Division 100 (Other matters) applies to the Official Trustee in the same way as it applies to the trustee of a regulated debtor's estate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 4, Division 100, section 100-1]

3.202 Subject to the following exceptions the trustee may assign any right to sue that is conferred on the trustee by the Bankruptcy Act:

•

if the trustee's action has already begun, the trustee cannot assign the right to sue unless the trustee has the approval of the Court;

•

before assigning any right the trustee must give written notice to the creditors of the proposed assignment. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 4, Division 100, subsections 100-5(1), (2) and (3)]

3.203 If a right is assigned under section 100-5, a reference in the Bankruptcy Act to the trustee in relation to the action is taken to be a reference to the person to whom the right has been assigned. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 4, Division 100, subsection 100-5(4)]

Insolvency Practice Rules

3.204 The Minister may, by legislative instrument, make rules providing for matters:

•

required or permitted by the Bankruptcy Act to be provided; or

•

necessary or convenient to be provided in order to carry out or give effect to the Bankruptcy Act.

3.205 The Minister requires this rule-making power to ensure the detail under and operational aspects of the Bankruptcy Act can be clearly outlined and, where necessary and appropriate, can be modified. Given the limitations on this rule-making power, as discussed below, it is appropriate to empower the Minister to make such rules. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 4, Division 105, subsection 105-1(1)]

3.206 Rules made under subsection 105-1(1) may include offences but the penalties for such offences must not be more than 50 penalty units for an individual or 250 penalty units for a body corporate. It is appropriate for offences that incur lesser penalties to be created by the Minister under the Insolvency Practice Rules. This will allow greater flexibility where creating offences of a more minor and technical nature while ensuring that more serious offences undergo scrutiny by Parliament. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 4, Division 105, subsections 105-1(2) and (3)]

3.207 For further clarification, subsections 105-1(4) and (5) outline limitations to the scope of the Insolvency Practice Rules. The rationale for these limitations is to ensure that rules cannot be created in relation to subject matter that should be limited to laws made by Parliament. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 4, Division 105, subsections 105-1(4) and (5)]

3.208 The Minister's power to make rules under this section cannot be delegated to any other person to ensure that this rule-making power is exercised personally by the Minister, as is appropriate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 4, Division 105, subsection 105-1(6)]

3.209 References in section 105-1 to 'this Act' do not include the regulations or rules made under section 105-1. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 4, Division 105, subsection 105-1(7)]

Application and transitional provisions

3.210 Division 3 of Part 3 of the Schedule relates to the transitional provisions upon the commencement of the Schedule.

3.211 Section 128 provides that Part 3 of the Schedule applies in relation to new administrations (that is, administrations that start on or after the commencement of the Schedule). Part 3 of the Schedule also applies in relation to an ongoing administration (for example, administrations that have ended but have ongoing obligations or processes). [Schedule 1, Part 3, Division 3, Subdivision B, section 127]

3.212 Subdivision B of Division 60 of the Schedule (in relation to the remuneration of trustees) applies in relation to a trustee of a regulated debtor's estate under ongoing administration who is appointed, or who consents to act, on or after the commencement day. This transitional provision allows for consistent treatment of the remuneration of trustees who are appointed on or after the commencement day. [Schedule 1, Part 3, Division 3, Subdivision C, section 128]

3.213 Despite the repeal of sections 161B and 162 of the old Act by the Schedule, those sections (other than subsections 162(5A), (6) and (6A)) continue to apply in relation to the remuneration of a trustee of an estate of a bankrupt who is appointed, or who consents to act, before the commencement day. This transitional provision allows for consistent treatment of the remuneration of trustees who are appointed before the commencement day. [Schedule 1, Part 3, Division 3, Subdivision C, section 129]

3.214 Section 60-20 of the Schedule (trustee must not derive profit or advantage from the administration of the estate) applies in relation to a trustee of a regulated debtor's estate under ongoing administration, whether or not the trustee is appointed, or consents to act, before, on or after the commencement day. However, that section does not apply in relation to arrangements made before the commencement day. Despite the repeal of section 165 of the old Act by the Schedule, section 165 will continue to apply in relation to arrangements made before the commencement day. This transitional provision applies section 60-20 to conduct that takes place on or after commencement and applies section 165 of the old Act to conduct that took place before commencement. [Schedule 1, Part 3, Division 3, Subdivision C, section 130]

3.215 Section 60-26 of the Schedule (payment in respect of performance by third parties) applies in relation to a trustee of a regulated debtor's estate under ongoing administration, whether or not the trustee is appointed, or consents to act, before, on or after the commencement day. Despite the repeal of section 162 of the old Act by the Schedule, subsection 162(6) continues to apply in relation to payments received before the commencement day. This transitional provision applies section 60-26 to payments received on or after commencement and applies section 162 of the old Act to payments received before the commencement day. [Schedule 1, Part 3, Division 3, Subdivision C, section 131]

