House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Small Business, Assistant Treasurer, the Hon Kelly O'Dwyer MP and the Attorney-General, the Hon Senator George Brandis)

Chapter 2 - Registration and disciplining registered trustees

Outline of chapter

2.1 The Insolvency Practice Schedule (Bankruptcy) introduces new rules relating to the registration, regulation, discipline and deregistration of registered trustees. These rules will be common (with some exceptions) with the corresponding rules in relation to registered liquidators which are introduced by the Insolvency Practice Schedule (Corporations).

2.2 The new rules regarding the registration and discipline of registered trustees are based on the existing framework for the registration and discipline of registered trustees under the Bankruptcy Act and the Bankruptcy Regulations.

Context of amendments

2.3 The regulation of insolvency practitioners, particularly corporate insolvency practitioners, has been the subject of a number of reviews in the past two decades by a range of bodies including the Australian Law Reform Commission; the Working Party to review the regulation of corporate insolvency practitioners; the Parliamentary Joint Committee on Corporations and Financial Services; and most recently the Senate Economics References Committee (Senate Committee) in 2010.

2.4 The 2010 Senate Inquiry was particularly concerned with the high profile cases of misconduct by members of the corporate insolvency industry before 2009 and the questions that this raised for the adequacy of efforts to oversee and regulate the insolvency system. In the period following the 2010 Senate Report confidence in the insolvency profession has not recovered.

2.5 The 2010 Senate Inquiry was particularly concerned with the high profile cases of misconduct by members of the corporate insolvency industry before 2009 and the questions that this raised for the adequacy of efforts to oversee and regulate the insolvency system. In the period following the 2010 Senate Report confidence in the insolvency profession has not recovered.

2.6 The insolvency profession must be skilled, honest and accountable in order for the insolvency regime to operate efficiently. Creditors and stakeholders are often unable to tell how the overall result of a liquidation or administration corresponded to the quality of the service provided by the insolvency practitioner and whether the costs incurred are reasonable. They must therefore be able to place a high degree of trust in the insolvency practitioner's integrity. Regulation that promotes a high level of professionalism and competence of insolvency practitioners is therefore essential to retaining confidence in the insolvency system as a whole.

2.7 Australia has always had separate personal and corporate insolvency systems. This includes separate laws, regulators, agencies responsible for policy development, and ministerial responsibility. The Senate Inquiry Report highlighted the current divergence between the regulatory systems for corporate and personal insolvency and expressed a desire for greater harmonisation of the two.

2.8 The Government has not accepted the Senate Committee recommendation that the corporate insolvency arm of ASIC be transferred to AFSA to form a new personal and corporate insolvency regulator. The Government has, however, recognised that providing for greater alignment of the laws that govern insolvency administration and insolvency practitioner regulation would benefit insolvency practitioners, creditors, shareholders, regulators and other stakeholders.

Summary of new law

2.9 The Schedule introduces a new framework in relation to the regulation of registered trustees:

•

applications to the Inspector-General to be registered as a trustee;

•

the referral of an application by the Inspector-General to a committee for consideration which will assess the application against specified criteria;

•

the registration of the applicant by the Inspector-General (in the event their application is successful), which may be subject to conditions;

•

a requirement that a registered trustee lodge an annual return with the Inspector-General;

•

a requirement that a registered trustee must give the Inspector-General notice if the person's circumstances change or if certain specified events occur;

•

the Inspector-General's powers in circumstances where a registered trustee fails to lodge a document or give information;

•

the Inspector-General's powers to suspend or cancel a registered trustee's registration in certain circumstances;

•

the Inspector-General's powers to give a show-cause notice and if no sufficient explanation is given, the Inspector-General can refer the matter to a committee to determine what action should be taken;

•

Inspector-General's powers to take further disciplinary action on the decision of a committee;

•

a committee's powers to take disciplinary action and the Inspector-General's obligation to give effect to the committee's decision;

•

a right given to prescribed industry bodies to notify the Inspector-General where they suspect there are grounds for disciplinary action to be taken against a registered trustee.

2.10 The Schedules create new strict liability offences and retain strict liability offences existing in the Bankruptcy Act and the Corporations Act. It is worth noting from the outset that the application of strict liability, as opposed to absolute liability, preserves the defence of honest and reasonable mistake of fact to be proved by the accused on the balance of probabilities. This defence maintains adequate checks and balances for individuals who may be accused of breaching such offences.

2.11 Strict liability offences are appropriate in this area of commercial regulation, as it is necessary to strongly deter misconduct that can have serious consequences for affected parties. Strict liability offences also reduce non-compliance, which bolsters the integrity of the regulatory regime enforced by ASIC and AFSA. Strict liability is particularly beneficial to these regulatory bodies as they need to deal with offences expeditiously to maintain public confidence in their regulatory regimes.

2.12 With the exception of section 60-21 discussed in detail below, the strict liability offences in the Bill meet all the conditions listed in the Guide to Framing Commonwealth Offences (pages 23 and 24). For example, the fines for the offences do not exceed 60 penalty units for an individual.

2.13 The majority of strict liability offences relate to conduct by an insolvency practitioner. For example, Division 65 of the Schedule provides strict liability offences around payments into and out of an administration account. By providing a strict liability enforcement regime for duties of insolvency practitioners, the Bill significantly enhances the likelihood of compliance by practitioners.

2.14 Insolvency practitioners possess statutory powers they may use with a high level of discretion in the exercise of these powers. Further, given the financial responsibilities associated with their duties, the consequences of an abuse of power can have far-reaching and significant consequences. (For example, if a practitioner were to sell off a debtor's family home to benefit themselves). As such, practitioners should be subject to a higher level of scrutiny in the performance of their duties as registered trustees and liquidators. Insolvency practitioners should, therefore, not only refrain from consciously doing wrong but actively take steps to fulfil their obligations and uphold the professional standards imposed upon them. Any changes to practitioner rules and standards are not expected to take effect until 2017. Practitioners will, therefore, have sufficient time to familiarise themselves with any new requirements and guard against the possibility of any contravention.

2.15 Further, many of the strict liability offences relate to conduct where a requirement for proof of intention would be difficult to establish and would render the offence unenforceable. For example, where the prosecution has to prove the accused intended to refrain from paying money into the appropriate administration account when he or she failed to do so. Further, a requirement to establish intent will draw a level of resources for investigation and prosecution from the regulators that cannot always be justified, especially for offences with such a low maximum penalty.

2.16 Some strict liability offences relate to creditor conduct (such as sections 80-55 and 80-60). For example, section 80-60 makes it an offence for a creditor to directly or indirectly become the purchaser of any part of the regulated debtor's estate, subject to certain exceptions. Strict liability is only imposed on non-practitioners for more serious misconduct that may have significant consequences for innocent third parties. Such as, people who purchase the property in good faith only to have the transaction set aside by the Court.

