House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon. Josh Frydenberg MP)

Chapter 2 - Temporary relief for companies seeking a small business restructuring practitioner

Outline of chapter

2.1 Schedule 2 to the Bill provides temporary relief for eligible companies seeking to enter the formal debt restructuring process described in Chapter 1. The Schedule sets out the eligibility criteria for access to the temporary restructuring relief, the circumstances in which the relief will cease, and safeguards to deter potential misuse of the relief.

Summary of new law

2.2 Schedule 2 establishes a temporary safe harbour in relation to a director's duty under section 588G(2) of the Corporations Act to prevent insolvent trading by a company. The safe harbour is available in relation to a company that intends to enter into the formal debt restructuring process but has been unable to secure and appoint an external administrator. A company is able to become eligible for temporary relief between 1 January 2021 and 31 March 2021. Once eligible, the temporary relief applies for three months, or for a further one month if the company is eligible to extend the period.

2.3 Schedule 2 includes safeguards to deter potential misuse of the relief. Offences apply where a company makes a false declaration about its eligibility for temporary relief, and where the company fails to notify ASIC if it is no longer eligible for temporary relief. The court is empowered to order that a company is not eligible for the temporary relief if it does not meet the requirements for accessing the relief. Further, registered liquidators are required to report to ASIC if they suspect that a company is not eligible for the temporary relief.

Comparison of key features of new law and current law

Detailed explanation of new law

Temporary relief from director's duty to prevent insolvent trading

2.4 Directors are required to ensure that their company does not trade while insolvent. The Corporations Act imposes a civil penalty where a director of a company fails to prevent the company from incurring a debt where they are aware there are grounds for suspecting the company is insolvent, or where a reasonable person in a similar position would suspect the company is insolvent (see section 588G(2)).

2.5 In order to provide for a situation where a company intends to enter restructuring but is unable to appoint a restructuring practitioner because of a deficient supply of practitioners (including because of the time needed for practitioners to become familiar with the new restructuring process), Schedule 2 provides a safe harbour in relation to the director's duty to prevent insolvent trading. This means that, for the purposes of the civil penalty in section 588G(2), a director is not required to prevent the company from incurring a debt while insolvent.

2.6 For the safe harbour to apply:

•

the company must be eligible for temporary restructuring relief when the debt is incurred;

•

the debt must be incurred in the ordinary course of the company's business; and

•

the company must have taken all reasonable steps to appoint a restructuring practitioner before the debt was incurred.

[Schedule 2, item 3, section 588GAAC(1) of the Corporations Act]

2.7 The circumstances in which a company is eligible for temporary restructuring relief are discussed at paragraphs 2.13 to 2.29.

2.8 The requirement that the debt is incurred in the ordinary course of the company's business is intended to prevent a company from accessing the safe harbour in relation to transactions that are not in the ordinary course of the company's business. A transaction that is outside the ordinary course of the company's business could be an indicator of illegal phoenixing or other dishonest behaviour which is not intended to be protected by the safe harbour.

2.9 The requirement that the company has taken all reasonable steps to appoint a restructuring practitioner before the debt was incurred is intended to prevent a company from accessing the safe harbour where it has no intention of trying to appoint a restructuring practitioner or has not done enough to make an appointment. The safe harbour is intended only for companies that are genuinely trying to enter restructuring. The safe harbour is not intended to protect a company that has become eligible for temporary restructuring relief, through the directors declaring their intention to enter restructuring, but where the company takes no steps to appoint a restructuring practitioner. What steps are reasonable will depend on the particular circumstances, including the size and nature of the company, and the availability of practitioners to accept appointments.