3.216 Section 133 of Part 3 of the Schedule provides for transitional provisions where a trustee ceases to be a trustee and another person becomes the new trustee. The old Act continues to apply where both trustees are appointed before commencement (under subsection 133(1)). However, where a former trustee was appointed as a trustee before commencement and the new trustee was appointed on or after the commencement day then the Schedule applies but the creditors are taken to have made a resolution under section 162 in relation to the remuneration the former trustee is entitled to receive. [Schedule 1, Part 3, Division 3, Subdivision C, section 132]

Transitional provisions-Funds Handling

3.217 Division 65 of the Schedule (Funds handling) applies in relation to an ongoing administration of a regulated debtor's estate. [Schedule 1, Part 3, Division 3, Subdivision D, section 133]

3.218 An account (for the purposes of administration of one or more bankrupt estates) that complies with the old Act or old regulations and that exists immediately before the commencement day is taken to be an administration account of the relevant estate(s) for the purposes of section 65-10 of the Schedule and subsection 280(5) of the Bankruptcy Act. [Schedule 1, Part 3, Division 3, Subdivision D, section 134]

3.219 Sections 65-10 and 65-15 of the Schedule create obligations for a trustee to pay all administration monies and not pay other money into the administration account. These sections do not apply in relation to money received before the commencement day. Despite the repeal, subsection 169(2) of the old Act continues to apply in relation to money received before the commencement day. [Schedule 1, Part 3, Division 3, Subdivision D, section 135]

3.220 Section 65-25 of the Schedule (paying money out of the administration account) does not apply in relation to money paid out of an administration account before the commencement day. [Schedule 1, Part 3, Division 3, Subdivision D, section 136]

3.221 Section 65-32 of the Schedule (reconciliation of administration account) does not apply in relation to money received, or payments made, in relation to a regulated debtor's estate before the commencement day. [Schedule 1, Part 3, Division 3, Subdivision D, section 137]

3.222 Section 65-40 of the Schedule (handling securities) does not apply in relation to negotiable instruments and other securities received before the commencement day. [Schedule 1, Part 3, Division 3, Subdivision D, section 139]

3.223 A review of a bill of costs for services in relation to the administration of a regulated debtor's estate may be carried out in accordance with regulations made for the purposes of section 65-46 of the Schedule, whether or not the service was provided before, on or after the commencement day. Subsections 140(3) and (4) apply if a review in accordance with regulations made for the purposes of subsection 167(2) of the old Act starts before the commencement day. Nothing in this Act affects the review; or the powers or any decisions of the Inspector-General in relation to the review; or any appeal or review in relation to the review. The old Act will continue to apply on and after the commencement day in relation to the review despite the amendments and repeals made by this Act. [Schedule 1, Part 3, Division 3, Subdivision D, section 140]

Transitional provisions-Information

3.224 Division 70 of the Schedule (Information) applies in relation to an ongoing administration of a regulated debtor's estate. [Schedule 1, Part 3, Division 3, Subdivision E, section 141]

3.225 Section 70-5 (annual administration return) of the Schedule applies in relation to the financial year starting on 1 July 2017 and later financial years. Further, the repeal of section 170A by the Schedule applies in relation to the financial year starting on 1 July 2017 and later financial years. [Schedule 1, Part 3, Division 3, Subdivision E, section 142]

3.226 Sections 70-10 and 70-11 of the Schedule (administration books and trustee's books when trading) do not apply in relation to events that occur before the commencement day; and in respect of which, or because of which, entries or minutes are to be made. Despite the repeal of sections 173 and 174 of the old Act by the Schedule, section 173 continues to apply in relation to events that occur before the commencement day; and in respect of which, or because of which, accounts and records must be kept. [Schedule 1, Part 3, Division 3, Subdivision E, sections 143 and 144]

3.227 Sections 70-15 to 70-25 of the Schedule (audit of administration books and requirements for trustees to comply with auditor requirements) apply to books relating to an ongoing administration of a regulated debtor's estate whether or not the books are kept under a provision of the old Act or of the Schedule. Despite the repeal of section 175 of the old Act by the Schedule, audits may be continued under that section in relation to accounts under section 173 as if the old Act continued to apply. [Schedule 1, Part 3, Division 3, Subdivision E, subsections 145(1) and (2)]

3.228 Despite the amendment of paragraph 109(1)(a) of the old Act (in relation to priority payment for the costs of audits) made by the Schedule, that section continues to apply in relation to the payment of costs of audits under section 175 of the old Act as if that amendment had not been made. [Schedule 1, Part 3, Division 3, Subdivision E, subsection 145(3)]

3.229 Section 70-30 of the Schedule (transfer of books to new trustee) applies in relation to a person who ceases to be the trustee of a regulated debtor's estate on or after the commencement day. [Schedule 1, Part 3, Division 3, Subdivision E, section 146].