2.17 Section 60-21 creates an offence (in personal insolvency) for a person to offer an inducement to securing the appointment or nomination of their preferred trustee. It provides that a person commits an offence of strict liability with a penalty of 50 penalty units, or 3 months imprisonment, or both. This provision, and its corresponding penalty, is modelled on section 595 of the Corporations Act. The severity of the penalty recognises the importance of appointing an impartial trustee who would have significant power to determine the outcome of an estate for creditors and for the regulated debtor. The conduct described in this offence amounts to an abuse of the insolvency process that could see favourable treatment for the creditors involved in the breach at the expense of innocent creditors. Such conduct would significantly undermine the integrity of the insolvency regime and have far-reaching consequences for insolvency practitioners, debtors, creditors and financial institutions.

Comparison of key features of new law and current law

Detailed explanation of new law

Working cooperatively with ASIC

2.18 The Inspector-General must work cooperatively with ASIC in relation to persons who are, have been or may become both registered trustees under the Bankruptcy Act and registered liquidators under the Corporations Act. This provision will allow the Inspector-General and ASIC to work cooperatively by sharing information in relation to people who work as registered trustees and as registered liquidators. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 10, section 10-5)]

Register of Trustees

2.19 The Inspector-General must establish and maintain a Register of Trustees which may be kept in any form that the Inspector-General considers appropriate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 15, subsection 15-1(1) and (2)]

2.20 The Insolvency Practice Rules may provide further detail in relation to the Register of Trustees. This may include what information is to be entered on the Register and whether that information is publically available. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 15, subsection 15-1(3) and (4)]

2.21 Without limiting the details to be entered in the Register, the details may include details of any disciplinary action recommended by a committee against a registered trustee and the details of persons who have had their registration suspended or cancelled. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 15, subsection 15-1(5)]

Registering trustees

2.22 An individual may apply to the Inspector-General to be registered as a trustee. An application is properly made if it is lodged with the Inspector-General in the approved form. The application must be accompanied by the application fee as determined by the Minister by legislative instrument. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision B, subsections 20-5]

2.23 If an application is properly made the Inspector-General may convene a committee to consider an application. The committee must consist of the Inspector-General, a registered trustee chosen by a prescribed body (for example, ARITA) and a person appointed by the Minister. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision B, section 20-10]

2.24 The Inspector-General must refer an application for registration that is properly made to a committee to consider within 2 months of receiving the application. This 2 month period allows the Inspector-General time to consider whether the application is properly made and to convene a committee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision B, section 20-15]

2.25 The committee must consider an application referred to it by the Inspector-General and must interview the applicant for the purposes of its consideration. The committee may also require the applicant to sit for an exam. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision B, Subsections 20-20(1) and (2)]

2.26 Within 45 business days after interviewing the applicant, regardless of whether the applicant is also required to sit for an exam, the committee must decide whether the applicant should be registered as a trustee or not. The committee must decide that the applicant should be registered if it is satisfied that the applicant:

•

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

•

will take out adequate and appropriate professional indemnity and fidelity insurance;

•

has not been convicted, within 10 years before making the application, of an offence involving fraud or dishonesty;

•

is not, and has not been within 10 years before making the application, an insolvent under administration;

•

has not had his or her registration as a trustee under the Bankruptcy Act cancelled within 10 years before making the application, other than in response to a written 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 before making the application, other than in response to a written request by the applicant to have the registration cancelled (this ensures that liquidators who voluntarily cancel their registration, for example due to retirement, are distinguished from liquidators who have had their registration cancelled involuntarily, for example as a result of disciplinary proceedings);

•

is not disqualified from managing corporations under this Act, or under a law of an external Territory or a law of a foreign country;

•

is otherwise a fit and proper person; and

•

is resident in Australia or a prescribed country. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision B, subsection 20-20(4)]

2.27 The committee may decide that the applicant should be registered even if the committee is not satisfied that the applicant:

•

has the qualifications, experience, knowledge and abilities prescribed in the Insolvency Practice Rules; or

•

has not had his or her registration as a trustee or liquidator cancelled within 10 years before making the application, other than by his or her own request for cancellation; or

•

is resident in Australia or a prescribed country;

provided that the committee is satisfied that the applicant would be suitable to be registered if the applicant complied with conditions specified by the committee. This provides the committee with greater flexibility to determine, on a case-by-case basis, what conditions may be appropriate to alleviate concerns raised by a failure to satisfy these requirements. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision B, subsection 20-20(5)]

2.28 The committee may decide that the applicant's registration is to be subject to any other conditions specified by the committee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision B, subsection 20-20(6)]

2.29 The registration requirements do not affect the operation of Part VIIC of the Crimes Act 1914 (Crimes Act) that, in certain circumstances, relieves a person from disclosing spent convictions. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision B, subsection 20-20(7)]

2.30 The committee must give the applicant and the Inspector-General a report setting out the committee's decision on the application, and its reasons for the decision and if the committee decides that the registration should be subject to conditions:

•

the condition; and

•

the committee's reasons for imposing the condition. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision B, section 20-25]

2.31 When the committee decides that an applicant should be registered, the Inspector-General must register the person upon the payment of the prescribed fee and the production of evidence that the person has taken out adequate and appropriate professional indemnity and fidelity insurance against the liabilities that the person may incur working as a registered trustee. [ Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision B, subsection 20-30(1)]

2.32 The Inspector-General registers an applicant by entering on the Register of Trustees the details relating to the applicant prescribed in the Insolvency Practice Rules. The registration is subject to the current conditions imposed on the registered trustee. After registering a person, the Inspector-General must give the person a certificate of registration which may be given electronically. The registration has effect for 3 years. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision B, subsection 20-30(2), (3), (4), (5) and (6)]

2.33 The Insolvency Practice Rules may prescribe conditions applying to the registration of all registered trustees or registered trustees of a specified class. A condition may be imposed limiting the kinds of activity in which a registered trustee may engage, either for the duration of the registration or for a shorter period. For example, if the applicant lacks relevant experience, the committee may impose a condition to limit the types of matters that may be accepted by the registered trustee to exclude the administration of debt agreements. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision B, section 20-35]

Variation of conditions

2.34 A registered trustee whose registration has conditions imposed on him or her may apply to the Inspector-General to have those conditions varied or removed. This recognises the fact that conditions placed on trustees can be temporary, for example, if the condition is imposed pending completion of certain qualifying courses. However, an application cannot be made if the person's registration as a trustee is suspended or the condition is of a prescribed kind or in prescribed circumstances. The application must be lodged with the Inspector-General in the approved form. A single application by a registered trustee may deal with more than one condition. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision C, section 20-40]

2.35 The Inspector-General may convene a committee to consider an application to vary conditions. The committee must consist of the Inspector-General, a registered trustee chosen by a prescribed body (for example, ARITA) and a person appointed by the Minister. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision C, section 20-45]

2.36 Within 2 months of receiving an application to vary a condition that is properly made, the Inspector-General must refer the application to a committee which the Inspector-General has convened for that purpose. This 2 month period allows the Inspector-General time to consider whether the application is properly made and to convene a committee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision C, section 20-50]

2.37 If an application to vary or remove a condition is referred to a committee, the committee must consider the application and, unless the applicant otherwise agrees, the committee must interview the applicant. Specifically, this means the applicant can choose to have the application determined without being interviewed. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision C, subsection 20-55(1) and( 2)]