2.10 In a proceeding relating to a contravention against section 588G(2), the person who seeks to rely on the safe harbour bears an evidential burden in relation to the safe harbour. The effect of this is that a director who seeks to rely on the safe harbour in such proceedings must adduce or point to evidence that suggests a reasonable possibility that the safe harbour applies. This is consistent with the standard approach in relation to exceptions to civil penalty provisions (see section 1317QD of the Corporations Act). [Schedule 2, item 3, sections 588GAAC(2) and (4) of the Corporations Act]

2.11 The regulations may prescribe circumstances in which the safe harbour is taken never to have applied in relation to a person and a debt. The power to prescribe circumstances may be used to deal with misuse of the temporary relief, such as where a company has dishonestly made itself eligible for the temporary relief. It is important that these circumstances can be dealt with in a timely manner, and it is therefore necessary and appropriate for the circumstances, if any, to be prescribed in regulations. [Schedule 2, item 3, section 588GAAC(3) of the Corporations Act]

2.12 The temporary relief applies only to the contravention of the civil penalty in section 588G(2). Where the failure to prevent the debt being incurred involves dishonesty, the director may still be liable for the criminal offence in section 588G(3) of the Corporations Act.

Becoming eligible for temporary restructuring relief

2.13 A company is eligible for temporary restructuring relief if all of the following is satisfied:

•

before 31 March 2021, the directors of the company make and publish a declaration setting out the company's eligibility;

•

the directors declare that there are reasonable grounds to believe that the company is insolvent or likely to become insolvent and that the eligibility criteria for restructuring (see Chapter 1) would be met on any day on or after the day the declaration is first published and before the temporary relief expires;

•

the board has resolved to the effect that a restructuring practitioner for the company should be appointed;

•

the company has not already entered into a form of external administration;

•

the declaration has not expired;

•

the company has not ceased to be eligible; and

•

the company was not previously eligible before ceasing to be eligible.

[Schedule 2, item 2, section 458E(1) of the Corporations Act]

2.14 These matters are discussed in further detail below.

The directors must make a declaration

2.15 Temporary restructuring relief is intended only for companies that have a genuine intention to enter into the formal debt restructuring process. For this reason, there are common requirements for entering into restructuring and eligibility for temporary restructuring relief. Particularly, to be eligible for temporary restructuring relief, the directors of the company must make a declaration that sets out that:

•

there are reasonable grounds to believe that the company is insolvent or likely to become insolvent and that the eligibility criteria for restructuring would be met on any day on or after the day the declaration is published and before the temporary relief expires;

•

the board has resolved to the effect that a restructuring practitioner for the company should be appointed; and

•

the company has not already entered into a form of external administration.

[Schedule 2, item 2, sections 458E(1)(a) to (d) of the Corporations Act].

2.16 The requirement that the eligibility criteria for the formal debt restructuring process would be met on any day on or after the day the declaration is published and before the temporary relief expires provides that the directors must have a reasonable belief that the company would be eligible to enter into restructuring if that assessment was made on any day in which the company is eligible for relief. For example, if the directors know that the liabilities of the company will, soon after publishing the declaration, no longer meet the liabilities test prescribed under section 453C(1)(a), then they do not have a reasonable belief for the purposes of section 458E(1)(b)(ii) and the company is not eligible for temporary restructuring relief. [Schedule 2, item 2, section 458E(1)(b) of the Corporations Act]

2.17 The requirement that the board has resolved to the effect that a restructuring practitioner for the company should be appointed reflects the intention that the directors must have decided that the best option for the company is to enter into the formal debt restructuring process. [Schedule 2, item 2, section 458E(1)(c) of the Corporations Act]

2.18 The requirement that the company has not already entered into a form of external administration will not be met where there is a:

•

restructuring practitioner for the company;

•

restructuring practitioner for a restructuring plan made by the company that has not yet terminated;

•

administrator of the company;

•

administrator of a deed of company arrangement executed by the company that has not yet terminated; or

•

liquidator or provisional liquidator of the company.

