Explanatory Statement

Issued by the authority of the Parliamentary Secretary to the Treasurer

Corporations Amendment Regulations 2007 (No. 13)

Corporations Act 2001

Select Legislative Instrument 2007 No. 325

Issued by the authority of the Parliamentary Secretary to the Treasurer

Subsection 1364(1) of the Corporations Act 2001 (the Corporations Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to those Acts. Subsection 1364(2) of the Corporations Act provides that, without limiting the generality of the power conferred by subsection 1364(1), the regulations may provide for a number of specific matters including:

•

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

•

the appointment and powers of proxies; and

•

the proving of debts in the winding up of a company.

The purpose of the amendments to the Corporations Regulations 2001 (Corporations Regulations) is to complement amendments to the Corporations Act made by the Corporations Amendment (Insolvency) Act 2007 and implement reforms to the external administration provisions of the Corporations Regulations.

The amendments provide for the sending of notices and documents to creditors, the prescription of a threshold for the compromise of debts, processes to complement the operation of the pooling facility introduced by the Corporations Act, electronic communications, the conduct of creditors' meetings and electronic lodgement of proxy appointments. They also make modifications to prescribed forms and schedules of the Corporations Regulations.

Details of the proposed amendments to the Corporations Regulations are set out in the Attachment.

Under subclauses 506(1) and 507(2) of the Corporations Agreement, the Commonwealth is required to consult with and receive the approval of at least three State and Territory Ministers of the Ministerial Council for Corporations (the Council) before making a regulation under the national law. The Commonwealth has received approval of the Council for the Regulations.

The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.

The Regulations commenced on the commencement of items 1 to 48 of Schedule 1 to the Corporations Amendment (Insolvency) Act 2007.

ATTACHMENT

Details of the proposed Corporations Amendment Regulations 2007 (No. 13)

Regulation 1 - Name of Regulations

This regulation provides that the title of the Regulations is the Corporations Amendment Regulations 2007 (No. 13).

Regulation 2 - Commencement

This regulation provides for the Regulations to commence on the commencement of items 1 to 48 of Schedule 1 to the Corporations Amendment (Insolvency) Act 2007.

Regulation 3 - Amendment of Corporations Regulations 2001

This regulation provides that Schedule 1 amends the Corporations Regulations 2001.

Regulation 4-Transitional

Subregulation 4(1) provides for transitional arrangements for certain changes (generally provisions specifying a time period within which certain actions must be taken) that are affected by the amendments in Item 57 of Schedule 1. Specifically, the existing timeframes will continue to apply to the extent they relate to the winding up or the administration of a company that began before the commencement of these Regulations.

Subregulation 4(2) permits the current form of statutory demand to be used concurrently with the new form, provided for by item 49, for 12 months after the commencement of the regulations. Thereafter the new form will be the prescribed form.

Schedule 1- Amendments

Item [1] -Subregulation 5.3A.07(4)

It is unnecessary to provide for the nomination of the deed administrator as liquidator for the purposes of the winding up as new subsections 499(2)-(2C), inserted by the Corporations Amendment (Insolvency) Act 2007, provide for the appointment of a liquidator for the purposes of the winding up. Item 1 omits subregulation 5.3A.07(4).

Item [2]: Regulations 5.3A.08 and 5.3A.09

The Corporations Act and the Corporations Regulations require various notices, documents and other forms of communication sent from external administrators of a company to the company's creditors to be published in a national newspaper that circulates in each State and Territory in which the company has a registered office or carries on business.

The Corporations Amendment (Insolvency) Act 2007 will repeal the requirement in paragraph 450C(b) for a deed administrator to publish a notice in the prescribed form that a company has failed to execute a deed of company arrangement within the required period. As a consequence, there will no longer be a requirement to publish notices in accordance with regulations 5.3A.08 and 5.3A.09. Item 2 repeals regulations 5.3A.08 and 5.3A.09.

Item [3]: After regulation 5.4.01

Subsection 477(2A) of the Corporations Act provides that, except with the approval of the court, the committee of inspection or of a resolution of the creditors, a liquidator of a company must not compromise a debt to the company if the amount claimed by the company is more than the prescribed amount, if an amount greater than $20,000 is prescribed or otherwise $20,000.

