Corporations Act 2001

CHAPTER 2L - DEBENTURES  

PART 2L.2 - DUTIES OF BORROWER  

SECTION 283BA  

283BA   DUTIES OF BORROWER  
A borrower that is required to enter into a trust deed under section 283AA has the duties imposed by this Part.

SECTION 283BB  

283BB   GENERAL DUTIES  
The borrower must:

(a) carry on and conduct its business in a proper and efficient manner; and

(b) provide a copy of the trust deed to:

(i) a debenture holder; or

(ii) the trustee;

if they request a copy; and

(c) make all of its financial and other records available for inspection by:

(i) the trustee; or

(ii) an officer or employee of the trustee authorised by the trustee to carry out the inspection; or

(iii) a registered company auditor appointed by the trustee to carry out the inspection;

and give them any information, explanations or other assistance that they require about matters relating to those records.

Note: The borrower also has a duty to call a meeting of debenture holders in certain circumstances (see section 283EA).

SECTION 283BC   DUTY TO NOTIFY ASIC OF INFORMATION RELATED TO TRUSTEE  

283BC(1)    
Within 14 days after the trustee is appointed, the borrower must lodge with ASIC a notice containing the following information:

(a)    the name of the trustee;

(b)    any other information related to the trustee or the debentures that is prescribed by the regulations.

283BC(2)    
If there is any change to the information, the borrower must, within 14 days of the change, lodge with ASIC a notice containing the changed information.

283BC(3)    
A notice under subsection (1) or (2) must be in the prescribed form.

SECTION 283BCA   REGISTER RELATING TO TRUSTEES FOR DEBENTURE HOLDERS  

The register

283BCA(1)    
ASIC must establish and maintain a register relating to trustees for debenture holders.

283BCA(2)    
The regulations may prescribe the way in which the register must be established or maintained, including the details that ASIC must enter in the register.

Inspection of register

283BCA(3)    
A person may inspect the register, and may make copies of, or take extracts from, the register.

283BCA(4)    
The regulations may prescribe the fees that a person must pay ASIC to do the things mentioned in subsection (3) .

283BCA(5)    
Any disclosure necessary for the purposes of this section is authorised by this section.

SECTION 283BD  

283BD   DUTY TO REPLACE TRUSTEE  
The borrower must take all reasonable steps to replace the trustee under section 283AE as soon as practicable after the borrower becomes aware that the trustee:

(a) has ceased to exist; or

(b) has not been validly appointed; or

(c) cannot be a trustee under section 283AC; or

(d) has failed or refused to act as trustee.

SECTION 283BE  

283BE   DUTY TO INFORM TRUSTEE ABOUT SECURITY INTERESTS  

If the borrower creates a security interest, it must:

(a) give the trustee written details of the security interest within 21 days after it is created; and

(b) if the total amount to be advanced on the security of the security interest is indeterminate and the advances are not merged in a current account with bankers, trade creditors or anyone else - give the trustee written details of the amount of each advance within 7 days after it is made.

Note: If the advances are merged in a current account the borrower must give the trustee the details in the quarterly report (see subsection 283BF(4) ).

SECTION 283BF   DUTY TO GIVE TRUSTEE AND ASIC QUARTERLY REPORTS  

Quarterly reports

283BF(1)    
Within 1 month after the end of each quarter, the borrower must:

(a)    give the trustee a quarterly report that sets out the information required by subsections (4) , (5) and (6) ; and

(b)    lodge a copy of the report with ASIC (see section 351 ).

First quarter

283BF(2)    
The first quarter is the period of 3 months ending on a day fixed by the borrower, by written notice to the trustee. The day must be less than 6 months after the first issue of a debenture under the trust deed.

Subsequent quarters

283BF(3)    
Each of the subsequent quarters are periods of 3 months. The trustee may allow a particular quarter to be a period of less than 3 months if the trustee is satisfied that special circumstances justify doing so.

