House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Parliamentary Secretary to the Treasurer, the Hon David Bradbury MP)

Chapter 2 - Publication Requirements

Context of amendments

2.1 There are significant costs to the administration of insolvent companies in complying with the current statutory obligations to publish corporate insolvency notices in state and territory, or national newspapers or in the ASIC gazette. In contrast, electronic publication of notices provides a more effective and efficient manner to bring information to the attention of people who may have an interest in the fact that a company has entered into external administration, or that events are occurring in a specific external administration.

2.2 A transition from newspaper notices to electronic publication on a single website administered by ASIC was recommended by the Corporations and Markets Advisory Committee in its 2008 report, Issues in External Administration.

2.3 The amendments to the requirement for the publication of corporate insolvency notices in newspapers were announced by the then Minister for Financial Services, Superannuation and Corporate Law in January 2010. The amendments to the requirement for the gazettal of corporate insolvency notices and the establishment of the corporate insolvency notices website were jointly announced by the Parliamentary Secretary to the Treasurer and the Attorney-General on 14 December 2011.

2.4 Regulations will prescribe a fee for the publication of corporate insolvency notices on a single website administered by ASIC. It is expected that the transfer to electronic publication of notices will result in savings to the industry, as it will replace the current requirement to place advertisements in newspapers and Gazettes.

2.5 This Bill facilitates the prescription of the publication of corporate insolvency notices on the single website.

Summary of new law

2.6 During the course of an external administration there are a range of events that creditors and other stakeholders are required to be made aware of. In addition to obligations to inform known creditors of these events, petitioning creditors and liquidators are required to notify the public so as to provide the highest chance that all interested parties are afforded the opportunity to avail themselves of their rights during an external administration. This public disclosure is currently conducted through advertisements in state-wide or national newspapers of the state or territory in which the administration takes place.

2.7 Public notices are also required to be published in the ASIC gazette in relation to certain events, including: the final meeting of the liquidation; the passing of a company resolution to voluntarily wind up a company; and when ASIC intends to deregister a company.

2.8 The Bill will amend the Corporations Act to repeal these requirements and instead create a regulation making power to facilitate the future provision of all external administration notices via a single website.

2.9 Future amending regulations to the Corporations Regulations will mandate the publication of notices on a single corporate insolvency notices website administered by ASIC.

Comparison of key features of new law and current law

Detailed explanation of new law

2.10 The Bill amends numerous provisions in the Corporations Act that require the publication of notices of events in external administrations. The new law provides that where these notices have previously been required to be:

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caused to be published in newspapers or on the ASIC gazette, that they will now be required to be published in a 'prescribed manner'; or

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published in newspapers or on the ASIC gazette, that they will now be required to be published in a 'prescribed manner'.

2.11 The petitioning creditor or liquidator obligated to publish, or arrange for the publication of, the notice in the circumstances will now be required to lodge the notice with ASIC. Once lodged with ASIC, ASIC must publish the notice in accordance with the amending regulations to be made to the Corporations Regulations.

2.12 The 'prescribed manner' will be determined through regulations to be made to the Corporations Act. A new regulation making power to define the "prescribed manner" is established in the Bill. [Schedule 1, item 26, section 1367A]

2.13 Under existing section 411 of the Corporations Act, a Court may make orders to approve a compromise or arrangement between a company, or other registrable body, and its creditors or members. The Court may also make orders requiring a meeting of the creditors, or members, to be held in order to consider the compromise or arrangement in any way that the Court deems appropriate.

2.14 If a meeting is ordered by the Court under section 411, notice of the time, date and purpose of the meeting is to be published in a newspaper advertisement which includes an explanatory statement setting out the details of the proposed compromise or arrangement, or details of where a copy of the explanatory statement can be viewed.

2.15 The Bill will amend the Corporations Act to provide that in addition to being able to be provided by advertisement, the notice of the section 411 meeting can be published in the prescribed manner. The retention of the ability to advertise notices of meetings in newspapers relating to compromises and arrangements is appropriate as these meetings may not relate to companies in external administration, but rather commercial restructures of solvent companies. [Schedule 1, item 5, paragraph 412(1)(b]

2.16 If an advertisement of a meeting to consider a compromise or arrangement provides that the explanatory statement can be viewed in a particular manner, the explanatory statement must be provided free of charge. This requirement to provide the explanatory statement will apply whether the notice of the meeting is advertised or published in the prescribed manner. [Schedule 1, item 6, subsection 412(4)]

2.17 Part 5.3A of the Corporations Act establishes a scheme for the appointment of a registered liquidator to administer a potentially insolvent company's affairs with a view to executing a deed of company arrangement that maximises the chances of the company continuing in existence or, where this is not possible, to maximise the return to creditors and members of the company. Where a liquidator is appointed to administer a company under Part 5.3A, the liquidator (known as an administrator) must convene an initial meeting of creditors within eight business days.