The 2004 Report of the Parliamentary Joint Committee on Corporations and Financial Services, Corporate Insolvency Laws: A Stocktake recommended that the Government review the appropriateness of the restrictions on a liquidators powers to compromise debts due to the company where the debt exceeds $20,000 (recommendation 56). Compromises of debts with a value over $20,000 are commonplace, especially when a large business is involved.

The requirement for a liquidator to obtain approval of a Court or creditors for such compromises on a case by case basis is unduly restrictive. Item 3 inserts new regulation 5.4.02 to prescribe the amount of $100,000 for the purposes of paragraph 477(2A)(a) of the Corporations Act.

Items [4] and [5]: Liquidator's general account: pooling

One of the objectives of the pooling regime introduced by the Corporations Amendment (Insolvency) Act 2007 is to reduce administrative duplication and associated transaction costs. In the event of pooling, it is desirable that a liquidator be able to pay money received by the liquidator into a single bank account for all of the companies in the group.

Item 5 inserts new subregulation 5.6.06(2) to clarify that a liquidator may open a single bank account, to be known as the liquidator's general account, in relation to a pooled group (rather than accounts for each company) and pay into that account all money received by the liquidator in relation to the liquidation of all of the companies in the pooled group. Item 4 allows for the division of regulation 5.6.06 into subregulations.

Item [6]: Regulation 5.6.07

Item 6 clarifies that regulation 5.6.07 allows a liquidator to deposit bills, notes and other securities payable to companies in the pooled group in the bank with which the liquidator's general account was opened.

Item [7]: Subregulation 5.6.10(1)

Subregulation 5.6.10(1) currently requires all payments out of the liquidator's general account to be made by cheque. Transfer of funds electronically, particularly in cases of bulk transactions (such as payments of dividends to creditors), is less costly, provides a computerised record of the transaction and reduces the chance of conversion or misappropriation. Item 7 amends subregulation 5.6.10(1) to allow payments out of the liquidator's general account to be made by electronic funds transfer as well as by cheque.

Items [8] and [25]: Subregulations 5.6.11(2) and 5.6.24(4)

Secured creditors should be able to vote for the full amount of their debts in meetings while the company is under administration or under a deed of company arrangement. This represents a departure from the normally applicable principle, reflected in regulation 5.6.24, that allows secured creditors to vote at meetings of creditors only to the extent of any shortfall in their security or alternatively to waive their rights to security in order to vote for the whole of their debt. This departure from the normal principle is intended to encourage secured creditors to participate in the voluntary administration procedure. The exception to the normal principle allowing secured creditors to vote for the whole of their debt or claim at a meeting convened under Part 5.3A is reflected in subregulation 5.6.24(4).

However, it is not clear whether subregulation 5.6.24(4) allows secured creditors who are bound by a deed of company arrangement to vote in respect of the whole of their debt or claim under a deed of company arrangement. The regulations clarify that secured creditors who are bound by a deed of company arrangement may vote in respect of the whole of their debt or claim at a meeting held under a deed of company arrangement (for example, at a meeting of creditors under a deed of company arrangement which is not 'convened under Part 5.3A').

Item 25 amends subregulation 5.6.24(4) so that it provides that regulation 5.6.24 does not apply to a meeting held under a deed of company arrangement as well as a meeting convened under Part 5.3A. Item 8 removes a potential inconsistency with subregulation 5.6.11(2), which applies regulations, including regulation 5.6.24, to meetings of creditors, by providing that subregulation 5.6.11(2) is subject to subregulation 5.6.24(4).

Item [9]: Subparagraph 5.6.11(2)(a)(iv)

Regulations 5.6.12 to 5.6.36A set out general requirements for notice of, conduct of, and voting at specified meetings. Item 9 extends subparagraph 5.6.11(2)(a)(iv) to provide that these general meeting rules will also apply to the convening of, conduct of, and voting at meetings of eligible employee creditors and meetings, on a consolidated basis, of creditors of companies in a group.

Item [10]: After regulation 5.6.11

The Corporations Act currently requires administrators and liquidators to send written copies of documents to creditors unless the court permits some other means of circulating information. Recommendation 20 of the 2004 Report of the Parliamentary Joint Committee on Corporations and Financial Services, Corporate Insolvency Laws: A Stocktake and recommendation 6 of the 2004 Report of the Corporations and Markets Advisory Committee on Large and Complex Enterprises proposed that external administrators be given greater discretion to communicate electronically with creditors.