3.230 For the avoidance of doubt, sections 70-35 and 70-36 of the Schedule (retention, return or destruction of books) apply to books relating to an ongoing administration of a regulated debtor's estate whether or not the books are kept under a provision of the old Act or of the Schedule. If an administration of an estate of a bankrupt or debtor ends before the commencement day; and immediately before that day, a person was required under the old Act to retain books relating to the estate for a period; and but for the repeal of section 312 by the Schedule, that period would have ended on or after the commencement day; section 312 of the old Act will continue to apply on and after the commencement day in relation to the person for the remainder of that period. However, subsection 312(4) of the old Act applies as if the reference to 15 years were instead a reference to 7 years (as is consistent with sections 70-35 and 70-36). If a person is entitled under section 312 of the old Act to destroy or return books then (despite section 70-35 of the Schedule) those books may be destroyed or returned. [Schedule 1, Part 3, Division 3, Subdivision E, section 147]

3.231 Subdivision D of Division 70 of the Schedule (Giving information etc. to creditors and others) applies whether or not the information, report or document referred to in subsections 70-40(1), 70-45(1), or 70-50(1) of the Schedule was obtained or generated, was made or prepared; or is in respect of actions or events that occurred; before, on or after the commencement day. [Schedule 1, Part 3, Division 3, Subdivision E, Section 148].

3.232 Section 70-55 and 70-56 of the Schedule (Commonwealth and regulated debtor rights to request information etc. from trustee) applies whether or not the information, report or document referred to in subsections 70-55(2) and 70-56(1) was obtained or generated; or was made or prepared; or is in respect of actions or events that occurred; before, on or after the commencement day. [Schedule 1, Part 3, Division 3, Subdivision E, sections 149 and 150].

3.233 Section 70-60 of the Schedule (Reporting to the Inspector-General) applies whether or not the information, report or document referred to in subsection 70-60(1) was obtained or generated; or was made or prepared; or is in respect of actions or events that occurred; before, on or after the commencement day. [Schedule 1, Part 3, Division 3, Subdivision E, section 151].

Transitional provisions-Meetings

3.234 Division 75 of the Schedule (Meetings of creditors) applies in relation to an ongoing administration of a regulated debtor's estate. However, Division 75 of the Schedule does not apply in relation to meetings convened or held before the commencement day. [Schedule 1, Part 3, Division 3, Subdivision F, section 152]

3.235 Section 75-15 of the Schedule (Trustee must convene meetings in certain circumstances) does not apply in relation to requests made before the commencement day; or directions given before the commencement day; or resolutions passed before the commencement day. [Schedule 1, Part 3, Division 3, Subdivision F, section 153]

3.236 If a trustee is required to convene, or has already called, a meeting of creditors under the old Act; and as at the commencement day, the meeting has not been held; then the old Act continues to apply on and after the commencement day in relation to the meeting. [Schedule 1, Part 3, Division 3, Subdivision F, section 154]

Transitional provisions-Committees of Inspection

3.237 Division 80 of the Schedule (Committees of Inspection) applies to a committee of inspection for an ongoing administration of a regulated debtor's estate that is appointed under that Division on or after the commencement day. Division 80 of the Schedule also applies to a committee of inspection for an ongoing administration of a regulated debtor's estate that is appointed under a provision of the old Act but is taken to be a committee of inspection under subsection 156(1). However, Division 80 of the Schedule does not apply in relation to meetings of, or related to, the committee of inspection convened or held before the commencement day. [Schedule 1, Part 3, Division 3, Subdivision G, section 155]

3.238 Committees validly appointed under the old Act are taken to be a committee of inspection established under section 80-10 of the Schedule on and after the day specified in subsection 156(2). [Schedule 1, Part 3, Division 3, Subdivision G, section 156]

3.239 The members appointed to the committee under section 70 of the old Act are the members of a continued committee. If a person is a member of a continued committee, then despite their repeal, subsections 70(3) and (4) and section 71 of the old Act continue to apply in relation to the person. Sections 80-15 to 80-25 of the Schedule and the Insolvency Practice Rules made under section 80-30 of the Schedule that relate to membership of a committee of inspection do not apply in relation to members of a continued committee [Schedule 1, Part 3, Division 3, Subdivision G, section 157]

3.240 Sections 80-35 and 85-5 of the Schedule (functions of the committees of inspection and creditors' directions) apply whether or not the direction is given before, on or after the commencement day. [Schedule 1, Part 3, Division 3, Subdivision G, section 158]