2.38 The committee must, within 20 business days after interviewing the applicant or obtaining the agreement of the applicant to forgo the interview, either decide whether the condition should be varied or removed and, if the condition is to be varied, specify the way in which it is to be varied. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision C, subsection 20-55(3)]

2.39 The committee must give the applicant and the Inspector-General a report setting out the committee's decision and the reasons for the decision. If the committee decides that a condition should be varied, the committee must set out the variation that is to be made. The condition is varied or removed in accordance with that decision. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision C, section 20-60 and section 20-65]

Renewal of registration

2.40 If a registered trustee wishes to continue practising after the current registration period, the individual must apply to have their registration renewed. The application must be lodged with the Inspector-General in the approved form and must be made before the applicant's registration as a trustee ceases to have effect. The note in this provision refers to paragraph 33(1)(c) of the Bankruptcy Act, which allows the Court to extend or abridge this time limit. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision D, subsection 20-70(1) and (2)]

2.41 If an individual applies to have his or her registration as a trustee renewed, the individual must, at least 1 month before the registration ceases to have effect, pay the renewal fee determined by the Minister by legislative instrument. If the renewal fee is not paid before that time, an additional amount equal to 20 per cent of the renewal fee is payable by the applicant by way of penalty. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision D, subsection 20-70(3)]

2.42 The application is properly made if it is lodged with the Inspector-General, in the approved form, before the applicant's registration as a trustee ceases to have effect. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision D, subsection 20-70(4)]

2.43 The Inspector-General must renew the registration where:

•

the application is properly made;

•

the applicant has produced evidence in writing to the Inspector-General that the applicant maintains adequate and appropriate professional indemnity insurance and adequate and appropriate fidelity insurance;

•

the applicant has complied with any condition dealing with continuing professional education to which the applicant is subject;

•

the applicant has paid the renewal fee and any late payment penalty; and

•

the applicant does not owe more than the prescribed amount of notified estate charges. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision D, subsection 20-75(1), (2) and (3)]

2.44 The Inspector-General renews the registration by entering or maintaining in the Register of Trustees the details relating to the applicant which are prescribed in the Insolvency Practice Rules. After renewing the registration, the Inspector-General must give the person a certificate of registration which may be given electronically. The renewed registration has effect for 3 years and is subject to the current conditions imposed on the registered trustee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision D, subsection 20-75(2), (3), (4), (5) and (6)]

2.45 For the purposes of renewal of registration a person owes a notified estate charge if:

•

the person owes either of the following: a charge under the Bankruptcy (Estate Charges) Act 1997, a penalty under section 281 (late payment penalty) of the Bankruptcy Act; and

•

the Inspector-General notified the person of the unpaid estate charge at least one month and 10 business days before the person's registration as a trustee ceases to have effect. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision D, subsection 20-75(7)]

Offence relating to registration

2.46 A person commits an offence with a penalty of 30 penalty units if the person represents that he or she is a registered trustee and the representation is false. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 20, Subdivision E, section 20-80]

Insurance

2.47 A registered trustee must maintain adequate and appropriate professional indemnity and fidelity insurance. If a registered trustee fails to comply with this requirement, he or she commits an offence. The Inspector-General may, by legislative instrument, determine what constitutes adequate and appropriate professional indemnity and fidelity insurance, in relation to either or both of the following:

•

specified circumstances;

•

one or more specified classes of registered trustees. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 25, subsection 25-1(1) and (2)]

2.48 Where the registered trustee intentionally or recklessly fails to comply with the insurance requirements, the maximum penalty is 1,000 penalty units, otherwise there is a strict liability offence with a maximum penalty of 60 penalty units. The severity of the penalty for intentionally or recklessly failing to comply with this requirement and the need for a strict liability offence reflects the importance of adequate and appropriate insurance for registered trustees. As providers of professional services who often deal with large sums of money, registered trustees must hold adequate and appropriate insurance to mitigate the risks associated with the profession. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 25, subsection 25-1(3) and (4)]

Annual trustee returns

2.49 A registered trustee must, within one month after the end of a return year, lodge with the Inspector-General an annual return. This applies whether the trustee is registered for all or part of the return year. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 30, subsection 30-1(1)]

2.50 A return year for a person who is registered as a trustee is the annual anniversary of that person's registration as a trustee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 30, Subsection 30-1(2)]

2.51 A return must be in the approved form and include evidence that the person has, during the whole of any period of the year during which the person was registered as a registered trustee, maintained adequate and appropriate professional indemnity and fidelity insurance against the liabilities that the person may incur working as a registered trustee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 30, subsection 30-1(3)]

2.52 Inspector-General may extend the period for lodging a return if the registered trustee applies for an extension before the end of that return period. The provision allows the Inspector-General to give further extensions. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 30, subsection 30-1(4)]

2.53 A registered trustee commits a strict liability offence, punishable by 5 penalty units, if the trustee fails to lodge a return. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 30, subsection 30-1(5)]

Notice requirements

2.54 Division 35 of Part 2 provides for notice requirements where:

•

a significant event occurs (section 35-1); and

•

other events, as prescribed, occur (section 35-5).

2.55 A registered trustee must notify the Inspector-General, in the approved form, where any of the following significant events occur that may affect the ability of the registered trustee to continue to practice:

•

the trustee becomes an insolvent under administration;

•

a bankruptcy notice is issued under the Bankruptcy Act in relation to the trustee as a debtor, or a corresponding notice is issued in relation to the registered trustee as debtor under a law of an external Territory or a law of a foreign country;

•

the registered trustee is convicted of an offence involving fraud or dishonesty;

•

the registered trustee is disqualified from managing corporations under the Corporations Act, or under a law of an external Territory or a law of a foreign country;

•

the registered trustee ceases to have adequate and appropriate professional indemnity insurance or fidelity insurance against the liabilities that the registered trustee may incur working as a registered trustee;

•

the registered trustee is issued with a show-cause notice under the Corporations Act in relation to the registered trustee's registration as a trustee under that Act;

•

the registered trustee's registration as a liquidator under the Corporations Act is suspended or cancelled;

•

any other prescribed event.

The notice must be lodged by the registered trustee within 5 business days after the registered trustee could reasonably be expected to be aware that the event has occurred. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 35, subsection 35-1(1)]

2.56 Where a trustee intentionally or recklessly fails to notify the Inspector-General that a significant event has occurred, the registered trustee commits an offence punishable by a maximum penalty of 100 penalty units. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 35, subsection 35-1(2)]

2.57 A registered trustee must notify the Inspector-General if certain prescribed events occur. A registered trustee also has an obligation to notify the Inspector-General if there are material inaccuracies in the information provided in an annual trustee return or in an annual administration return. Failure to notify the Inspector-General within 10 business days after the registered trustee could reasonably be expected to be aware that the event has occurred commits an offence punishable by a maximum penalty of 5 penalty units. Such notices must be provided in the approved form. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 35, section 35-5]

Direction to comply

2.58 The Inspector-General may give a registered trustee a direction in writing to comply with a requirement under the Bankruptcy Act to lodge documents or provide information required under the Bankruptcy Act within 10 business days after the direction is given. On the application of the registered trustee, the Inspector-General may extend, or further extend, that period. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision B, subsections 40-5(1), (2) and (3)]