The Corporations Act currently facilitates electronic distribution of notices of meetings of members (see subsections 249J(3) and (3A)) in circumstances where the member concerned has agreed in advance to receiving such communications electronically. The Corporations Amendment (Insolvency) Act 2007 will extend this approach to facilitate electronic communication with creditors. Amendments made to the Corporations Act by the Corporations Amendment (Insolvency) Act 2007 allow creditors to nominate to receive such communications electronically.

The regulations dealing with external administrations will be amended to permit electronic distribution of various notices to creditors. This will reduce costs and improve the timeliness of communications.

Item 10 inserts a new regulation 5.6.11A which establishes a framework for electronic communication of certain notices. Subregulation 5.6.11A(1) defines the 'notifier' and the 'recipient', who are persons authorised or required to send or receive (respectively) notices under the following provisions:

•

5.6.12(1) - Notice of meeting;

•

5.6.16(6) - Notice of adjournment of meeting;

•

5.6.48(2)(b) - Notice to persons claiming to be creditor to submit formal proof;

•

5.6.53(1) - Liquidator dealing with formal proof of debt or claim;

•

5.6.54(1) - Notice of rejection of proof of debt or claim (Form 537);

•

5.6.55(3) - Notice of revocation or amendment of decision on proof of debt;

•

5.6.59(1) - Notice of time and place to settle list of contributories (Form 539);

•

5.6.62(1) - Notice of inclusion in list of contributories;

•

5.6.65(1)(b) - Notice of intention to declare a dividend (Form 547); and

•

5.6.66(1)(d) and (3)(a) - Dealing with formal proof of debt or claim.

Subregulation 5.6.11A(2) deals with the sending of information to an electronic address (for example, by e-mail). Under subregulation 5.6.11A(2), sending notices or other documents to an email address will be permitted provided the recipient has nominated the electronic address for that purpose. It is expected that, in practice, external administrators will seek nominations by creditors at the outset of proceedings that would be effective for all notices during the course of the proceeding.

Subregulation 5.6.11A(3) is similar in form to subregulation 5.6.11A(2) but deals with electronic means of communicating notices other than using an electronic address. This facilitates the use of electronic communication technologies that do not utilise an electronic address concept similar to that of e-mail.

Subregulation 5.6.11A(4) is modelled on subsection 249J(3A) of the Corporations Act. It deals with the situation whereby, rather than sending an entire notice or document to the recipient, the notifier merely sends a short notification that it is available to be accessed by some electronic means (for example, viewing on an internet site). In that case, the recipient must first nominate both the notification and access methods in advance. The notifier must notify the recipient that the notice or other document is available, and details of how to access it.

Subregulation 5.6.11A(5) is modelled on subsection 249J(4) of the Corporations Act and provides that a notice or document sent by electronic address under subregulation 5.6.11A(3) or by electronic means under subregulation 5.6.11A(4) is taken to be given or sent on the next business day after they are sent.

Subregulation 5.6.11A(6) is modelled on subsection 249J(5) of the Corporations Act and provides that notices and documents made available under the facility available in subregulation 5.6.11A(4) are taken to be given or sent on the next business day after the recipient is notified that the notice or other document is available to access.

Subregulation 5.6.11A(7) clarifies that the additional electronic communication possibilities under provided under regulation 5.6.11A do not limit the means of communicating the notices or other documents otherwise permitted under the affected provisions.

Items 13, 18 and 37 to 45 include a note in the same form drawing attention to the facility for electronic communication in regulation 5.6.11A. The note is added to the provisions to which regulation 5.6.11A applies.

Items [11] and [12]: Notice of meeting

Subregulation 5.6.12(1) identifies the persons to whom the convenor of a meeting must give notice of the meeting. Items 11 and 12 prescribe the notice requirements for meetings of eligible employee creditors (employee creditors of the company whose debts are paid in priority to unsecured debts) and for consolidated meetings of creditors of companies in a group.

Item [14]: Subregulation 5.6.12(5)

Subregulation 5.6.12(5) allows an administrator to convene a meeting of a committee of creditors with less than the normal 14 days notice, if the administrator considers this is appropriate.