[Schedule 2, item 2, section 458E(1)(d) of the Corporations Act]

2.19 The requirements in sections 458E(1)(a) to (d) reflect particular requirements for entering into the formal debt restructuring process in sections 453C and 453D, and described in Chapter 1. The need for the directors to have a reasonable belief in relation to these requirements for the purposes of eligibility for temporary restructuring relief reflects the intention that the relief is provided only for a company that intends to enter, and is likely to meet the requirements for entering, restructuring under Part 5.3B.

The declaration must be published

2.20 The directors must publish the declaration on ASIC's public notices website. The process for complying with this requirement is set out in section 5.6.75 of the Corporations Regulations. The company's period of temporary restructuring relief begins on the day the declaration is published. [Schedule 2, item 2, section 458E(1)(a) of the Corporations Act]

2.21 Publication of the declaration on ASIC's published notices website provides the public, including creditors or potential creditors, with knowledge that the company is insolvent or likely to become insolvent and plans to appoint a restructuring practitioner.

2.22 If ASIC has prescribed a form for the declaration, the declaration must be in that form. Otherwise, the declaration is to be in writing. [Schedule 2, item 2, section 458E(1)(a)(i) and (ii) of the Corporations Act]

The declaration must be provided to ASIC

2.23 Following publication of the declaration on ASIC's public notices website, the company must also give a copy of the declaration to ASIC. This must happen within five business days after the declaration is published. [Schedule 2, item 2, section 458E(4) of the Corporations Act]

2.24 Directors of a company commit an offence if they fail to comply with the requirement to provide a copy of the declaration to ASIC. The imposition of an offence is necessary to ensure that ASIC is made aware of companies that are obtaining temporary restructuring relief, enabling the regulator to take action (for example, to seek an order from the court that a company is not eligible for temporary restructuring relief - see section 458G). In this way, the imposition of an offence is intended to reduce the incidence of misuse of the temporary relief. [Schedule 2, item 2, sections 458E(4) and 1311(1) of the Corporations Act]

2.25 Because no penalty is specified for the offence, the offence is an offence of strict liability and 20 penalty units is taken to be the penalty specified for the offence. A director who commits the offence may be punished on conviction with a penalty not exceeding 20 penalty units (see sections 1311A and 1311F of the Corporations Act). As a strict liability offence, no fault element applies to a director's failure to give ASIC a copy of the declaration but the defence of mistake of fact is available. An infringement notice may be issued in relation to an alleged contravention of the requirement to provide a copy of the declaration to ASIC. The operation of this offence is consistent with established principles in the Criminal Code as well as the existing legislative scheme for offences set out in Parts 9.4 and 9.4AB of the Corporations Act.

2.26 In considering the imposition of this offence, regard has been had to the Guide to Framing Commonwealth Offences.

The declaration must not have expired

2.27 A company is not eligible for temporary restructuring relief if the directors' declaration expires. The declaration expires when the period of temporary relief ends (this is described at paragraph 2.30). [Schedule 2, item 2, sections 458E(1)(e) and (2) of the Corporations Act]

The company must not have ceased to be eligible

2.28 A company is not eligible for temporary restructuring relief if it ceases to be eligible for any reason. The circumstances in which a company cease to be eligible for temporary restructuring relief are described from paragraph 2.38. [Schedule 2, item 2, section 458E(1)(f) of the Corporations Act]

2.29 Further, a company is not eligible for temporary restructuring relief if it has previously been eligible for temporary restructuring relief that has ceased. That is, a company that was once eligible but ceased to be eligible cannot regain eligibility (even if the circumstances that caused the cessation of the initial eligibility no longer exist). [Schedule 2, item 2, section 458E(1)(g) of the Corporations Act]

The period of temporary restructuring relief

The period for establishing eligibility

2.30 A company must establish its eligibility for temporary restructuring relief in the period beginning on 1 January 2021 and ending on 31 March 2021. A directors' declaration establishing eligibility can only be published in this period. This reflects the temporary nature of the restructuring relief which is intended to address the situation where high demand for the formal debt restructuring process leads to companies being unable to appoint a restructuring practitioner. [Schedule 2, item 2, sections 458D and 458E(1) of the Corporations Act]

