Corporations Amendment (Insolvency) Act 2007 (132 of 2007)

Schedule 4   Fine-tuning voluntary administration

Part 2   Rights to property during administration

Corporations Act 2001

59   After section 442C

Insert:

442CA Property subject to a lien or pledge - inspection or examination by potential purchasers etc.

(1) If:

(a) a company is under administration; and

(b) property of the company is subject to a lien or pledge; and

(c) the administrator is entitled to dispose of the property by way of sale;

the holder of the lien or pledge must, if requested to do so by the administrator, give potential purchasers a reasonable opportunity to inspect or examine the property.

(2) If:

(a) a company is under administration; and

(b) property of the company is subject to a lien or pledge; and

(c) the administrator disposes of the property by way of sale;

the administrator is entitled to obtain possession of the property in order to effect the sale.

442CB Property subject to a lien or pledge or to a retention of title clause - administrator's duty of care in exercising power of sale

(1) If:

(a) a company is under administration; and

(b) property of the company is subject to a lien or pledge; and

(c) the administrator is entitled to dispose of the property by way of sale;

then, in exercising a power of sale in respect of the property, the administrator must act reasonably.

(2) If:

(a) a company is under administration; and

(b) property is used or occupied by, or is in the possession of, the company; and

(c) another person is the owner of the property; and

(d) the property is subject to a retention of title clause under a contract; and

(e) the administrator is entitled to dispose of the property by way of sale;

then, in exercising a power of sale in respect of the property, the administrator must act reasonably.

(3) Subsections (1) and (2) do not limit section 180, 181, 182, 183 or 184.

442CC Proceeds of sale of property

Property subject to a lien or pledge

(1) If:

(a) a company is under administration; and

(b) property of the company is subject to a lien or pledge; and

(c) the administrator disposes of the property by way of sale;

then:

(d) if the net proceeds of sale equals or exceeds the total of the debts secured by:

(i) the lien or pledge; and

(ii) any other security over the property, where the debt secured by the security has a priority that is equal to or higher than the priority of the debt secured by the lien or pledge;

the administrator must:

(iii) set aside so much of the net proceeds as equals the total of those debts; and

(iv) apply the amount so set aside in paying those debts; or

(e) if the net proceeds of sale fall short of the total of the debts secured by:

(i) the lien or pledge; and

(ii) any other security over the property, where the debt secured by the security has a priority that is equal to or higher than the priority of the debt secured by the lien or pledge;

then:

(iii) the administrator must set aside the net proceeds; and

(iv) the administrator must apply the amount so set aside in paying those debts in order of priority, on the basis that if the amount is insufficient to fully pay debts of the same priority, they must be paid proportionately; and

(v) if any of those debts is not fully paid - so much of the debt as remains unpaid may be recovered from the company as an unsecured debt.

Property subject to a retention of title clause

(2) If:

(a) a company is under administration; and

(b) property is used or occupied by, or is in the possession of, the company; and

(c) another person is the owner of the property; and

(d) the property is subject to a retention of title clause under a contract (the original contract ); and

(e) the administrator disposes of the property by way of sale;

then:

(f) if the net proceeds of sale equals or exceeds the total of:

(i) so much of the purchase price, or other amount, under the original contract as remains unpaid; and

(ii) if there are one or more securities over the property - the debts secured by the securities;

the administrator must:

(iii) set aside so much of the net proceeds as equals that total; and

(iv) apply the amount so set aside in paying that total; or

(g) if the net proceeds of sale fall short of the total of:

(i) so much of the purchase price, or other amount, under the original contract as remains unpaid; and

(ii) if there are one or more securities over the property - the debts secured by the securities;

then:

(iii) the administrator must set aside the net proceeds; and

(iv) the administrator must apply the amount so set aside in paying those debts in order of priority, on the basis that if the amount is insufficient to fully pay debts of the same priority, they must be paid proportionately; and

(v) if any of those debts is not fully paid - so much of the debt as remains unpaid may be recovered from the company as an unsecured debt.