Item 14 extends this exception to the normal notice requirement to meetings of eligible employee creditors. This will allow administrators additional flexibility to develop a proposal to put to such a meeting, if this is intended. Eligible employee creditors will continue to receive notice of the meeting convened under section 439A in the normal time period.

Item [15]: After subregulation 5.6.14(2)

Section 249S of the Corporations Act allows a company to hold a meeting at two or more venues using technology that gives its members as a whole a reasonable opportunity to participate. This allows for new technologies to be used to conduct meetings across various locations, at a minimum cost to participants and the company. There is no similar provision in the regulations dealing with meetings in external administration proceedings.

Regulation 5.6.14 provides that a convenor of a meeting "must convene the meeting at the time and place he or she thinks most convenient for the majority of persons entitled to receive notice of the meeting". This may imply a meeting must be in one location. Regulation 5.6.13A allows telephone conferencing facilities to be used, but it does not contemplate simultaneous physical meeting places connected by, for example, mutual live video and audio transmissions.

Subregulation 5.6.14(3) clarifies that a meeting may be held at two or more venues using technology that gives participants a reasonable opportunity to participate.

Item [16]: Regulation 5.6.14A

Regulation 5.6.14A provides that a convenor of a meeting must advertise the meeting in a daily newspaper circulating generally in each 'State, Territory and excluded [sic] Territory' in which the company has carried on business in the previous two years before the meeting.

The requirement in subsection 445F(2) of the Corporations Act to advertise a meeting proposing a termination or variation of a deed of company arrangement will be repealed by the Corporations Amendment (Insolvency) Act 2007. However, regulation 5.6.14A might still require such a meeting to be advertised.

Item 16 replaces regulation 5.6.14A with a new regulation which will clarify that the requirement to advertise a meeting does not apply to a meeting convened under subsection 445F(2) and a meeting of eligible employee creditors under subsection 444DA(2), and remove the reference to an 'excluded' Territory and refer merely to a 'Territory'. 'Territory' is defined in section 9 of the Corporations Act to include an external Territory.

Item [17]: Subregulation 5.6.16(5)

Item 17 omits subregulation 5.6.16(5) as it was replicated in subregulation 5.6.18(2).

Item [19]: Paragraph 5.6.17(1)(c)

Subregulation 5.6.17(1) states that if a liquidator, provisional liquidator or administrator convenes a meeting, that person (or a person nominated by them) must chair the meeting.

Item 19 extends subregulation 5.6.17(1) to clarify that an administrator or a liquidator of a pooled group (or a person nominated by them) must chair a meeting convened by them.

Items [20] and [23]: Subregulation 5.6.21(4)

Subregulation 5.6.21(4) states that, in a split vote situation, the person presiding at a creditors' meeting may exercise a casting vote in favour of the resolution, in which case the resolution is carried, or they may exercise a casting vote against the resolution, in which case the resolution is not carried. Currently, there is no requirement for chairpersons to explain their decision about how they exercise their casting vote.

Recommendation 10 of the 2004 Report of the Corporations and Markets Advisory Committee on Large and Complex Enterprises proposed that there be a requirement to publish reasons for the way casting votes are exercised.

A requirement to publish the reasons for exercising a casting vote will reinforce the need for chairpersons to carefully and deliberately consider the reasons for exercising any casting vote.

At a meeting of eligible employee creditors a casting vote will not be exercisable in the case of a split vote. Unless a resolution is supported by a majority in number of the eligible employee creditors voting (whether in person, by attorney or by proxy) and more than half the value of the total debts owed to those creditors, a resolution will not be carried at such a meeting.

Item 23 inserts a new subregulation 5.6.21(4A) requiring the person presiding at a meeting of creditors to include, in the minutes of the meeting, their reasons for exercising, or not exercising a casting vote where a result is not reached under subregulation 5.6.12(2) or 5.6.12(3).

Item 23 also inserts a new subregulation 5.6.21(4B) to provide that, at a meeting of eligible employee creditors, a resolution will not be carried if no result is reached.

Item 20 make subregulations 5.6.21(4) subject to subregulation 5.6.21(4B).

