Corporations Act 2001

CHAPTER 5 - EXTERNAL ADMINISTRATION  

PART 5.4 - WINDING UP IN INSOLVENCY  

Note: This Part applies to a sub-fund of a CCIV in a modified form: see Division 5 of Part 8B.6 .

Division 1 - When company to be wound up in insolvency  

SECTION 459A  

459A   ORDER THAT INSOLVENT COMPANY BE WOUND UP IN INSOLVENCY  
On an application under section 459P, the Court may order that an insolvent company be wound up in insolvency.

SECTION 459B  

459B   ORDER MADE ON APPLICATION UNDER SECTION 234, 462 OR 464  
Where, on an application under section 234, 462 or 464, the Court is satisfied that the company is insolvent, the Court may order that the company be wound up in insolvency.

SECTION 459C   PRESUMPTIONS TO BE MADE IN CERTAIN PROCEEDINGS  

459C(1)    
This section has effect for the purposes of:

(a) an application under section 234 , 459P , 462 or 464 ; or

(b) an application for leave to make an application under section 459P.

459C(2)    
The Court must presume that the company is insolvent if, during or after the 3 months ending on the day when the application was made:

(a) the company failed (as defined by section 459F ) to comply with a statutory demand; or

(b) execution or other process issued on a judgment, decree or order of an Australian court in favour of a creditor of the company was returned wholly or partly unsatisfied; or

(c) a receiver, or receiver and manager, of property of the company was appointed under a power contained in an instrument relating to a circulating security interest in such property; or

(d) an order was made for the appointment of such a receiver, or receiver and manager, for the purpose of enforcing such a security interest; or

(e) a person entered into possession, or assumed control, of such property for such a purpose; or

(f) a person was appointed so to enter into possession or assume control (whether as agent for the secured party or for the company).

459C(3)    
A presumption for which this section provides operates except so far as the contrary is proved for the purposes of the application.

SECTION 459D   CONTINGENT OR PROSPECTIVE LIABILITY RELEVANT TO WHETHER COMPANY SOLVENT  

459D(1)   [ Contingent or prospective liability]  

In determining, for the purposes of an application of a kind referred to in subsection 459C(1), whether or not the company is solvent, the Court may take into account a contingent or prospective liability of the company.

459D(2)   [ Other matters may be taken into account]  

Subsection (1) does not limit the matters that may be taken into account in determining, for a particular purpose, whether or not a company is solvent.

Division 2 - Statutory demand  

SECTION 459E   CREDITOR MAY SERVE STATUTORY DEMAND ON COMPANY  

459E(1)    
A person may serve on a company a demand relating to:

(a)    a single debt that the company owes to the person, that is due and payable and whose amount is at least the statutory minimum; or

(b)    2 or more debts that the company owes to the person, that are due and payable and whose amounts total at least the statutory minimum.

459E(2)    
The demand:

(a)    if it relates to a single debt - must specify the debt and its amount; and

(b)    if it relates to 2 or more debts - must specify the total of the amounts of the debts; and

(c)    

must require the company to pay the amount of the debt, or the total of the amounts of the debts, or to secure or compound for that amount or total to the creditor ' s reasonable satisfaction, within the statutory period after the demand is served on the company; and

(d)    must be in writing; and

(e)    must be in the prescribed form (if any); and

(f)    must be signed by or on behalf of the creditor.

459E(3)    
Unless the debt, or each of the debts, is a judgment debt, the demand must be accompanied by an affidavit that:

(a)    verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and

(b)    

complies with the rules of court.

459E(4)    
A person may make a demand under this section relating to a debt even if the debt is owed to the person as assignee.