2.59 Where the document or information is not provided within 10 business days after the direction has been given (or that period as extended), the Inspector-General may give a direction that the registered trustee not accept any further appointments or apply to the Court for an order that the registered trustee comply with the Inspector-General's direction. However, a decision of the Inspector-General to give such a direction is reviewable by the AAT under subsection 96-1(c). [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision B, subsection 40-5(4)]

2.60 A direction to comply is not a legislative instrument. Nothing in section 40-5 limits the operation of any other provision of the Bankruptcy Act, or any other law, in relation to a person who fails to comply with a requirement to lodge a document with, or give information or a document to, the Inspector-General. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision B, subsection 40-5(5) and (6)]

2.61 Where the Inspector-General reasonably suspects that any information that a registered trustee is required under the Bankruptcy Act to give to the Inspector-General is incomplete or incorrect in any particular, the Inspector-General may direct the trustee to do one or more of the following within 10 business days after the direction (the period can be extended on the application of the registered trustee):

•

confirm to the Inspector-General that the information is complete and correct;

•

complete or correct the information;

•

notify any person specified by the Inspector-General of the addition or correction. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision B, subsections 40-10(1), (2) and (3)]

2.62 Where the registered trustee does not comply within the period of 10 business days (or the period as extended), the Inspector-General may give a direction that the registered trustee not accept further appointments or apply to the Court for an order directing the trustee to comply with the requirement within such time specified in the order. However, a decision of the Inspector-General to give such a direction is reviewable by the AAT under section 96-1(c). [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision B, subsection 40-10(4)]

2.63 A direction to correct inaccuracies is not a legislative instrument. Nothing in section 40-10 limits the operation of any other provision of the Bankruptcy Act, or any other law, in relation to a person given incomplete or incorrect information. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision B, subsections 40-10(5) and (6)]

2.64 The Inspector-General may, in writing, direct a registered trustee not to accept any further appointments as a registered trustee or not to accept any further appointments for a period specified in the direction if:

•

the registered trustee has failed to comply with a direction to remedy a failure to lodge documents, or give information or documents; or

•

the registered trustee has failed to comply with a direction to correct inaccuracies; or

•

a committee has decided that the Inspector-General should direct that a trustee not accept any further appointments as trustee, or not to accept any further appointments as trustee during the period specified in the direction; or

•

the registered trustee has failed to comply with a direction to give relevant information to the Inspector-General; or

•

the registered trustee has failed to comply with a direction given to the trustee under subsection 75-20(1) or (2), which relates to a direction to convene a creditor meeting or to comply with requirements in relation to such a meeting.

2.65 This provision empowers the Inspector-General to enforce obligations on a registered trustee without initial recourse to the Court, noting that the Inspector-General may apply to a Court for an order to compel the registered trustee to comply with a direction. However, a decision of the Inspector-General to give such a direction is reviewable by the AAT under subsection 96-1(c). [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 16, Subdivision B, subsection 40-15(1)]

2.66 If the Inspector-General gives a direction not to accept further appointments, it is a condition of the registered trustee's registration that the registered trustee must comply with the direction. The Inspector-General may withdraw a direction not to accept further appointments. Upon the direction being withdrawn the condition is removed from the trustee's registration. A direction not to accept further appointments is not a legislative instrument. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision B, subsections 40-15(2), (3) (4) and (5)]

2.67 The Inspector-General's power to direct a registered trustee not to accept further appointments, does not limit the operation of any other provision of the Bankruptcy Act, or any other law, relating to the lodgement of a document or a person giving incomplete or incorrect information or any matter relating to a decision by a committee in relation to the Inspector-General giving a direction that a registered trustee not accept further appointments. The Inspector-General's power to apply to a Court for an order that a registered trustee comply with a direction under subsection 40-15(1) is also not affected. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision B, Subsections 40-15(6) and (7)]

Automatic cancellation

2.68 The registration of a registered trustee is automatically cancelled if:

•

the person becomes an insolvent under administration; or

•

the person dies. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision C, subsection 40-20(1)]

2.69 The cancellation takes effect on the day that the person becomes an insolvent under administration or the day that the person dies. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision C, subsection 40-20(2)]

The Inspector-General may suspend or cancel registration

2.70 The Inspector-General may suspend or cancel the registration of a registered trustee if:

•

the person is disqualified from managing corporations under Part 2D.6 of the Corporations Act, or under a law of an external Territory or a law of a foreign country;

•

the person ceases to have adequate and appropriate professional indemnity and fidelity insurance against the liabilities that the person may incur working as a registered liquidator;

•

the person's registration as a liquidator under the Corporations Act has been cancelled or suspended, other than in compliance with a written request by the person to cancel or suspend the registration;

•

the person owes more than the prescribed amount of notified estate charges;

•

the person fails to repay remuneration in accordance with an order of the Court;

•

the person has been convicted of an offence involving fraud or dishonesty;

•

the person lodges a request with the Inspector-General in the approved form to have the registration suspended. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision D, subsections 40-25(1) and 40(30(1)]

2.71 The powers given to the Inspector-General to suspend or cancel a person's registration as a trustee does not affect the operation of Part VIIC of the Crimes Act which in certain circumstances relieves a person from disclosing spent convictions. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision D, subsections 40-25(2) and 40-30(2)]

2.72 Where the Inspector-General decides to suspend or cancel a person's registration as a trustee, the Inspector-General must, within 10 business days of making the decision, give the person a written notice setting out the decision and the reasons for the decision. The decision comes into effect on the day after the notice is given to the person. However, a failure by the Inspector-General to give the notice within 10 business days, does not affect the validity of the decision. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision D, section 40-35]

Disciplinary action by committee

2.73 The Inspector-General may issue a show cause notice to a registered trustee where, in the Inspector-General's opinion:

•

the registered trustee no longer has the prescribed qualifications, experience, knowledge and abilities;

•

the registered trustee has committed an act of bankruptcy, within the meaning of the Bankruptcy Act or a corresponding law of an external Territory or a foreign country;

•

the registered trustee is disqualified from managing corporations under Part 2D.6 of the Corporations Act, or under a law of an external Territory or a law of a foreign country;

•

the registered trustee has ceased to have adequate and appropriate professional indemnity or fidelity insurance against the liabilities that the person may incur working as a registered trustee;

•

the registered trustee has breached a current condition imposed on the registered trustee;

•

the trustee has contravened a provision of the Bankruptcy Act;

•

the trustee's registration as a liquidator has been cancelled or suspended other than in compliance with a written request by the trustee to cancel or suspend the registration;

•

the trustee owes more than the prescribed amount of notified estate charges;

•

the trustee fails to repay remuneration in accordance with an order from the Court;

•

the trustee has been convicted of an offence involving fraud or dishonesty;

•

the trustee is permanently or temporarily unable to perform the functions and duties of a trustee, for example, because of physical or mental incapacity;

•

the trustee has failed to carry out adequately and properly the duties of a trustee or any other duties or functions that under a law of the Commonwealth or of a State or Territory, or the general law that a trustee is required to carry out;