Items [21] and [22]: Paragraph 5.6.21(4)(b)

Subregulation 5.6.21(4) provides that if there is a split vote on a resolution (i.e. a vote supported by number of creditors but not value, or vice versa), the chairperson at the meeting may exercise a casting vote on the resolution. The subregulation does not state the outcome if a casting vote is not exercised by the chairperson. This may result in uncertainty about the fate of some resolutions.

Item 22 amends subregulation 5.6.21(4) and adds paragraph 5.6.21(4)(b) to make it clear that, in a split vote situation, if the chairperson does not exercise their casting vote the resolution is defeated. Item 21 makes a consequential amendment to paragraph 5.6.21(4).

Item [24]: After regulation 5.6.23

Amendments to section 560 included in the Corporations Amendment (Insolvency) Act 2007 will provide that a person who advances money to a company, from which employee entitlements are paid, has the same rights under Chapter 5 as a creditor of the company. Regulation 5.6.21 sets out the procedure for voting after a poll has been demanded. It is necessary to clarify the voting status of persons by whom money is advanced.

An advancer may make an advance for a number of employees. To limit the scope for these provisions to be misused to manipulate voting outcomes, the regulation will clarify that the advancer will only have one vote (by number) in a poll at a meeting of creditors, regardless of the number of employees in respect of whom money is advanced. The advancer will be able to vote for the full value of all the money they advance.

Regulation 5.6.23A provides that an advancer is entitled to only one vote by number at a meeting of creditors, whether he/she has advanced money on one occasion only, on more than one occasion in respect to the same matter or on one or more occasions in respect of more than one matter.

Item [25]: Subregulation 5.6.24(4)

It is not clear that secured creditors who are bound by a deed of company arrangement may vote in respect of the whole of their debt or claim under a deed of company arrangement other than on conditions laid down in regulation 5.6.24. Item 25 makes it clear that that secured creditors who are bound by a deed of company arrangement may vote in respect of the whole of their debt or claim at a meeting held under a deed of company arrangement (for example, at a meeting of creditors under a deed of company arrangement which is not 'convened under Part 5.3A').

Item 25 clarifies subregulation 5.6.24(4) so that it provides that regulation 5.6.24 does not apply to a meeting held under a deed of company arrangement as well as a meeting convened under Part 5.3A.

Items [26] and [29]: Regulation 5.6.27

Item 26 and 29 corrects cross references in subregulations 5.6.27(1) and 5.6.27(3).

Items [27] and [30]: Minutes for consolidated meetings

Regulation 5.6.27 deals with minutes of meetings. Where a meeting is held the chairperson is required to draw up and sign minutes for the meeting in accordance with subregulation 5.6.27(1). The minutes must be lodged in accordance with subregulation 5.6.27(3).

One of the objectives of the proposed new pooling regime is to reduce administrative duplication and associated transaction costs. As such, where a meeting is held on a consolidated basis for a pooled group of companies, there will not be a requirement to prepare or lodge minutes in respect of each of the individual companies in the group. A single record for the consolidated meeting will suffice.

Subregulation 5.6.27(1A) provides that if a meeting is held on a consolidated basis subregulation 5.6.27(1) does not require the chairperson to draw up and enter separate minutes for each of the companies to which the meeting relates. Subregulation 5.6.27(3A) provides that the chairperson does not have to lodge separate copies of minutes where the meeting is held on consolidated basis.

Item [28]: Paragraph 5.6.27(2)(b)

Item 28 amends regulation 5.6.27(2) to require a record of persons present at a meeting to be kept for meetings of eligible employee creditors.

Items [31], [32], [33] and [34]: Electronic lodgement of proxy appointments

Under the Corporations Act, electronic proxy voting is possible for meetings of a company's members. Subsection 250A(1) allows for proxy appointments to be signed or otherwise authenticated as prescribed by the regulations. Regulation 2G.2.01 provides for electronic authentication.

There is no facility in the regulations dealing with proxies for meetings held for the purposes of external administration (regulations 5.6.28 to 5.6.31) for electronic proxy appointments.

Regulations 5.6.28, 5.6.29 and 5.6.31 are amended to permit the lodgement of proxies electronically in cases where the convenor of the meeting chooses to permit that facility.

Regulation 5.6.31 is amended to allow a convenor to specify on the proxy form an electronic address or other electronic means for the receipt of proxy appointments.