2.18 Currently, an administrator must cause notice of the meeting of creditors to be published in the print media at least five days prior to the creditors meeting. The Bill amends the Corporations Act to provide that the administrator must cause a notice setting out prescribed information to be published in the prescribed manner. [Schedule 1, item 7, paragraph 436E(3)(b)]

2.19 An administrator is required to convene a meeting of creditors within a period of 20 or 25 business days, as determined by existing subsection 439A(5) of the Corporations Act, of the commencement of the administration. The purpose of the meeting is to provide an opportunity for the creditors to decide whether to: enter into a deed of company arrangement; end the administration by placing the company back in the hands of the directors; or place the company into liquidation.

2.20 To give the best opportunity for all creditors to be aware of the meeting, the administrator must provide written notice to all known creditors, and cause notice of the meeting to be published in a national newspaper. The Bill amends the Corporations Act to provide that rather than this notice being required to be published in the print media, the notice setting out information about the meeting must be published in the prescribed manner. [Schedule 1, item 8, paragraph 439A(3)(b)]

2.21 Where the creditors of a company in administration resolve at the conclusion of the administration to wind up the company, or the company fails to comply with the deed of company arrangement within the statutory timeframe, the company is taken to have passed a special resolution that it be wound up voluntarily. Currently, the liquidator must lodge a notice of the winding up with ASIC and, 15 days after that lodgement, cause notice of the meeting to be published in a national newspaper. The Bill amends the Corporations Act to provide that rather than this notice being published in the print media, the notice setting out prescribed information about the meeting must be published in the prescribed manner. [Schedule 1, item 9, paragraph 446A(5)(b)]

2.22 If an administrator of a company needs to be replaced, the entity or person who appointed the administrator is able to appoint a replacement. Following the appointment of the replacement, a meeting of creditors must be convened to give the creditors as a whole an opportunity to appoint a different liquidator. Notice of the meeting must be given directly to all known creditors, and a notice published in the print media. The Bill amends the Corporations Act to provide that rather than this notice being published in the print media, the notice setting out prescribed information about the meeting must be published in the prescribed manner. [Schedule 1, item 10, paragraph 449C(5)(b)]

2.23 Following an administrator's appointment to a company, the administrator must lodge notice of their appointment with ASIC by the end of the day of their appointment and publish notice of their appointment in the print media within three business days. The Bill amends the Corporations Act to provide that rather than this notice being published in the print media, the notice setting out prescribed information about the meeting must be published in the prescribed manner. [Schedule 1, item 11, paragraph 450A(1)(b)]

2.24 Where an application to wind up a company is made to the Court, the applicant must notify ASIC that the application has been made, serve a copy of the application on the company, and advertise the application in print media in accordance with the relevant Court rules. The Bill amends the Corporations Act to provide that rather than advertise the application as required by the Court rules, that the notice setting out the prescribed information about the application must be published in the prescribed manner. [Schedule 1, item 12, paragraph 465A(c)]

2.25 A company may voluntarily resolve to be wound up upon the passage of a special resolution of the company's members, unless an application for the winding up of the company has been filed, an order for the winding up of the company has been made, or the company is an active trustee company. Where a company so resolves to wind up, it must lodge a copy of the resolution with ASIC within seven days, and publish a notice of the passing of the resolution in the ASIC Gazette within 21 days of the resolution. The Bill amends the Corporations Act to repeal the requirement to publish the gazettal of the notice and replaces it with a requirement to publish the notice setting out prescribed information in the prescribed manner. [Schedule 1, item 13, paragraph 491(2)(b)]

2.26 The liquidator of a company placed into a creditors' voluntary winding up must convene a meeting of the company's creditors within 11 days after the day of the meeting of the company at which the resolution for the winding up of the company was passed. This initial meeting is an opportunity for the creditors to remove the liquidator and appoint a replacement. The liquidator is required to give at least seven days notice of the meeting and send the creditors prescribed information. The liquidator is also required to publish notice of the meeting in a daily state-wide newspaper in each state or territory in which the company is carrying on business, or has in the past two years. The advertisement must be published between 7 and 14 days before the meeting. The Bill amends the Corporations Act to provide that rather than this notice being published in the print media, the liquidator must arrange for the notice setting out the prescribed information about the meeting to be published in the prescribed manner. [Schedule 1, item 14, paragraph 497(2)(d)]