3.241 Section 80-40 of the Schedule (Committee of inspection may request information) applies whether or not the information, report or document referred to in subsection 80-40(1) was obtained or generated, or was made or prepared, or is in respect of actions or events that occurred before, on or after the commencement day. [Schedule 1, Part 3, Division 3, Subdivision G, section 159]

3.242 Sections 80-55 and 80-60 of the Schedule (obligations of committee of inspection members and obligations of creditors appointing committee members) apply to arrangements made on or after the commencement day. [Schedule 1, Part 3, Division 3, Subdivision G, section 160]

Transitional provisions-Review of the administration of a regulated debtor's estate

3.243 Division 90 of the Schedule (Review of the administration of a regulated debtor's estate) applies in relation to an ongoing administration of a regulated debtor's estate whether or not the matter to be reviewed occurred before, on or after the commencement day. [Schedule 1, Part 3, Division 3, Subdivision H, section 161]

3.244 Reviews by the Inspector-General (under Subdivision C of Division 90 of the Schedule) may be carried out whether or not the remuneration is paid or payable; or the cost or expense is incurred or paid; or the funds were withdrawn or proposed to be withdrawn; before, on or after the commencement day. If a review in accordance with regulations for the purposes of subsection 167(1) of the old Act starts before the commencement day, subsections 162(3) and (4) will apply. Nothing in the Act affects the review; or the powers of or any decision made by the Inspector-General in relation to the review; or any requirement for a trustee to repay an amount of remuneration; or any appeal or review in relation to the review. The old Act continues to apply on and after the commencement day in relation to ongoing reviews. [Schedule 1, Part 3, Division 3, Subdivision H, section 162]

3.245 Section 163 applies where a court makes an order under the old Act (the old Act order). The old Act order does not cease to have effect because a provision under which it was made has been amended or repealed by the Schedule. If the old Act order is inconsistent with a provision of the Bankruptcy Act as amended by the Transitionals Act (including savings and transitional provisions) then, subject to Part 3, the provision does not apply to the extent that it is inconsistent with the old Act order. [Schedule 1, Part 3, Division 3, Subdivision H, section 163]

3.246 Generally, the old Act will continue to apply in relation to ongoing proceedings before a court. If proceedings are brought under the old Act in a court in relation to the administration of a regulated debtor's estate before the commencement date or on or after the commencement day in accordance with this Division, then subject to Part 3, nothing in the Transitionals Act affects the proceedings; or the power of the court to make orders; or any orders already made by the court; or any enforcement in relation to, or as a result of, the proceedings (including giving effect to any court orders). Similarly, subject to Part 3, nothing in the Act affects any appeal or review in relation to the proceedings. Subject to Part 3, the old Act continues to apply on and after the commencement day in relation to the proceedings despite the amendments and repeals made by the Act. [Schedule 1, Part 3, Division 3, Subdivision H, section 164].

3.247 For the avoidance of doubt, sections 90-5 and 90-10 of the Schedule (Court may inquire on its own initiative or on application of the creditors) apply whether or not the information, report or document mentioned in subsections 90-5(2) and 90-10(3) was prepared before, on or after the commencement day. Paragraph 90-15(3)(f) of the Schedule (a Court order in relation to remuneration) applies whether or not the remuneration is paid or payable before, on or after the commencement day. Subsection 90-15(4) of the Schedule (factors that may be considered by the Court in making an order) applies whether or not the action or failure to act occurred before, on or after the commencement day. [Schedule 1, Part 3, Division 3, Subdivision H, section 165].

3.248 For the avoidance of doubt, section 90-35 of the Schedule (removal of a trustee by creditors) applies whether or not the trustee was appointed before, on or after the commencement day. [Schedule 1, Part 3, Division 3, Subdivision H, section 166]

Transitional provisions-Administrative Review

3.249 A 'reviewable provision' means section 155A, 155F or 155I of the old Act. If an application is made to the Administrative Appeals Tribunal under a reviewable provision for review of a decision (the reviewable decision) under that provision either before the commencement day; or on or after the commencement day (in accordance with a provision of this Part), then subject to Part 3, nothing in the Act affects any proceedings before the Administrative Appeals Tribunal in relation to the reviewable decision; or the powers of the Administrative Appeals Tribunal in relation to the reviewable decision; or any enforcement in relation to, or as a result of, a decision of the Administrative Appeals Tribunal in relation to the reviewable decision; or any appeal or review in relation to a decision of the Administrative Appeals Tribunal in relation to the reviewable decision. Subject to Part 3, the old Act continues to apply on and after the commencement day in relation to the proceedings despite the amendments and repeals made by the Act.

3.250 In relation to applications made to the Administrative Appeals Tribunal after the commencement day, despite the repeal of a reviewable provision by the Schedule, applications may be made to the Administrative Appeals Tribunal under the reviewable provision. [Schedule 1, Part 3, Division 4, section 167]