•

the trustee has failed to carry out adequately and properly (whether in Australia or in an external Territory, or in a foreign country) the duties of an administrator in relation to a debt agreement;

•

the trustee is not a fit and proper person;

•

the trustee is not resident in Australia or a prescribed country; or

•

the trustee has failed to comply with prescribed standards applicable to the exercise of powers, or the carrying out of duties, of registered trustees. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision E, Subsection 40-40(1)]

2.74 A show cause notice issued by the Inspector-General is not a legislative instrument. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision E, subsection 40-40(2)]

2.75 The Inspector-General's powers to issue a show cause notice do not affect the operation of Part VIIC of the Crimes Act 1914 which in certain circumstances relieves a person from disclosing spent convictions. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision E, subsection 40-40(3)]

2.76 The Insolvency Practice Rules may prescribe standards applicable to the exercise of powers, or the carrying out of duties, of registered trustees. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision E, subsection 40-40(4)]

2.77 The Inspector-General may convene a committee to consider disciplinary action in relation to a registered trustee. The committee convened by the Inspector-General must consist of the Inspector-General, a registered trustee chosen by a prescribed body (for example, ARITA) and a person appointed by the Minister. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision E, subsections 40-45(1) and (2)]

2.78 The Inspector-General may refer a registered trustee to a committee which they have convened if they have given a show cause notice to the registered trustee and either:

•

the Inspector-General does not receive an explanation within 20 business days after the notice is given; or

•

the Inspector-General is not satisfied by the explanation given by the registered trustee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision E, section 40-50]

2.79 Where a registered trustee is referred to a committee, the committee must decide one or more of the following:

•

that the trustee should continue to be registered;

•

that the trustee's registration should be suspended for a period, or until the occurrence of an event, specified in the decision;

•

that the trustee's registration be cancelled;

•

that the Inspector-General should direct the trustee not to accept any further appointments as trustee, or not to accept any further appointments as trustee during the period specified in the decision;

•

that the trustee should be publicly admonished or reprimanded;

•

that a condition specified in the decision should be imposed on the trustee;

•

that a condition should be imposed on all other registered trustees that they must not allow the trustee to carry out any of the functions or duties, or exercise any of the powers of a registered trustee on their behalf for a period specified in the decision of no more than 10 years;

•

that the Inspector-General should publish specified information in relation to the committee's decision and the reasons for that decision. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision E, subsection 40-55(1)]

2.80 The conditions imposed by a committee on a registered trustee may include one or more of the following:

•

a condition that the trustee engage in, or refrain from engaging in, specified conduct;

•

a condition that the trustee engage in, or refrain from engaging in, specified conduct except in specified circumstances;

•

a condition that the trustee publish specified information;

•

a condition that the trustee notify a specified person or class of persons of specified information;

•

a condition that the trustee publish a specified statement;

•

a condition that the trustee make a specified statement to a specified person or class of persons. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision E, subsection 40-55(2)]

2.81 In making its decision, the committee may have regard to:

•

any information provided to the committee by the Inspector-General;

•

any explanation given by the trustee;

•

any other information given by the trustee to the committee;

•

if the trustee is or was also a registered liquidator under the Corporations Act - any information in relation to the trustee given to the committee by ASIC or a committee convened under the Insolvency Practice Schedule (Corporations); and

•

any other matter that the committee considers relevant. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision E, subsection 40-55(3)]

2.82 The committee is required to give the registered trustee and the Inspector-General a report setting out:

•

the committee's decision in relation to the trustee;

•

the committee's reasons for that decision;

•

if the committee decides that the trustee should be registered subject to a condition the report should set out the condition and the reasons for imposing the condition; and

•

if the committee decides that a condition should be imposed on all other registered trustees in relation to the registered trustee the report should set out the condition and the committee's reasons for imposing the condition. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision E, section 40-60]

2.83 The Inspector-General is required to give effect to the committee's decision. [Schedule 1, Insolvency Practice Schedule (Bankruptcy, Part 2, Division 40, Subdivision E, section 40-65]

Lifting or shortening suspension

2.84 A person whose registration as a registered trustee has been suspended may apply to the Inspector-General in the approved form for the suspension to be lifted or for the period to be shortened. If the application is lodged in the approved form the application is properly made. [Schedule 1, Insolvency Practice Schedule (Bankruptcy, Part 2, Division 40, Subdivision F, section 40-70]

2.85 The Inspector-General may convene a committee for the purposes of considering an application, or applications, made to have a suspension shortened or lifted. The committee must consist of the Inspector-General, a registered trustee chosen by a prescribed body (for example, ARITA) and a person appointed by the Minister. [Schedule 1, Insolvency Practice Schedule (Bankruptcy, Part 2, Division 40, Subdivision F, section 40-75]

2.86 The Inspector-General must refer an application to a committee which the Inspector-General has convened within 2 months after receiving the application. This 2 month period allows the Inspector-General time to convene a committee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision F, section 40-80]

2.87 The committee must consider the application referred to it and, unless the applicant otherwise agrees, the committee must interview the applicant for the purposes of considering the application. Within 10 business days after the interview the committee must decide whether the suspension should be lifted, or the period of the suspension shortened, and if it is to be shortened, specify when the suspension is to end. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision F, section 40-85]

2.88 The committee must give the applicant and the Inspector-General a report setting out the committee's decision, the committee's reasons for the decision and if the committee has decided that the period of suspension should be shortened, when the suspension is to end. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision F, section 40-90]

2.89 If the committee decides that a suspension should be lifted or the period of suspension shortened, the lifting or shortening of the suspension comes into effect in accordance with the decision. [Schedule 1, Insolvency Practice Schedule (Bankruptcy),Part 2, Division 40, Subdivision F, section 40-95]

Action initiated by industry body

2.90 An industry body (as prescribed in the Insolvency Practice Rules) may lodge a notice (an industry notice) stating that the body reasonably suspects that there are grounds for the Inspector-General to take disciplinary action against a registered trustee. The industry body must identify the registered trustee and include the information and copies of any documents upon which the suspicion is founded. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision G, subsection 40-100(1)]

2.91 The Inspector-General must consider the information and documents included in the industry notice and take action as follows:

•

If the Inspector-General decides to take no action the Inspector-General must give the industry body a notice within 45 business days after the industry notice is lodged.

•

However, such a notice does not preclude the Inspector-General from taking action based wholly or partly on the basis of information in the industry notice of the following kind:

-

suspending or cancelling the registration of the registered trustee;

-

giving the registered trustee a show cause notice; or

-

imposing a condition on the registered trustee.