459E(5)    
A demand under this section may relate to a liability under any of the following provisions of the Income Tax Assessment Act 1936 :

(aa)    

former section 220AAE, 220AAM or 220AAR;

(a)    

former section 221F (except subsection 221F(12)), former section 221G (except subsection 221G(4A)) or former section 221P;

(b)    

former subsection 221YHDC(2);

(c)    

former subsection 221YHZD(1) or (1A);

(d)    

former subsection 221YN(1);

(e)    section 222AHA;

and any of the provisions of Subdivision 16-B in Schedule 1 to the Taxation Administration Act 1953 , even if the liability arose before 1 January 1991.

459E(6)    
Subsection (5) is to avoid doubt and is not intended to limit the generality of a reference in this Act to a debt.

SECTION 459F   WHEN COMPANY TAKEN TO FAIL TO COMPLY WITH STATUTORY DEMAND  

459F(1)    
If, as at the end of the period for compliance with a statutory demand, the demand is still in effect and the company has not complied with it, the company is taken to fail to comply with the demand at the end of that period.

459F(2)    
The period for compliance with a statutory demand is:

(a) if the company applies in accordance with section 459G for an order setting aside the demand:

(i) if, on hearing the application under section 459G , or on an application by the company under this paragraph, the Court makes an order that extends the period for compliance with the demand - the period specified in the order, or in the last such order, as the case requires, as the period for such compliance; or

(ii) otherwise - the period beginning on the day when the demand is served and ending 7 days after the application under section 459G is finally determined or otherwise disposed of; or

(b) otherwise - the statutory period after the demand is served.

Division 3 - Application to set aside statutory demand  

SECTION 459G   COMPANY MAY APPLY  

459G(1)    
A company may apply to the Court for an order setting aside a statutory demand served on the company.

459G(2)    

An application may only be made within the statutory period after the demand is so served.

459G(3)    

An application is made in accordance with this section only if, within that period:

(a) an affidavit supporting the application is filed with the Court; and

(b) a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company.

SECTION 459H   DETERMINATION OF APPLICATION WHERE THERE IS A DISPUTE OR OFFSETTING CLAIM  

459H(1)   [ Court satisfied of dispute or offsetting claim]  

This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:

(a) that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;

(b) that the company has an offsetting claim.

459H(2)   [ Calculation of substantiated amount]  

The Court must calculate the substantiated amount of the demand in accordance with the formula:

Admitted total − Offsetting total

where:

admitted total
means:

(a) the admitted amount of the debt; or

(b) the total of the respective admitted amounts of the debts;

as the case requires, to which the demand relates.

offsetting total
means:

(a) if the Court is satisfied that the company has only one offsetting claim - the amount of that claim; or

(b) if the Court is satisfied that the company has 2 or more offsetting claims - the total of the amounts of those claims; or

(c) otherwise - a nil amount.

459H(3)   [ Substantiated amount less than statutory minimum]  

If the substantiated amount is less than the statutory minimum, the Court must, by order, set aside the demand.

459H(4)   [ Substantiated amount equal to or greater than statutory minimum]  

If the substantiated amount is at least as great as the statutory minimum, the Court may make an order:

(a) varying the demand as specified in the order; and

(b) declaring the demand to have had effect, as so varied, as from when the demand was served on the company.

459H(5)   [ Definitions]  

In this section:

admitted amount
, in relation to a debt, means:

(a) if the Court is satisfied that there is a genuine dispute between the company and the respondent about the existence of the debt - a nil amount; or

(b) if the Court is satisfied that there is a genuine dispute between the company and the respondent about the amount of the debt - so much of that amount as the Court is satisfied is not the subject of such a dispute; or

(c) otherwise - the amount of the debt.

offsetting claim
means a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates).

respondent
means the person who served the demand on the company.

459H(6)   [ Paramountcy]  

This section has effect subject to section 459J.

SECTION 459J   SETTING ASIDE DEMAND ON OTHER GROUNDS  

459J(1)   [ Defect or other reason]  

On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:

(a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or

(b) there is some other reason why the demand should be set aside.

459J(2)   [ Mere defect]  

Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect.

SECTION 459K  

459K   EFFECT OF ORDER SETTING ASIDE DEMAND  
A statutory demand has no effect while there is in force under section 459H or 459J an order setting aside the demand.