Initial relief period

2.31 If the eligibility requirements are met and the declaration is published within the period for establishing eligibility, the company's period of temporary restructuring relief begins on the day the declaration is published. Unless the eligibility ceases earlier (for the reasons described in paragraph 2.38), the period continues up to and expires three months after the declaration is published (the initial relief period). [Schedule 2, item 2, section 458E(2) of the Corporations Act]

Extension to the period of temporary relief

2.32 Rather than the regular three months, the temporary relief period expires after four months where an extension applies. For the four-month period to apply:

•

the following must continue to be satisfied in relation to the company:

-

there are reasonable grounds to believe that the company is insolvent or likely to become insolvent and that the eligibility criteria for restructuring would be met on any day after the declaration is published and before the temporary relief expires;

-

the board has resolved to the effect that a restructuring practitioner for the company should be appointed; and

-

the company has not already entered into a form of external administration; and

•

the directors of the company must have taken all reasonable steps to appoint a restructuring practitioner but have been unable to do so.

[Schedule 2, item 2, section 458E(2)(b) of the Corporations Act]

2.33 Further, for the four-month period to apply, the directors must publish a further declaration that:

•

states that sections 458E(1)(b), (c) and (d) (regarding eligibility for temporary restructuring relief) continue to be satisfied in relation to the company;

•

sets out steps that the company has taken to appoint a restructuring practitioner; and

•

sets out the steps that the company intends to take to appoint a restructuring practitioner in the extended period.

[Schedule 2, item 2, section 458E(3) of the Corporations Act]

2.34 The declaration relating to the extended period must be published no later than two weeks before the end of the initial relief period. As with the declaration made for the initial relief period (under section 458E(1)(a)), if ASIC has prescribed a form for the declaration, the declaration must be in that form. Otherwise, the declaration is to be in writing. [Schedule 2, item 2, sections 458E(2)(b)(iv) and 458E(3)(c) and (d) of the Corporations Act]

2.35 The directors must publish the declaration on ASIC's public notices website - this process is described at paragraphs 2.20 to 2.23.

2.36 As with the declaration made for the initial relief period, following publication of the declaration on ASIC's public notices website, the directors must also give a copy of the declaration to ASIC. The applicable offence and penalty for failure to provide the declaration to ASIC is described above in relation to the provision of the original directors' declaration. [Schedule 2, item 2, section 458E(2)(b) and (4) of the Corporations Act]

2.37 Even where the eligibility requirements would still be met for temporary restructuring relief, a company that has been eligible for temporary restructuring relief for three months (or four months if extended) cannot become eligible again (see section 458E(1)(g)). If a company has not entered restructuring by this time, it may still seek to enter restructuring but the temporary relief no longer applies to the company.

Example 1.1 Period of temporary restructuring relief

Wombat Consulting Pty Ltd is small business that has become insolvent. On 15 February 2021, Wombat's directors make a declaration that complies with section 458D(1) of the Corporations Act and publish notice of the declaration in the prescribed manner. Wombat gives ASIC a copy of the notice the next day.

The initial relief period for Wombat is the period of three months beginning on 15 February 2021 and expiring on 14 May 2021.

However, despite taking all reasonable steps to appoint a restructuring practitioner, Wombat has been unable to do so and the directors decide that they need to extend the relief period so that they can continue their efforts to enter restructuring. Wombat still meets the requirements for eligibility for temporary restructuring relief. On 25 March 2021, the directors make a declaration that complies with section 458D(3) of the Corporations Act and publishes a notice of the declaration in the prescribed manner. Wombat gives ASIC a copy of the notice the next day.

Following the second declaration, the relief period for Wombat is the period of four months beginning on 15 February 2021 and expiring on 14 June 2021.

However, on 8 June 2021, Wombat appoints a restructuring practitioner under section 453B of the Corporations Act so its eligibility for relief ends when the appointment is made.