Content of quarterly report

283BF(4)    
The report for a quarter must include details of:

(a)    any failure by the borrower and each guarantor to comply with the terms of the debentures or the provisions of the trust deed or this Chapter during the quarter; and

(b)    any event that has happened during the quarter that has caused, or could cause, 1 or more of the following:

(i) any amount deposited or lent under the debentures to become immediately payable;

(ii) the debentures to become immediately enforceable;

(iii) any other right or remedy under the terms of the debenture or provisions of the trust deed to become immediately enforceable; and

(c)    

any circumstances that have occurred during the quarter that materially prejudice:

(i) the borrower, any of its subsidiaries, or any of the guarantors; or

(ii) any security interest included in or created by the debentures or the trust deed; and

(d)    any substantial change in the nature of the business of the borrower, any of its subsidiaries, or any of the guarantors that has occurred during the quarter; and

(e)    any of the following events that happened in the quarter:

(i) the appointment of a guarantor;

(ii) the cessation of liability of a guarantor body for the payment of the whole or part of the money for which it was liable under the guarantee;

(iii) a change of name of a guarantor (if this happens, the report must also disclose the guarantor ' s new name); and

(f)    

the net amount outstanding on any advances at the end of the quarter if the borrower has created a security interest where:

(i) the total amount to be advanced on the security of the security interest is indeterminate; and

(ii) the advances are merged in a current account with bankers, trade creditors or anyone else; and

(g)    

any other matters that may materially prejudice any security interests or other interests of the debenture holders.

Note: Paragraph (f) - the borrower has a duty to inform the trustee about security interests as they are created (see section 283BE ).

283BF(5)    
If the borrower has deposited money with, or lent money to, a related body corporate during the quarter, the report must also include details of:

(a)    the total of the money deposited with, or lent to, the related body corporate during the quarter (see subsection (7) ); and

(b)    the total amount of money owing to the borrower at the end of the quarter in respect of the deposits or loans to the related body corporate.

Disregard any amount that the borrower deposits with an ADI in the normal course of the borrower ' s business.

283BF(6)    
If the borrower has assumed a liability of a related body corporate during the quarter, the report must also include details of the extent of the liability assumed during the quarter and the extent of the liability as at the end of the quarter.

283BF(7)    
For the purposes of subsections (5) and (6) , the report:

(a)    must distinguish between deposits, loans and assumptions of liability that are secured and those that are unsecured; and

(b)    

may exclude any deposit, loan or assumption of liability on behalf of the related body corporate if ithas:

(i) guaranteed the repayment of the debentures of the borrower; and

(ii) secured the guarantee by a security interest over all of its property in favour of the trustee.

Formalities

283BF(8)    
The report must:

(a)    be made in accordance with a resolution of the directors; and

(b)    specify the date on which the report is made.

SECTION 283BG  

283BG   EXCEPTIONS TO BORROWER ' S DUTY TO REPORT TO TRUSTEE AND ASIC  

Section 283BF does not apply in respect of:

(a)    a borrower, while:

(i) it is under external administration; or

(ii) a receiver, or a receiver and manager, of property of the borrower has been appointed and has not ceased to act under that appointment; or

(b)    a security interest in PPSA retention of title property.

SECTION 283BH   HOW DEBENTURES MAY BE DESCRIBED  

283BH(1)    

The borrower may describe or refer to the debentures in:

(a)    any disclosure in relation to the offer of the debentures; or

(b)    any other document constituting or relating to the offer of the debentures; or

(c)    the debentures themselves;

only in accordance with the following table:

How debentures may be described

How debentures may be described

How debentures may be described
Item	Description	When description may be used
1	mortgage debenture	only if the circumstances set out in subsection (2) are satisfied
2	debenture	only if the circumstances set out in subsection (2) or (3) are satisfied
2A	secured note	only if: (a) the circumstances set out in subsection (4) are satisfied; and (b) in a case described in subsection 283BHA(1) , (2) or (3) - the requirements set out in that subsection are satisfied
3	unsecured note or unsecured deposit note	in any other case

283BH(1A)    

The borrower commits an offence if it intentionally or recklessly contravenes subsection (1) .

When debentures can be called mortgage debentures or debentures

283BH(2)    
The borrower may describe or refer to the debentures as:

(a)    mortgage debentures; or

(b)    debentures;

if:

(c)    the repayment of all money that has been, or may be, deposited or lent under the debentures is secured by a first mortgage given to the trustee over land vested in the borrower or in any of the guarantors; and

(d)    the mortgage has been registered, or is a registrable mortgage that has been lodged for registration, in accordance with the law relating to the registration of mortgages of land in the place where the land is situated; and

(e)    the total amount of that money and of all other liabilities (if any) secured by the mortgage of that land ranking equally with the liability to repay that money does not exceed 60% of the value of the borrower ' s or guarantor ' s interest in that land as shown in the valuation included in the disclosure document for the debentures.