SECTION 459L  

459L   DISMISSAL OF APPLICATION  
Unless the Court makes, on an application under section 459J, an order under section 459H or 459J, the Court is to dismiss the application.

SECTION 459M  

459M   ORDER SUBJECT TO CONDITIONS  
An order under section 459H or 459J may be made subject to conditions.

SECTION 459N  

459N   COSTS WHERE COMPANY SUCCESSFUL  
Where, on an application under section 459G, the Court sets aside the demand, it may order the person who served the demand to pay the company's costs in relation to the application.

Division 4 - Application for order to wind up company in insolvency  

SECTION 459P   WHO MAY APPLY FOR ORDER UNDER SECTION 459A  

459P(1)    
Any one or more of the following may apply to the Court for a company to be wound up in insolvency:

(a)    the company;

(b)    a creditor (even if the creditor is a secured creditor or is only a contingent or prospective creditor);

(c)    a contributory;

(d)    a director;

(e)    a liquidator or provisional liquidator of the company;

(f)    ASIC;

(g)    a prescribed agency.

Note: The Reserve Bank may also apply under this section to the Court for an order if a condition in section 831A is satisfied in relation to a CS facility licensee: see section 849AA .

459P(2)    
An application by any of the following, or by persons including any of the following, may only be made with the leave of the Court:

(a)    a person who is a creditor only because of a contingent or prospective debt;

(b)    a contributory;

(c)    a director;

(d)    ASIC.

459P(3)    
The Court may give leave if satisfied that there is a prima facie case that the company is insolvent, but not otherwise.

459P(4)    
The Court may give leave subject to conditions.

459P(5)    
Except as permitted by this section, a person cannot apply for a company to be wound up in insolvency.

SECTION 459Q  

459Q   APPLICATION RELYING ON FAILURE TO COMPLY WITH STATUTORY DEMAND  
If an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the application:

(a)    must set out particulars of service of the demand on the company and of the failure to comply with the demand; and

(b)    must have attached to it:

(i) a copy of the demand; and

(ii) if the demand has been varied by an order under subsection 459H(4) - a copy of the order; and

(c)    

unless the debt, or each of the debts, to which the demand relates is a judgment debt - must be accompanied by an affidavit that:

(i) verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and

(ii) complies with the rules of court.

SECTION 459R   PERIOD WITHIN WHICH APPLICATION MUST BE DETERMINED  

459R(1)   [ Time limit]  

An application for a company to be wound up in insolvency is to be determined within 6 months after it is made.

459R(2)   [ Extension of period]  

The Court may by order extend the period within which an application must be determined, but only if:

(a) the Court is satisfied that special circumstances justify the extension; and

(b) the order is made within that period as prescribed by subsection (1), or as last extended under this subsection, as the case requires.

459R(3)   [ Application automatically dismissed]  

An application is, because of this subsection, dismissed if it is not determined as required by this section.

459R(4)   [ Order subject to conditions]  

An order under subsection (2) may be made subject to conditions.

SECTION 459S   COMPANY MAY NOT OPPOSE APPLICATION ON CERTAIN GROUNDS  

459S(1)   [ Demand may not ground opposition]  

In so far as an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the company may not, without the leave of the Court, oppose the application on a ground:

(a) that the company relied on for the purposes of an application by it for the demand to be set aside; or

(b) that the company could have so relied on, but did not so rely on (whether it made such an application or not).

459S(2)   [ Ground material to solvency]  

The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent.

SECTION 459T   APPLICATION TO WIND UP JOINT DEBTORS IN INSOLVENCY  

459T(1)   [ Joint debtors]  

A single application may be made for 2 or more companies to be wound up in insolvency if they are joint debtors, whether partners or not.

459T(2)   [ Joint debtor application may be split]  

On such an application, the Court may order that one or more of the companies be wound up in insolvency, even if it dismisses the application in so far as it relates to another or others.