Regulation 5.6.29 is expanded to provided that, if an electronic address is offered, the proxy form must be completed in a way that allows electronic authentication, including a method of identifying the person entitled to appoint a proxy and an indication of the person's approval of the information in the proxy. This facility would allow authentication of the proxy by, for example, allowing a hard copy signature to be scanned and sent through email. Alternatively, a digital signature or some other form of authentication mechanism could be made available.

Regulation 5.6.28 (which requires prior lodgement of proxy appointments in order for a person claiming to be a proxy to speak or vote at a meeting) is amended to recognise the possibility that a proxy can be lodged by electronic means.

Item 34 inserts a new subregulation 5.6.31(2), which will permit a meeting convenor to specify on a proxy form an electronic address (such as an e-mail address), or another electronic means, by which a person may lodge a proxy appointment. Item 33 makes a consequential amendment.

Item 32 replaces regulation 5.6.29. Subregulation 5.6.29(1) provides that a proxy appointment must be in accordance with Form 532 and completed in hard copy or, if the convenor has offered an electronic address or other electronic means in accordance with subregulation 5.6.31(2), in such a way as to comply with the authentication requirements of subregulation 5.6.29(3). Subregulation 5.6.29(2) provides for authentication methods for completing a hard copy of Form 532. Subregulation 5.6.29(3) provides for authentication methods for Form 532 to be lodged electronically.

Item 31 makes amendments to regulation 5.6.28. Subregulation 5.6.29(4) will apply where persons claim to be a proxy appointed by an instrument that was given by electronic means under subregulation 5.6.29(3). Like the former subregulation 5.6.28(3), the new regulation provides that any person claiming to be a proxy may not speak or vote (except on the election of chairperson) unless their instrument of appointment has been lodged with the chairperson or with the person named in the notice convening the meeting as the person who is to receive the instrument.

Item [35]: Directed proxy voting

Former subregulation 5.6.33(1) did not allow a proxy (either general or special) to vote in favour of any resolution that would directly or indirectly place the person, the person's partner or the person's employer in a position to receive any remuneration out of assets of the company except as a creditor rateably with the other creditors of the company.

This regulation will prevent an administrator from using any creditors' special proxies in favour of a resolution that the company be wound up, as the administrator automatically becomes the liquidator of the company where the creditors resolve that the company be wound up if no replacement is appointed. It also prevents use of special proxies directed to external administrators being used in relation to remuneration matters. These restrictions can cause practical difficulties.

The 1998 Report of the Companies and Securities Advisory Committee on Corporate Voluntary Administration recommended that any person should be permitted to vote for or against any resolution in accordance with a special proxy, whether or not that vote is to the person's financial advantage (recommendation 17).

Item 35 replaces existing regulation 5.6.33 with a new regulation 5.6.33 that will not affect special proxies. Under the proposed regulation general proxies will still not be able to be used to vote in favour of any resolution that would directly or indirectly place the person, the person's partner or the person's employer in a position to receive any remuneration out of the assets of the company, except as an ordinary unsecured creditor.

Item [36]: Paragraph 5.6.48(2)(a)

Item 36 removes the incorrect reference to an 'excluded' Territory from paragraph 5.6.48(2)(a) and refer to a 'Territory'. 'Territory' is defined in section 9 of the Corporations Act to include an external Territory.

Item [46] - After regulation 5.6.72

A definition of 'eligible unsecured creditor' is provided for in section 579Q of the Corporations Act. Under paragraph 579Q(1)(b) the regulations are able to extend the definition of 'eligible unsecured creditor' so as to include a creditor as an 'eligible unsecured creditor' for the purposes of the pooling provisions. Under subsection 579Q(2) the regulations are able to exclude a creditor as an 'eligible unsecured creditor' for the purposes of the definition.

Under paragraph 571(1)(d) of the Corporations Act a liquidator has the power to modify the outcome of a pooling determination in certain ways, if they consider it is just and equitable to do so. For the purpose of paragraph 579Q(1)(b), the regulations provide that if, as a result of a modification made under paragraph 571(1)(d), a debt payable by a company or companies in the group to any other company or companies in the group is not extinguished or a claim that a company or companies in the group has against any other company or companies in the group is not extinguished, the debtor or claimant is, for the purposes of pooling, an 'eligible unsecured creditor'.