Ceasing to be eligible for temporary restructuring relief

2.38 In addition to temporary restructuring relief ceasing because the period for temporary restructuring relief expires after 3 months (or 4 months if extended), eligibility for temporary restructuring relief ceases where:

•

the directors of the company fail to provide ASIC with a copy of the declaration regarding the company's eligibility (including the declaration regarding eligibility for relief for the extended period);

•

the company enters into external administration;

•

the company withdraws its eligibility; and

•

the court orders that the company is not eligible.

[Schedule 2, item 2, section 458E(5) of the Corporations Act]

Directors fail to provide ASIC with the declaration

2.39 As described above, following publication of the declaration on ASIC's public notices website, the company must also give a copy of the declaration to ASIC. Where the directors fail to provide a copy of the declaration to ASIC, the company ceases to be eligible for temporary restructuring relief. [Schedule 2, item 2, section 458E(5)(b) of the Corporations Act]

Company enters into external administration

2.40 For the purposes of ceasing to be eligible for temporary restructuring relief, a company enters into external administration where a small business restructuring practitioner for the company is appointed under section 453B, where an administrator of the company is appointed under section 436A, 436B or 436C, or where a liquidator, or provisional liquidator, is appointed to wind up the company. The company ceases to be eligible for temporary restructuring relief when the relevant appointment is made. [Schedule 2, item 2, sections 458E(5)(c), (d) and (e) of the Corporations Act]

Directors withdraw the company's eligibility

2.41 A company ceases to be eligible for temporary restructuring relief if the directors declare that the company is not, or is not to be treated as, eligible for temporary restructuring relief. [Schedule 2, item 2, section 458E(5)(f) of the Corporations Act]

2.42 The directors of a company must make a declaration that the company should no longer be treated as eligible for temporary restructuring relief if the company is not eligible for the relief. Particularly, directors are required to give this notice where there are no longer reasonable grounds to believe that:

•

the company is insolvent or likely to become insolvent in the relief period; or

•

the eligibility criteria for the formal debt restructuring process would be met in relation to the company if a restructuring practitioner were appointed on any day in the relief period.

[Schedule 2, item 2, section 458F(1) of the Corporations Act]

2.43 The requirement that a company withdraws its eligibility for relief where it is not eligible reflects the intention that the temporary restructuring relief is appropriately targeted and intended only for companies that would be able to enter into a formal debt restructuring process.

2.44 The requirement that directors withdraw the company's eligibility for relief where it is not eligible is a civil penalty provision. Accordingly, directors that fail to make a declaration, publish the declaration (following the process set out in section 5.6.75 of the Corporations Regulations) and give a copy of the declaration to ASIC in these circumstances are liable for a civil penalty. The penalty applies where one or more of the directors becomes aware of the relevant fact (that there are not reasonable grounds to believe that the company is eligible) and where, within five business days, the directors fail to make the declaration, publish it, and provide a copy to ASIC. [Schedule 2, items 2 and 4, sections 458F(1) and 1317E(3)of the Corporations Act]

2.45 The imposition of a civil penalty for directors failing to make and publish a declaration and provide a copy of the declaration to ASIC in these circumstances is necessary to deter the company from seeking to access temporary restructuring relief where it is not eligible.

2.46 Joint liability of directors provides for the integrity of the regime by ensuring a director with information relating to the ineligibility of the company for temporary relief cannot ignore that information. The information must be shared with other directors (and with ASIC) and must lead to the company ceasing to be eligible for temporary restructuring relief under section 458E(5). In this way, the imposition of a civil penalty is intended reduce the incidence of behaviour that would otherwise be prohibited by section 588G(2) of the Corporations Act.

2.47 The penalty is categorised as a corporation/scheme civil penalty provision - and therefore the Court may order one or more directors or the company to pay to the Commonwealth a pecuniary penalty, worked out in accordance with section 1317G of the Corporations Act. [Schedule 2, items 2 and 4, sections 458F(1) and 1317E(3) of the Corporations Act]

2.48 Where the contravention results in damage to the company, the court may also make an order for compensation to the company, worked out in accordance with section 1317H of the Corporations Act.

