Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017 (112 of 2017)

Schedule 1   Amendments

Part 2   Stay on enforcing rights merely because of arrangements or restructures

Corporations Act 2001

8   At the end of Part 5.2

Add:

434J Stay on enforcing rights merely because of the appointment of a managing controller of a corporation's property etc.

Stay on enforcing rights

(1) A right cannot be enforced against a corporation for:

(a) the reason of the appointment or existence of a managing controller of the whole or substantially the whole of the corporation's property; or

(b) the corporation's financial position, if there is a managing controller of the whole or substantially the whole of the corporation's property; or

(c) a reason, prescribed by the regulations for the purposes of this paragraph, that relates to:

(i) the appointing, or possible appointing, of a managing controller of the whole or substantially the whole of the corporation's property; or

(ii) the corporation's financial position;

if such an appointment is later made for the whole or substantially the whole of the corporation's property; or

(d) a reason that, in substance, is contrary to this subsection;

if the right arises for that reason by express provision (however described) of a contract, agreement or arrangement.

Note: This result is subject to subsections (5) and (7), and to any order under section 434K.

Example: A right to terminate a contract will not be enforceable to the extent that those rights are triggered by the appointment of a managing controller.

Period of the stay

(2) The right cannot be enforced as described in subsection (1) during the period (the stay period ) starting at the appointment of the managing controller and ending:

(a) unless paragraph (b) applies - when the managing controller's control of the corporation's property ends; or

(b) if one or more orders are made under subsection (3) for the corporation as the result of an application made before the end of the managing controller's control of the corporation's property - when the last made of those orders ceases to be in force.

(3) The Court:

(a) may order an extension of the period otherwise applying under subsection (2) for the corporation if the Court is satisfied that the extension is appropriate having regard to the interests of justice; and

(b) before deciding an application for an order under paragraph (a), may grant an interim order, but must not require the applicant to give an undertaking as to damages as a condition for doing so.

Enforcing rights after the stay for reasons relating to earlier circumstances

(4) The right is unenforceable against the corporation indefinitely after the end of the stay period to the extent that a reason for seeking to enforce the right:

(a) is the corporation's financial position before the end of the stay period; or

(b) is the appointment or existence of a managing controller of the whole or substantially the whole of the corporation's property before the end of the stay period; or

(c) is a reason, prescribed by the regulations for the purposes of this paragraph, relating to circumstances in existence during the stay period; or

(d) is a reason referred to in paragraph (1)(c) or (d).

Rights not subject to the stay

(5) Subsection (1) does not apply to the right if it is:

(a) a right under a contract, agreement or arrangement entered into after the appointment of the managing controller; or

(b) a right contained in a kind of contract, agreement or arrangement:

(i) prescribed by the regulations for the purposes of this subparagraph; or

(ii) declared under paragraph (6)(a); or

(c) a right of a kind declared under paragraph (6)(b); or

(d) a right of a kind declared under paragraph (6)(c), and the circumstances specified in that declaration exist.

(6) For the purposes of subsection (5), the Minister may, by legislative instrument:

(a) declare kinds of contracts, agreements or arrangements referred to in a specified law of the Commonwealth; or

(b) declare kinds of rights to which subsection (1) does not apply; or

(c) declare kinds of rights to which subsection (1) does not apply in specified circumstances.

(7) Subsection (1) does not apply to the right to the extent that the managing controller has consented in writing to the enforcement of the right.

Stay on corporation's right to new advance of money or credit

(8) If:

(a) one or more rights of an entity cannot be enforced against a corporation for a period because of subsection (1); and

(b) the corporation has a right under a contract, agreement or arrangement against the entity for a new advance of money or credit;

that right of the corporation cannot be enforced during the same period.

Replacement managing controllers

(9) If a new managing controller of the whole or substantially the whole of the corporation's property is appointed to replace an earlier such managing controller, then:

(a) for the purposes of subsections (2) and (5), treat the new managing controller as if it were appointed when the first such managing controller was; and

(b) treat references in subsection (2) to when the managing controller's control of the corporation's property ends as references to when the last such managing controller's control of the corporation's property ends.

434K Lifting the stay

(1) The Court may order that subsection 434J(1) does not apply for one or more rights against a corporation if the Court is satisfied that this is appropriate in the interests of justice.

(2) An application for the order may be made by the holder of those rights.

434L Order for rights to be enforceable only with leave of the Court

Orders

(1) The Court may order that one or more rights under a contract, agreement or arrangement are enforceable against a corporation only:

(a) with the leave of the Court; and

(b) in accordance with such terms (if any) as the Court imposes.

Example: The order could be sought for a right to terminate for convenience.

(2) The Court may make the order if:

(a) there is a managing controller of the whole or substantially the whole of the corporation's property; and

(b) the Court is satisfied that:

(i) the rights are being exercised; or

(ii) the rights are likely to be exercised; or

(iii) there is a threat to exercise the rights;

because of one or more reasons referred to in paragraphs 434J(1)(a) to (d); and

(c) an application for the order is made by the managing controller.

(3) An order under subsection (1) must specify the period for which it applies. In working out the period, the Court must have regard to:

(a) subsections 434J(2), (3) and (4); and

(b) the interests of justice.

(4) Subsection (1) does not apply to a right referred to in subsection 434J(5) or (7).

Interim orders

(5) Before deciding an application for an order under subsection (1), the Court may grant an interim order for one or more rights under a contract, agreement or arrangement not to be enforced against a corporation.

(6) The Court must not require an applicant for an order under subsection (1) to give an undertaking as to damages as a condition of granting an interim order.

434LA Self-executing provisions

(1) The object of subsection (2) is to ensure that a self-executing provision:

(a) cannot start to apply against a corporation for certain reasons; and

(b) can be the subject of a Court order providing that the provision can only start to apply against a corporation with the leave of the Court, and in accordance with such terms (if any) as the Court imposes.

(2) Sections 434J to 434L also apply in relation to a self-executing provision in a corresponding way to the way they apply in relation to a right. For this purpose, assume those sections apply with such modifications as are necessary, including any prescribed by the regulations for the purposes of this subsection.

Note 1: This subsection achieves the object in subsection (1) by extending the application of all of the outcomes, exceptions and powers in sections 434J to 434L.

Note 2: These modifications include, for example, treating:

(a) a reference that a right cannot be enforced (however described) as including a reference that a self-executing provision cannot start to apply; and

(b) the words "if the right arises for that reason by express provision (however described) of a contract, agreement or arrangement" as being omitted from subsection 434J(1); and

(c) a reference that one or more rights are enforceable as including a reference that one or more self-executing provisions can start to apply; and

(d) paragraph 434L(2)(b) as alternatively providing that the Court is satisfied that one or more reasons referred to in paragraphs 434J(1)(a) to (d) can cause the self-executing provisions to start to apply.

(3) In this section:

self-executing provision means a provision of a contract, agreement or arrangement that can start to apply automatically:

(a) for one or more reasons; and

(b) without any party to the contract, agreement or arrangement making a decision that the provision should start to apply.

434M When other laws prevail - certain other Commonwealth Acts

If there is any inconsistency between sections 434J to 434LA and one of the following Acts, that Act prevails to the extent of the inconsistency:

(a) the Payment Systems and Netting Act 1998;

(b) the International Interests in Mobile Equipment (Cape Town Convention) Act 2013.