2.27 The creditors in a creditors' voluntary winding up may resolve to adjourn the initial meeting to a day not later than 21 days after the original meeting. If the meeting is adjourned, the company must ensure notice of the new date is published in the print media, unless the adjournment is less than eight days. The Bill amends the Corporations Act to provide that rather than requiring this notice to be published in the print media, the company must publish the notice setting out information about the meeting in the prescribed manner. [Schedule 1, item 15, subsection 498(3)]

2.28 At the completion of a creditors' voluntary winding up, the liquidator must hold a final joint meeting of the creditors and members to give an account of how the liquidation has been conducted and how company property has been disposed of. The liquidator must advertise the details of the final meeting in the ASIC gazette at least one month before the meeting. The Bill amends the Corporations Act to provide that rather than the notice being gazetted, the notice must be published in the prescribed manner. [Schedule 1, item 16, subsection 509(2)]

2.29 A liquidator of a company may disclaim certain types of company property. Where the liquidator seeks to disclaim property that he or she suspects other persons may have an interest in, and the liquidator is unable to notify the potentially interested person, the liquidator must ensure notice of the disclaimer is published in the print media. The Bill amends the Corporations Act to provide that rather than requiring this notice to be published in the print media, the company must publish the notice setting out information about the meeting in the prescribed manner. [Schedule 1, item 17, subsection 568A(2)]

2.30 Part 5.8 of the Corporations Act sets out a range of offences for company officers relating to companies that have entered into external administration, a compromise or arrangement with the creditors of a company, or have ceased to carry on business. For the purposes of Part 5.8 of the Corporations Act, a company is taken to have ceased to carry on business where ASIC has gazetted a notice of deregistration of the company and two months have passed since the notice was published. As the Bill amends the publication requirements for the deregistration of companies to no longer be published in the gazette, but rather in the prescribed manner, the definition of ceased to carry on business in Part 5.8 is amended in line with the new publication requirements. [Schedule 1, item 18, paragraph 589(3)(a)]

2.31 ASIC may deregister a company if an application for deregistration is made by the company, a director or member of the company, or a liquidator of the company. If ASIC decides to deregister the company, ASIC must give notice of the proposed deregistration on the ASIC database and in the gazette. After two months have passed, ASIC may deregister the company. The Corporations Act will be amended so that ASIC will be required to given notice of the deregistration on the database and publish the notice of the proposed deregistration in the prescribed manner. [Schedule 1, item 19, paragraph 601AA(4)]

2.32 ASIC may initiate the deregistration of a company where a company has ignored notices sent to it by the regulator, has not lodged any documents with the regulator, and ASIC has no reason to believe the company is carrying on business. Where ASIC seeks to deregister a company on its own initiative, it must gazette its intentions to deregister the company. The Bill replaces the current requirement to gazette the notice with a requirement to publish the notice of the deregistration in the prescribed manner. [Schedule 1, item 21, subsection 601AB(3)]

2.33 Subsection 601AB(4), subsection 601AB(5), and subparagraph 1351(4)(a)(i) will be amended to reflect the change in paragraph numbers as a result of other amendments in the Bill. [Schedule 1, item 22, subsection 601AB(4); Schedule 1, item 23, subsection 601AB(5); Schedule 1, item 24, subparagraph 1351(4)(a)(i)]

2.34 The heading for section 601AB(1) mistakenly refers to 'the ASIC' rather than ASIC. The Bill will amend the heading of section 601AB(1) to refer to 'ASIC' only. [Schedule 1, item 20, subsection 601AB(1)]

2.35 Part 9.10 of the Corporations Act sets out circumstances when fees are, and are not, payable to the Commonwealth. A deregistered company is not required to pay its review fee where the publication of the company's deregistration in the ASIC gazette falls around the review date for the company. As this Bill replaces the requirement to publish in the gazette with a requirement to publish in a prescribed manner, subparagraph 1351(4)(a)(ii) will be amended to make appropriate reference to that form of publication. [Schedule 1, item 25, subparagraph 1351(4)(a)(ii)]

Application and transitional provisions

2.36 The provisions will apply to events that occur after the commencement of Schedule 1 of the Bill.