The regulations also provide that if a Court determines that a creditor is an eligible unsecured creditor, the creditor is specified for the purpose of paragraph 579Q(1)(b). The regulations also provide that if a Court, by order, determines that a creditor is not an eligible unsecured creditor, the creditor will not be an 'eligible unsecured creditor' for the purposes of the definition.

Item 46 inserts regulation 5.6.73 to clarify who is an eligible unsecured creditor for the purposes of pooling. For the purpose of paragraph 579Q(1)(b), subregulation 5.6.73(1) will provide that if, as a result of a modification made under paragraph 571(1)(d), a debt payable by a company or companies in the group to any other company or companies in the group is not extinguished or a claim that a company or companies in the group has against any other company or companies in the group is not extinguished, the debtor or claimant is an 'eligible unsecured creditor'.

Subregulation 5.6.73(1) also provides that if a Court determines that a creditor is an eligible unsecured creditor, the creditor is specified for the purpose of paragraph 579Q(1)(b).

Subregulation 5.6.73(2) provides that if a Court, by order, determines that a creditor is not an eligible unsecured creditor, the creditor is specified for the purpose of paragraph 579Q(2).

Item [47] - Subparagraphs 9.1.02(a)(vii), (d)(vii) and (e)(viii)

Item 47 replacess obsolete references in subparagraphs 9.1.02(a)(vii), (d)(vii) and (e)(viii) to 'placement under official management' with references to 'placement under voluntary administration or a deed of company arrangement'.

Item [48] - Regulation 9.2.04

Subparagraph 1282(2)(a)(i) of the Corporations Act provides that one criteria that must be satisfied for ASIC to register a liquidator is that the applicant is a member of the Institute of Chartered Accountants in Australia, CPA Australia or any other prescribed body. This provision will be repealed by the Corporations Amendment (Insolvency) Act 2007. Regulation 9.2.04 currently contains a Table of prescribed bodies for the purposes of subparagraph 1282(2)(a)(i) of the Corporations Act. Item 48 will omit regulation 9.2.04.

Item [49] - Schedule 2, Form 509H

Under section 459E(1) of the Corporations Act, a person may serve a statutory demand on a company relating to a single debt that the company owes to the person, which is due and payable and whose amount is at least the statutory minimum; or two or more debts that the company owes to the person, that are due and payable and whose amounts total at least the statutory minimum. Form 509H, 'Creditor's statutory demand for payment of debt', is the prescribed form for a statutory demand for the purposes of paragraph 459E(2)(e).

Failure to comply with a statutory demand can have serious consequences for a company, including potentially being wound up in insolvency. Each year applications to a court for termination of windings up are made in circumstances where the company is solvent, but the statutory demand was either not brought to the attention of the relevant officers or its significance was not recognised.

Form 509H will be amended so that there is a clear warning on its face stating that a failure to respond to a statutory demand can have very serious consequences for a company.

Item 49 replaces the current Form 509H with a new form that contains a boxed, bold warning noting the seriousness of the consequences for a company of a failure to respond to the demand, including liquidation and the passing of control to a liquidator. Subregulation 4(2) permits the current form of statutory demand to be used concurrently with the new form for 12 months after the commencement of the regulations.

Item [50] - Schedule 2, Form 529

Form 529 is the prescribed form for notice of a meeting: subregulation 5.6.12(6). In the form the type of meetings for which Form 529 may be used refers to the obsolete procedure of official management and makes no reference to meetings in a voluntary administration. Item 50 deletes

"(f) members and creditors in relation to an official management under subsection 433(1)" and substitute "(f) creditors of company under administration apart from section 436E" and "(g) creditors of company under a deed of company arrangement".

Item [51] - Schedule 2, Form 531B

Item 51 amends the title of Form 531B so that it extends to meetings of eligible employee creditors.

Item [52] - Schedule 8A, clause 4

The person who is to be the administrator of a deed of company arrangement must prepare an instrument setting out its terms. The deed is taken to include prescribed provisions which are set out in schedule 8A of the Principal Regulations. It is not mandatory to include these provisions in every deed. The deed may provide otherwise.