2.49 In considering the imposition of this civil penalty, regard has been had to the Guide to Framing Commonwealth Offences.

2.50 Also, a company may make a declaration that the company should no longer be treated as eligible for temporary restructuring relief for any reason. [Schedule 2, item 2, section 458F(2) of the Corporations Act]

2.51 A company may do so, for example, if it decides that it no longer wishes to appoint a restructuring practitioner. Again, the company is required to publish the declaration in the prescribed manner (following the process set out in section 5.6.75 of the Corporations Regulations) and provide a copy of the declaration to ASIC within five business days of publishing the declaration. [Schedule 2, item 2, sections 458F(2) and (3) of the Corporations Act]

Court orders

2.52 The Court may order that a company is not eligible for temporary restructuring relief if there are not reasonable grounds to believe that:

•

the company is insolvent, or is likely to become insolvent, before the declaration expires;

•

the eligibility criteria for restructuring would be met;

•

the company has taken, or will take, all reasonable steps to appoint a restructuring practitioner.

[Schedule 2, item 2, section 458G(1) of the Corporations Act]

2.53 The Court's power is not limited to the reasons above. The Court may order that a company is not eligible for temporary restructuring relief for any other reason. [Schedule 2, item 2, section 458G(4) of the Corporations Act]

2.54 The Court may order that a company is not eligible for temporary restructuring relief on its own initiative, or on the application of ASIC or a creditor of the company. [Schedule 2, item 2, section 458G(2) of the Corporations Act]

2.55 Where the Court orders that a company is no longer eligible for temporary restructuring relief, the directors of the company must publish notice of the order in the prescribed manner (as described above in relation to publishing declarations) and give ASIC a copy of the order. This must occur within five business days. [Schedule 2, item 2, section 458G(3) of the Corporations Act]

2.56 Failure to comply with the requirement to publish the notice and give a copy to ASIC within five business days is an offence. The imposition of an offence is necessary to ensure that ASIC is made aware of instances where the Court has ordered that a company is no longer eligible for temporary restructuring relief. The making of such an order may indicate misuse of the temporary restructuring relief which may prompt further investigation by ASIC. [Schedule 2, item 2, sections 458G(3) and 1311(1) of the Corporations Act]

2.57 Because no penalty is specified for the offence, the offence is an offence of strict liability and 20 penalty units is taken to be the penalty specified for the offence. A director who commits the offence may be punished on conviction with a penalty not exceeding 20 penalty units (see sections 1311A and 1311F of the Corporations Act). As a strict liability offence, no fault element applies to a director's failure to publish the order or give a copy to ASIC. An infringement notice may be issued in relation to an alleged contravention of the requirement to publish the order or give a copy to ASIC. The operation of this offence is consistent with established principles in the Criminal Code as well as the existing legislative scheme for offences set out in Parts 9.4 and 9.4AB of the Corporations Act.

2.58 In considering the imposition of this offence, regard has been had to the Guide to Framing Commonwealth Offences.

Further safeguards

2.59 The temporary restructuring relief is targeted and intended only for companies that would be able to enter into a formal debt restructuring process. This is reflected in the requirements for eligibility for temporary restructuring relief. As described above, safeguards aimed at preventing misuse of the temporary relief include:

•

the safe harbour only applies where the director seeking to rely on it is able to adduce evidence regarding the company's satisfaction of the conditions placed on access to the safe harbour, including that the company is eligible for temporary restructuring relief and that the company has taken all reasonable steps to appoint a restructuring practitioner;

•

directors must publish the fact of the company's eligibility for temporary restructuring relief on ASIC's published notices website and provide a copy of the declaration to ASIC;

•

the directors must withdraw the company's eligibility in certain circumstances;

•

the court may make orders that the company should not be treated as eligible for temporary restructuring relief; and

•

there is a limited time period in which a company can establish its eligibility for temporary restructuring relief and the period of the relief itself is limited.

