House of Representatives

Explanatory Memorandum

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

Chapter 4 - Refinements to the registration of liquidators and trustees

Outline of chapter

4.1 Schedule 3 to the Bill amends the requirements for registration as a liquidator under the Corporations Act and registration as trustee under the Bankruptcy Act.

Summary of new law

4.2 Under the Corporations Act, only a registered liquidator can perform certain roles, such as that of the receiver of the property of a corporation, the administrator of a company or of a deed of company arrangement, or the liquidator or provisional liquidator of a company. A small business restructuring practitioner, discussed in Chapter 1, is also required to be a registered liquidator. Similarly, under the Bankruptcy Act, only the Official Trustee or a registered trustee can act as the trustee of a regulated debtor's estate.

4.3 Schedule 3 amends the existing registration requirements to provide more flexibility to committees considering applications for registration as a liquidator or trustee. The amendments provide that the committee may decide that an applicant should be registered even if the committee is not satisfied of particular criteria.

Comparison of key features of new law and current law

Detailed explanation of new law

Registration as a liquidator

4.4 An individual may apply to ASIC to be registered as a liquidator. The application is referred to a committee, which assesses the application against specified criteria (the applicant's qualifications, conduct and fitness and whether the applicant will take out appropriate insurance). The committee reports its decision to ASIC and, if the committee decides that the applicant should be registered, ASIC registers the applicant as a liquidator.

4.5 Prior to the amendments made by Schedule 3, the committee may decide that the applicant should be registered even if the committee is not satisfied that the applicant meets particular criteria provided the committee is satisfied that the applicant would be suitable to be registered if the applicant complied with certain conditions. The particular criteria to which this rule relates are that the applicant:

•

has the qualifications, experience, knowledge and abilities set out in the Insolvency Practice Rules;

•

has not had his or her registration as a liquidator cancelled within 10 years (other than in response to a request by the applicant to have the registration cancelled);

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has not had his or her registration as a trustee under the Bankruptcy Act cancelled within 10 years (other than in response to a request by the applicant to have the registration cancelled); and

•

is resident in Australia or in another prescribed country.

4.6 Schedule 3 amends section 20-20 of the Insolvency Practice Schedule to allow the committee to approve the registration of a liquidator if the applicant does not satisfy the criteria listed above without conditions provided the applicant would be suitable to be registered as a liquidator. These amendments give the committees, convened by ASIC, greater flexibility to decide that a person is suitable to be registered as a liquidator. [Schedule 3, item 10, section 20-20(5) of Schedule 2 to the Corporations Act]

4.7 The committee retains the flexibility to make the registration subject to certain conditions if it is appropriate to do so. This flexibility encourages a greater diversity of practitioners into the field, and greater resilience of the sector. [Schedule 3, item 11, section 20-20(6) of Schedule 2 to the Corporations Act]

Registration as a trustee

4.8 An individual may apply to the Inspector-General to be registered as a trustee. The application will be referred to a committee, which will assess the application against specified criteria (the applicant's qualifications, conduct and fitness and whether the applicant will take out appropriate insurance). The committee will report its decision to the Inspector-General and, if the committee decides that the applicant should be registered, the Inspector-General will register the applicant as a trustee.

4.9 Prior to the amendments made by Schedule 3, the committee may decide that the applicant should be registered even if the committee is not satisfied that the applicant meets particular criteria provided the committee is satisfied that the applicant would be suitable to be registered if the applicant complied with certain conditions. The particular criteria to which this rule relates are that the applicant:

•

has the qualifications, experience, knowledge and abilities set out in the Insolvency Practice Rules;

•

has not had his or her registration as a trustee cancelled within 10 years (other than in response to a request by the applicant to have the registration cancelled);

•

has not had his or her registration as a liquidator under the Corporations Act cancelled within 10 years (other than in response to a request by the applicant to have the registration cancelled); and

•

is a resident in Australia or in another prescribed country.

4.10 Schedule 3 amends section 20-20 of Schedule 2 to the Bankruptcy Act 1966 to allow the committee to approve the registration of a trustee if the applicant does not satisfy the criteria listed above without conditions provided the applicant would be suitable to be registered as a trustee. These amendments give the committees, convened by the Inspector-General, greater flexibility to decide that a person is suitable to be registered as a trustee. [Schedule 3, item 1, section 20-20(5) of Schedule 2 to the Bankruptcy Act]

4.11 The committee retains the flexibility to make the registration subject to certain conditions if it is appropriate to do so. This flexibility encourages a greater diversity of trustees into the field, and greater resilience of the sector. [Schedule 3, item 2, section 20-20(6) of Schedule 2 to the Bankruptcy Act]

Commencement provisions

4.12 Schedule 3 to the Bill commences on 1 January 2021. [Item 2 of the Bill]