•

If the Inspector-General does take action based wholly or partly on the information included in an industry notice, the Inspector-General must give the industry body notice of that fact. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision G, subsections 40-100(2-6)]

2.92 An industry notice is not a legislative instrument. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2,Division 40, Subdivision G, subsection 40-100(7)]

2.93 Section 40-105 specifies that if an industry body gives a notice under section 40-100 in good faith and based on a reasonable suspicion then that body is not liable for any civil, criminal or administrative process for giving that notice. This protection also extends to a person who provides information or makes a decision that causes the industry body to give notice under section 40-100. This provision provides immunity from civil, criminal or administrative liability (including disciplinary action or dismissal) for industry bodies and individuals making public interest disclosures. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 40, Subdivision G, section 40-105]

2.94 The Insolvency Practice Rules may prescribe industry bodies, such as ARITA, for the purposes of Subdivision G of Division 40. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), 2 Part 2, Division 40, Subdivision G, section 40-110]

Court oversight of registered trustees

2.95 The Court may make such orders as it thinks fit in relation to a registered trustee. The Court may exercise this power on its own initiative, during proceedings before the Court or on application by the trustee or the Inspector-General. This provision recognises the overarching authority the Court may exercise over registered trustees. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 45, subsections 45-1(1), (2) and (3)]

2.96 Without limiting the matters which the Court may take into account when making orders the Court may take into account:

•

whether the registered trustee has faithfully preformed, or is faithfully performing, the registered trustee's duties;

•

whether an action or failure to act by the registered trustee is in compliance with an order of the Court;

•

whether any person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the registered trustee; and

•

the seriousness of the consequences of any action or failure by the registered trustee, including the effect of that action or failure to act on public confidence in registered trustees as a group. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 45, section 45-1(4)]

2.97 Section 45-1 does not limit the Court's powers under any other provision of the Bankruptcy Act or under any other law. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 45, subsection 45-1(5)]

2.98 The Court may also make orders in relation to a registered trustee that deal with the costs of a matter considered by the Court. The orders may order that the registered trustee is personally liable for some or all of the costs and that the registered trustee is not entitled to be reimbursed by a regulated debtor's estate or creditors in relation to some or all of those costs. Section 45-5 does not limit the Court's powers under any other provision of the Bankruptcy Act or under any other law. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 45, section 45-5]

Committees under this Part

2.99 If a prescribed body appoints a person to a committee, that person must have the knowledge or experience prescribed in the Insolvency Practice Rules or if no knowledge is prescribed , the knowledge and experience necessary to carry out the functions to be performed. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 50, section 50-5]

2.100 If the Minister appoints a person to a committee, that person must have knowledge or experience in one or more fields of business, law (including the law relating to bankruptcy), economics, accounting, public policy relating to bankruptcy. Previously, under sections 155, 155E and 155H the committee would consist of 'an APS employee'. This has been repealed and replaced by provisions such as this to ensure that only persons with the appropriate knowledge or experience are appointed to a committee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 50, section 50-10]

2.101 A single committee may consider more than one matter relating to the application for registration of one or more applicants for registration as a trustee and a matter or matters relating to one or more registered trustees. This recognises that it is more efficient to allow a committee to consider multiple matters given the time it can take to convene a committee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 50, section 50-15]

2.102 The consideration of a matter is not affected by a change in the membership of the committee. A matter may be adjourned or transferred to another committee. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 50, section 50-20]

2.103 The Insolvency Practice Rules may provide for and in relation to the manner in which the committees perform their functions including: meetings, requirements for a quorum, disclosure of interests, the manner in which questions are to be decided by the committee, the reconstitution of a committee and the termination of the consideration of a matter by committee, and the transfer of matters to another committee. The detail of how a committee will perform its functions is more appropriately dealt with by the Insolvency Practice Rules, which can be more readily amended where an alteration of procedures is necessary and appropriate. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 50, section 50-25].

2.104 A member of a committee is entitled to receive the remuneration that is determined by the Remuneration Tribunal but if no determination by the Tribunal is in operation, the member is entitled to receive such remuneration as the Minister determines in writing. A member is entitled to receive such allowances as the Minister determines in writing. The operation of the requirements in relation to the remuneration of a member of a committee has effect subject to the Remuneration Tribunal Act 1973. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 50, section 50-30]

2.105 A member of a committee commits an offence if information or a document is given to the member for the purposes of exercising powers or functions as a member of the committee and the member uses or discloses the information or document and none of the exceptions under subsection 50-35(2) apply. The penalty is 50 penalty units. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 50, subsection 50-35(1)]

2.106 The restriction on the use of information or a document disclosed to a member of a committee does not apply in the circumstances listed in 50-35(2). These exceptions allow disclosure or use of information where there is a legitimate purpose for such disclosure or use. For example, to provide information to assist a body in the execution of its disciplinary function. [Schedule 1, Insolvency Practice Schedule (Bankruptcy), Part 2, Division 50, subsection 50-35(2)]

Consequential amendments to the Bankruptcy Act

Trustees

2.107 Sections 154A to 155K are repealed as the details regarding the appointment of trustees are now contained in Division 8 (Registering trustees) of the Schedule. [Schedule 1, Part 2, item 47]

2.108 Subsections 156A(4) to (7) are repealed as the Court's power to make orders in relation to estate administration is now contained in section 90-15 of the Schedule. [Schedule 1, Part 2, item 48]

2.109 Subsections 157(6) to (9) are repealed as the provisions are considered to no longer be necessary due to the following reasons:

•

Section 90-15 contains a general power for the Court to 'make orders as it thinks fit in relation to the administration of the regulated debtor's estate', whilst section 90-20 allows a creditor to apply for an order under section 90-15. This sufficiently covers the ability for a creditor to file an objection to an appointment with the Court under subsection 157(6).

•

Subsection 157(7A) contains a requirement for the provision of notice to the Official Receiver of the cancellation of a trustee's appointment and reappointment of a new trustee. It is not necessary that this requirement be legislated, because standard practice is that the Official Receiver is made aware of the cancellation/appointment of trustees via other measures.

•

Subsection 157(8) currently requires that the Official Receiver issue a person with a certificate of appointment following their appointment as a trustee. Subsection 157(9) provides for the date of effect of a certificate under the previous subsection. These provisions relating to a certificate are superfluous, so the Schedule repeals these subsections. [Schedule 1, Part 2, item 49]

2.110 Section 161A is repealed because the requirement to provide the Inspector-General notice if the trustee is convicted of an offence involving fraud or dishonesty is now contained in section 35-1. [Schedule 1, Part 2, item 50]

2.111 The heading of Division 2 Part VIII is amended to include the words 'of the Official Trustee and Official Receiver' to clarify the application of the Division. [Schedule 1, Part 2, item 51]

2.112 Sections 161B and 162 are repealed as the details regarding the constraints on a trustee's remuneration are now contained in section 60-15 and the Insolvency Practice Rules. [Schedule 1, Part 2, item 52]

2.113 Sections 164 to 167 of the Bankruptcy Act are repealed for the following reasons:

•

Section 164: Details regarding remuneration of trustees where one trustees succeeds another will now be contained in the Insolvency Practice Rules.

•

Section 165: Details from section 165, which precludes a trustee from accepting extra benefits, are modified to align with the Corporations Act and will now be contained in section 60-20 of the Insolvency Law Reform Bill.

•

Section 166: An obligation to provide creditors with notice of the trustee's engagement of services in connection with the administration of the estate is now contained in section 60-26.

•

Section 167: The substance of section 167, which relates to a review of a trustee's remuneration by the Inspector-General, is replaced by Subdivision C in Division 90. [Schedule 1, Part 2, item 53].