Clause 4 of Schedule 8A requires the administrator of the deed to apply the property of the company in the order of priority specified in section 556 of the Corporations Act. Item 50 amends clause 4 to refer to sections 560 and 561 as well as section 556. This will ensure consistency with new subsection 444DA(1) inserted by the Corporations Amendment (Insolvency) Act 2007.

Item [53] - Schedule 8A, clauses 8 and 9

The person who is to be the administrator of a deed of company arrangement must prepare an instrument setting out its terms. The deed is taken to include prescribed provisions which are set out in schedule 8A of the Principal Regulations. It is not mandatory to include these provisions in every deed. The deed may provide otherwise.

Clause 8 of Schedule 8A applies to deeds of company arrangement certain Corporations Act provisions dealing with proof and ranking of claims in a winding up. It provides that references to the liquidator in these provisions are to be read as references to the deed administrator. Clause 8 is limiting in that it does not state that the winding up provisions are to apply with whatever modifications are necessary to apply the relevant provisions. It does not adapt the winding up provisions for deeds of company arrangement (for instance, by specifying a date to be the equivalent of the "relevant date" in a winding up). It makes no reference to the regulations that deal with proof of debt procedures in a liquidation (Regulations 5.6.39-5.6.57).

Clause 8 is amended so that it allows for the making of whatever modifications may be necessary to apply the specified provisions, to clarify that a reference to "the relevant date" means a reference to the date of the administrator's appointment and to refer to the regulations which deal with proof of debt procedures in a liquidation.

Clause 9 of Schedule 8A is deleted. It duplicates regulation 5.3A.06. The regulations that apply generally to meetings of creditors in insolvency administrations also apply to meetings of creditors under a deed of company arrangement.

Item [54] - Schedule 8A, clause 10

The person who is to be the administrator of a deed of company arrangement must prepare an instrument setting out its terms. The deed is taken to include prescribed provisions which are set out in schedule 8A of the Principal Regulations. It is not mandatory to include these provisions in every deed. The deed may provide otherwise.

Clause 10 applies certain Corporations Act provisions regarding the lodging of accounts to deed administrators. Item 54 deletes the reference to section 432 in clause 10 as new section 445J, inserted by the Corporations Amendment (Insolvency) Act 2007, addresses this matter.

Item [55] - Schedule 8A, clause 11

The person who is to be the administrator of a deed of company arrangement must prepare an instrument setting out its terms. The deed is taken to include prescribed provisions which are set out in schedule 8A of the Principal Regulations. It is not mandatory to include these provisions in every deed. The deed may provide otherwise.

Clause 11 of Schedule 8A sets out rules for a committee of inspection that may be appointed to advise and assist the deed administrator. Item 55 will amend clause 11 to allow for, but not require, a committee of inspection. A committee of inspection is not mandatory and is only necessary in large and complex administrations.

Item [56] - Schedule 9, item 27

Regulation 7.11.02 states that each body corporate listed in Schedule 9 is declared to be an authorised trustee corporation for the purpose of a provision in which the expression appears. Item 56 will recognise the change of name of a body corporate in Schedule 9.

Item [57] - Further amendments

Part 5.3A and Part 5.6 of the Corporations Regulations use different terminology for establishing periods or dates in the course of a voluntary administration, namely 'business days' and 'days'. It would be simpler if a consistent terminology were adopted.

Amendments inserted by the Corporations Amendment (Insolvency) Act 2007 convert references to 'days' to 'business days' in Part 5.3A and 5.6 of the Corporations Act. All references in Part 5.3A and some references in Part 5.6 to 'days' are changed to 'business days'. The changes are only intended to operate in respect of the voluntary administration procedure.

Item 57 makes the following amendments to regulations referring to time periods expressed in 'days' as follows:

•

5.3A.07(5)(a) and 5.6.14(2) - '7 days' will become '5 business days';

•

5.3A.04, 5.6.12(3), 5.6.12(4), 5.6.12(5), 5.6.26(3) and 5.6.27(7)(b) - '14 days' will become '10 business days';

•

5.3A.07(5)(b) - '21 days' will become '15 business days'; and

•

5.6.18(2) - '60 days' will become '45 business days'.

Subregulation 4(1) provides that the amendments do not affect administrations and liquidations that began before the commencement of these regulations.