2.60 In addition, schedule 2 includes a number of further safeguards.

Directors must not give a false declaration

2.61 When making a declaration about a company's eligibility for temporary restructuring relief (including for the extension to the relief period), directors must not make false or misleading statements. If a director provides false or misleading information in the declaration, the director may be subject to civil or criminal penalties under section 1308 of the Corporations Act. These are existing penalties within the Corporations Act penalties framework, and provide an appropriate level of deterrence in relation to directors providing information that may be false or misleading.

Registered liquidators must report to ASIC

2.62 A company that is eligible for temporary restructuring relief must take steps to appoint a restructuring practitioner (a restructuring practitioner must be a registered liquidator - see Chapters 1 and 3). In these interactions between a registered liquidator and a company that is seeking to enter into the formal debt restructuring process, the registered liquidator may become aware that the company should not, in fact, be eligible for temporary restructuring relief. In these circumstances, it is intended that the company should not continue to obtain access to the safe harbour in section 588GAAC.

2.63 To achieve this, a registered liquidator must notify ASIC where a company is eligible for temporary restructuring relief but where the liquidator suspects that there are not reasonable grounds to believe:

•

the company is insolvent, or likely to become insolvent;

•

the eligibility criteria for the formal debt restructuring process would be met in relation to the company if a restructuring practitioner were appointed.

2.64 In these circumstances, the registered liquidator must give ASIC notice in writing setting out the registered liquidator's reasons for forming the suspicion. The notice must be given within five business days after first forming the suspicion. A liquidator's failure to comply with this requirement to notify ASIC is an offence. [Schedule 2, item 2, section 458H of the Corporations Act]

2.65 The imposition of an offence is necessary to ensure that registered liquidators report information to ASIC about potential misuse of the temporary restructuring relief. In this way, the imposition of an offence is intended to reduce the incidence of behaviour that would otherwise be prohibited by section 588G(2) of the Corporations Act.

2.66 Because no penalty is specified for the offence, the offence is an offence of strict liability and 20 penalty units is taken to be the penalty specified for the offence. A registered liquidator who commits the offence may be punished on conviction with a penalty not exceeding 20 penalty units (see sections 1311A and 1311F of the Corporations Act). As a strict liability offence, no fault element applies to a liquidator's failure to give ASIC notice but the defence of mistake of fact is available. This is consistent with established principles in the Criminal Code as well as the existing legislative scheme for offences set out in Part 9.4 of the Corporations Act. [Schedule 2, item 2, section 458H of the Corporations Act]

2.67 In considering the imposition of this offence, regard has been had to the Guide to Framing Commonwealth Offences.

Consequential amendments

2.68 Schedule 2 to the Bill inserts definitions for eligible for temporary restructuring relief and restructuring relief period into the Corporations Act. [Schedule 2, item 1, section 9 of the Corporations Act]

2.69 Schedule 2 to the Bill also makes an amendment to section 1317E of the Corporations Act (dealing with declaration of contravention of a civil penalty provision) to include the new civil penalty provision relating to the obligation for directors to notify ASIC that the company is no longer eligible for temporary restructuring relief. The civil penalty provision is categorised as a corporation/scheme provision. [Schedule 2, item 4, the table in section 1317E(3) of the Corporations Act]

Application and transitional provisions

2.70 The amendments to create the temporary restructuring relief framework for a company seeking to enter the formal debt restructuring process applies from when the restructuring process becomes available on 1 January 2021. Directors cannot make a declaration regarding eligibility for temporary restructuring relief after 31 March 2021. [Schedule 2, item 2, section 458D of the Corporations Act]

Commencement provisions

2.71 Schedule 2 to the Bill commences immediately after Schedule 1 (Restructuring of a company) commences. Schedule 1 commences on 1 January 2021. [Item 2 of the Bill]