2.114 Divisions 3 and 4 of Part VIII are repealed for the following reasons:

•

Section 168 and 169, which relate to trustee's requirements to pay moneys into a bank account that is not a private account, are now replaced by section 65-10 and section 90-15.

•

Subsection 170(2), which relates to the provision of information by the trustee to a bankrupt, is now contained in section 70-56.

•

Section 170A, as details regarding the provision of a return in relation to the administration of an estate during a financial year are now contained in section 70-5.

•

Section 171, which requires a trustee to give and retain receipts, is repealed without replacement as the provision of receipts can be dealt with by ordinary business practices without a statutory requirement.

•

Section 173, which relates to the books to be kept by a trustee, is now covered by section 70-10.

•

Section 174, which relates to the books a trustee must keep when trading, is now covered by section 70-11.

•

Section 175, which relates to an audit of administration books by the Inspector-General, is now covered by sections 70-15 and 70-25. Further, section 70-20 provides that a Court may order the Inspector-General to audit books on application of a person with financial interest.

•

Section 176, which relates to a Court order against a trustee to 'make good' loss caused by a breach of duty, is now covered by the general power of the Court in relation to bankruptcy administrations under section 90-15.

•

Section 177, which relates to a requirement for the trustee to have regard to any lawful directions by creditors' resolutions or by the committee of inspection. This is now covered in sections 80-35 and 85-5.

•

Section 178: the right to make an application to the Court to appeal against a trustee's decision is contained in section 90-20.

•

Section 179 is to be repealed because subsection 179(1) is replaced by section 90-15, and subsection 179(2) is replaced by a creditor's right to request information contained in Subdivision C of Division 70 of Schedule 2, and section 70-60. The Court's power to make orders as it thinks fit in relation to the administration of the regulated debtor's estate is contained in section 90-5. [Schedule 1, Part 2, item 54]

2.115 Section 181 is repealed because removal by creditors is now dealt with in Subdivision D of Division 90 (Removal by creditors) of the Schedule. [Schedule 1, Part 2, Section 55]

2.116 Subsection 181A(2) is being amended to remove the cross-reference to section 64A as this reference is no longer relevant given that section 64A is being repealed and replaced by the meetings regulation-making power in section 75-50. [Schedule 1, Part 2, item 56]

2.117 Section 182 is repealed for the following reasons:

•

Because subsection 182(1) provides for the automatic cancellation of a trustee's registration if the trustee becomes bankrupt, enters into a debt agreement or signs an authority under section 188 (Part X). This detail is now contained in section 40-20 of the Schedule and so can be repealed.

•

Subsections 182(4) and (5), which relate to notification requirements upon the death of a registered trustee, are no longer required as this is adequately covered by the automatic cancellation provision in section 40-20 of the Schedule. [Schedule 1, Part 2, item 57]

Application and transitional provisions

Registering trustees

2.118 If, before the commencement day, a person applies for registration as a trustee under section 154A of the old Act and the person's application is pending (that is, it has not been refused nor has the person been registered), the application will be considered to have never been made. In these circumstances, the Inspector-General must, on behalf of the Commonwealth, refund to the person an amount equal to the fee paid in relation to the application and the person is open to reapply for registration under Division 20 of the Schedule. A person will be considered to be registered as a trustee if the person is registered as a trustee under the National Personal Insolvency Index. [Schedule 1, Part 3, Division 2, Subdivision A, item 103(1) and (2)]

2.119 If, before the commencement day, a person has applied for registration as a trustee to be extended under section 155D of the old Act and the person's application has not been refused and the person's registration as a trustee has not been extended, section 155D of the old Act continues to apply in relation to the application as if that section had not been repealed by the Schedule. At the time for renewal, instead of extending a persons' registration under the old Act, the Inspector-General must renew the registration of the person as a trustee under the Schedule. [Schedule 1, Part 3, Division 2, Subdivision A, item 104]

2.120 If a person is registered as a trustee immediately before the commencement day, on the commencement day the person is taken to be registered as a trustee under Subdivision B of Division 20 of the Schedule. That is, persons registered under the old Act will continue to be registered under the Schedule. However, a person will not be considered to be registered as a trustee if the person is an insolvent under administration or the person is dead [Schedule 1, Part 3, Division 2, Subdivision A, items 105(1) and (2)]

2.121 An old Act registrant is a person who is taken to be registered under Subdivision B of Division 20 of the Schedule because of section 107. [Schedule 1, Part 3, Division 2, Subdivision A, Section 105(3)]

2.122 The Inspector-General must enter the details of old Act registrants on the Register of Trustees. The details must be those prescribed under subsection 15-1(3) of the Schedule that relate to the old Act registrant. [Schedule 1, Part 3, Division 2, Subdivision A, section 106(1)]

2.123 If the Inspector-General holds information in relation to old Act registrants, the Inspector-General may use and disclose that information to establish and maintain the Register of Trustees. [Schedule 1, Part 3, Division 2, Subdivision A, section 106(2)]

2.124 An old Act registrant's registration on the Register of Trustees is for 3 years after the old Act registration day in relation to that person. The old Act registration day is the day on which registration began; or the most recent extension of that registration began; whichever is the later. That is, the continuation of a trustee's registration under item 105 does not restart the time for a 3-year period of registration. [Schedule 1, Part 3, Division 2, Subdivision A, section 107]

2.125 Conditions may be imposed on old Act registrants in accordance with the Schedule. [Schedule 1, Part 3, Division 2, Subdivision A, section 108]

2.126 If a condition applies to an old Act registrant under sections 155E, 155F or 155I of the old Act; and that condition is still in force immediately before the commencement day, that condition (including any modifications under sections 155F or 155I of the old Act) will be a current condition imposed on the old Act registrant. Subdivision C of Division 20 of the Schedule applies to a condition imposed under subsection (1) in the same way as it applies to a condition imposed by a committee under that Schedule. [Schedule 1, Part 3, Division 2, Subdivision A, section 109]

2.127 If a condition applies to an old Act registrant under sections 155A, 155F or 155I of the old Act; and the old Act registrant has applied for the condition to be changed or removed under section 155E of the old Act before the commencement day; and a decision on the application has not been made before the commencement day under section 155F of the old Act; the application is taken never to have been made and the Inspector-General must, on behalf of the Commonwealth, refund to the person an amount equal to the fee paid in relation to the application. The trustee may then apply under section 20-40 of the Schedule for the condition to be varied or removed. [Schedule 1, Part 3, Division 2, Subdivision A, Section 110]

2.128 The old Act will apply in relation to the decision if an old Act registrant has applied for a condition to be changed or removed under section 155E of the old Act before the commencement day; and before the commencement day, a committee has made a decision on the application under section 155F. The same matter may not be dealt with under Division 20 of the Schedule. [Schedule 1, Part 3, Division 2, Subdivision A, section 111]

2.129 If an old Act registrant does not apply for renewal of their registration under the Schedule before their period of registration ends under section 108 ('the expiry day'), the old Act registrant may not accept further appointments after their registration expires. [Schedule 1, Part 3, Division 2, Subdivision A, section 112(1)].