When debentures can be called debentures

283BH(3)    
The borrower may describe or refer to the debentures as debentures if:

(a)    

the repayment of all money that has been, or may be, deposited or lent under the debentures has been secured by a security interest in favour of the trustee over the whole or any part of the tangible property of the borrower or of any of the guarantors; and

(b)    

the tangible property that constitutes the security for the security interest is sufficient and is reasonably likely to be sufficient to meet the liability for the repayment of all such money and all other liabilities that:

(i) have been or may be incurred; and

(ii) rank in priority to, or equally with, that liability.

When debentures can be called secured notes

283BH(4)    

The borrower may describe or refer to the debentures as secured notes if:

(a)    the repayment of all money that has been, or may be, deposited or lent under the debentures has been secured by a first ranking security interest in favour of the trustee over the whole or any part of the property of the borrower or of any of the guarantors; and

(b)    the property that constitutes the security for the security interest is sufficient and is reasonably likely to be sufficient to meet the liability for the repayment of all such money and all other liabilities that:

(i) have been or may be incurred; and

(ii) rank in priority to, or equally with, that liability.

SECTION 283BHA   ADDITIONAL REQUIREMENTS FOR DESCRIBING DEBENTURES AS SECURED NOTES  
Advertisements and publications

283BHA(1)    
If the borrower proposes to describe or refer to the debentures as secured notes in an advertisement or publication in relation to the offer, or intended offer, of debentures that requires a disclosure document - the borrower must ensure that the advertisement or publication includes:

(a)    a statement that the secured notes are not bank deposits; and

(b)    a statement that there is a risk that investors could lose some or all of their money.

Disclosure documents and quarterly reports

283BHA(2)    
If the borrower proposes to describe or refer to the debentures as secured notes in a disclosure document or in a quarterly report prepared under section 283BF - the borrower must ensure that the disclosure document or quarterly report includes statements of the following:

(a)    key features of the security interest, including:

(i) that the security interest is first ranking; and

(ii) the type of security interest; and

(iii) the identity of the person providing the security interest; and

(iv) the property constituting the security for the security interest;

(b)    that, in the borrower ' s assessment, the property that constitutes the security for the security interest is sufficient and is reasonably likely to be sufficient to meet the liabilities referred to in paragraph 283BH(4)(b) ;

(c)    if the value of the property that constitutes the security for the security interest may be affected by the financial position or performance of a related body corporate or related party of the borrower - that fact.

Borrower ' s website

283BHA(3)    
If the borrower describes or refers to the debentures as secured notes on its website - the borrower must ensure that the reports, documents and notices mentioned in an item of the following table are published on the borrower ' s website in the period specified in that item:

Publication requirements
Item	Document, report or notice	Period for publication
1	The most recent quarterly report prepared in relation to the borrower under section 283BF	As soon as practicable after a copy of the report is required to be lodged with ASIC
2	Each disclosure document (including any replacement or supplementary document) lodged with ASIC in relation to the borrower in the previous 13 months	As soon as practicable after a copy of the document is lodged with ASIC
3	Each continuous disclosure notice required to be lodged with ASIC under section 675 in relation to the borrower in the previous 12 months	As soon as practicable after the notice is required to be lodged with ASIC

283BHA(4)    
In this section:

advertisement or publication
, in relation to an offer, or intended offer, of debentures that requires a disclosure document, means:

(a) an advertisement for the offer or intended offer; or

(b) a publication of a statement that:

(i) directly or indirectly refers to the offer or intended offer; or

(ii) is reasonably likely to induce people to apply for the debentures.

related party
has the meaning given by section 228 .

SECTION 283BI  

283BI   OFFENCES FOR FAILURE TO COMPLY WITH STATUTORY DUTIES  
The borrower commits an offence if it intentionally or recklessly contravenes section 283BB, 283BC, 283BD, 283BE, 283BF or 283EA.