2.130 An old Act registrant is taken to be registered as a trustee under Subdivision B of Division 20 of the Schedule after the expiry day, subject to a condition that they must not accept any further appointments as trustee of an estate. That condition is a current condition imposed on the old Act registrant. [Schedule 1, Part 3, Division 2, Subdivision A, section 112(2) and (3)]

2.131 The old Act registrant will be considered to have lodged a request to have their registration as a trustee cancelled on the day after the end of the administration of all estates for which the old Act registrant is a trustee and the Inspector-General is taken to have cancelled the registration under subsection 40-30(1) of the Schedule. [Schedule 1, Part 3, Division 2, Subdivision A, Section 112(4)]

Annual Returns

2.132 For the purposes of determining a 'return year' under subsection 30-1(2) of the Schedule, 'the day on which that registration first began', means 'the old Act registration day for that person (as defined for the purpose of Part 3 of Schedule 1 of the Insolvency Law Reform Act 2015)' Section 30-1 of the Schedule applies in relation to return years that begin on or after the commencement day. [Schedule 1, Part 3, Division 2, Subdivision B, Section 113]

Notice Requirements

2.133 If a significant event (as per section 35-1 of the Schedule) occurs within 2 years before the commencement day, the old Act registrant must inform the Inspector-General of the event before the commencement day. The notice must be lodged within one month of the commencement day or within one month after the old Act registrant is or could reasonably be expected to be aware of the event. [Schedule 1, Part 3, Division 2, Subdivision C, subsections 114(1) and (2)]

2.134 The old Act registrant will be taken to have committed an offence if they intentionally or recklessly fail to comply with this requirement within the relevant period. The penalty for this offence will be 100 penalty units. The penalty for this offence is consistent with the equivalent offence under section 35-1 of the Schedule. [Schedule 1, Part 3, Division 2, Subdivision C, subsection 114(3)]

Cancellation by the Inspector-General under the old Act

2.135 If a person gives the Inspector-General a written request to cease their registration as a trustee under section 155G of the old Act and that request has not come into effect, then the Inspector-General may not accept the request under section 155G. However, the person is taken to have lodged a request under paragraph 40-30(1)(g) of the Schedule. [Schedule 1, Part 3, Division 2, Subdivision D, section 115]

Disciplinary proceedings before a committee

2.136 Where, before the commencement day, the Inspector-General has issued a show-cause notice under subsection 155H(1) of the old Act to an old Act Registrant but has not convened a committee to consider whether the old Act registrant should continue to be registered, the notice is taken never to have been made. This does not preclude the Inspector-General from giving notice to the old Act registrant under section 40-40 of the Schedule. Further information on the operation of section 40-40 in relation to an event that occurs before commencement is provided for in the explanation of section 123. Item 116 does not apply for the purposes of sections 186LA and 186LB, which relate to trust accounts for debt agreement administrations. [Schedule 1, Part 3, Division 2, Subdivision E, section 116]

2.137 This item applies where, before the commencement day, a committee has decided to cancel registration of a trustee under section 115I of the old Act, but the Inspector-General has not yet given effect to the decision. Under these circumstances, the committee is taken to have made a decision under section 40-55 of the Schedule and the decision takes effect on the commencement day. For committee decisions to continue registration under section 115I of the old Act, item 109 provides that any conditions imposed will be carried over as a 'current condition'. This item does not affect any right or obligation that any person has before the commencement day (including any right to review by the AAT) in relation to the consideration of the matter by the committee. [Schedule 1, Part 3, Division 2, Subdivision E, Section 117]

2.138 If, before the commencement day, the Inspector-General convened a committee under section 155H of the old Act to consider whether a trustee should continue to be registered; and the committee has not made a decision in relation to the trustee under section 155I of the old Act before the commencement day, the committee must cease its consideration of the matter on the commencement day without making a decision. The fact that the committee has ceased to consider the matter does not preclude the matter, or any aspect of the matter, from being dealt with under Division 40 of the Schedule. To avoid doubt, nothing in this item affects any right or obligation that any person has before the commencement day, including any right to review, in relation to the consideration of the matter by the committee. [Schedule 1, Part 3, Division 2, Subdivision E, section 118]

Suspension, cancellation and disciplinary action

2.139 Subdivision B of Division 40 of the Schedule (Direction to comply) applies whether or not a requirement mentioned in that Subdivision to lodge a document or give information or a document arises before, on or after the commencement day. [Schedule 1, Part 3, Division 2, Subdivision F, Section 119]

2.140 Section 40-25 of the Schedule (Suspension of registration) applies whether or not an event mentioned in subsection 40-25(1) occurs before, on or after the commencement day. However, paragraph 40-25(1)(c) of the Schedule does not apply where a liquidator's registration is cancelled or suspended under the Corporations Act as in force at any time before the commencement day). The reason for this exception to the general rule is that AFSA has no power under the legislation, prior to the commencement day, to suspend a person's registration as a trustee on the grounds that the person's registration as a liquidator under the Corporations Act has been cancelled. [Schedule 1, Part 3, Division 2, Subdivision F, Section 120]

2.141 Section 40-30 of the Schedule (Cancellation of registration) applies whether or not an event mentioned in subsection 40-30(1) occurs before, on or after the commencement day. However, paragraph 40-30(1)(c) of the Schedule does not apply where a liquidator's registration is cancelled or suspended under the Corporations Act (as in force at any time before the commencement day). The reason for this exception to the general rule is that AFSA has no power under the legislation, prior to the commencement day, to cancel a person's registration as a trustee on the grounds that the person's registration as a liquidator under the Corporations Act has been cancelled. [Schedule 1, Part 3, Division 2, Subdivision F, Section 121]

2.142 Subdivision E of Division 40 of the Schedule applies whether or not an event mentioned in subsection 40-40(1) of the Schedule occurs before, on or after the commencement day. However, in relation to an event that occurs before the commencement day, paragraph 40-40(1)(p) of the Schedule has effect as if the reference in that paragraph to 'a standard prescribed for the purposes of subsection (4)' was a reference instead to 'a standard prescribed by regulations made for the purpose of subsection 155H(5) of the old Act'. This is to avoid retrospective application of the Insolvency Practice Rules. [Schedule 1, Part 3, Division 2, Subdivision F, Section 122]

2.143 Section 40-100 of the Schedule, which relates to notice by an industry body, applies whether or not the grounds to which a notice under that section relates arise because of an action, a failure to act or circumstance that occurs before, on or after the commencement day. [Schedule 1, Part 3, Division 2, Subdivision F, section 123]

Powers of the Court and other bodies

2.144 Regardless of whether or not an event in relation to which (or because of which) an order is made occurs before, on or after the commencement day, the Court may exercise its powers to make an order under section 45-1 of the Schedule. [Schedule 1, Part 3, Division 2, Subdivision G, section 124]

2.145 The Inspector-General, the Administrative Appeals Tribunal, the Court or any other body (relevant body) may decide to register or cancel a person's registration (or impose conditions on registration) as a trustee under the old Act where there is a continued application of the old Act on or after commencement day. Alternatively, the relevant body may instead act under the Schedule and modify the application of Part 3 of Schedule 2, or the Schedule by order. [Schedule 1, Part 3, Division 2, Subdivision G, Section 125]