Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (130 of 2020)

Schedule 2   Temporary relief for companies seeking a restructuring practitioner

Corporations Act 2001

2   At the end of Division 7 of Part 5.3B

Add:

458D Meaning of restructuring relief period

In this Act:

restructuring relief period means the period:

(a) beginning on 1 January 2021; and

(b) ending on 31 March 2021.

458E When is a company eligible for temporary restructuring relief ?

When is a company eligible for temporary restructuring relief?

(1) A company is eligible for temporary restructuring relief if:

(a) before the end of the restructuring relief period, the directors of the company:

(i) make a declaration in writing that sets out the matters mentioned in paragraphs (b), (c) and (d) and, if there is a prescribed form for the declaration, is in the prescribed form; and

(ii) publish notice of the declaration in the prescribed manner; and

(b) there are reasonable grounds to believe that:

(i) the company is insolvent, or is likely to become insolvent before the declaration under subparagraph (a)(i) expires; and

(ii) the eligibility criteria for restructuring would be met in relation to the company if a restructuring practitioner were appointed on the day on which notice of the declaration under subparagraph (a)(i) is published, or on any day afterwards on which the declaration has not expired; and

(c) the board has resolved to the effect that a restructuring practitioner for the company should be appointed; and

(d) there is no:

(i) restructuring practitioner for the company; or

(ii) restructuring practitioner for a restructuring plan made by the company that has not yet terminated; or

(iii) administrator of the company; or

(iv) administrator of a deed of company arrangement executed by the company that has not yet terminated; or

(v) liquidator or provisional liquidator of the company; and

(e) the declaration under subparagraph (a)(i) has not expired; and

(f) the company has not otherwise ceased to be eligible for temporary restructuring relief for any reason; and

(g) the company has not previously been eligible for temporary restructuring relief that has ceased:

(i) because a previous declaration under subparagraph (a)(i) has expired; or

(ii) for any other reason.

(2) A declaration under subparagraph (1)(a)(i) in relation to a company expires:

(a) 3 months after notice of the declaration is first published in the prescribed manner (the initial relief period ); or

(b) a further one month after the initial relief period if:

(i) paragraphs (1)(b), (c) and (d) continue to be satisfied in relation to the company; and

(ii) the directors of the company have taken all reasonable steps to appoint a restructuring practitioner but have been unable to do so; and

(iii) the directors of the company make a further declaration under subsection (3), and publish notice of that declaration in the prescribed manner; and

(iv) notice of the further declaration is published no later than 2 weeks before the end of the initial relief period.

(3) A declaration by the directors of a company under this subsection must:

(a) state that paragraphs (1)(b), (c) and (d) continue to be satisfied in relation to the company; and

(b) set out:

(i) the steps that the company has taken to appoint a restructuring practitioner; and

(ii) the steps that the company intends to take to appoint a restructuring practitioner before the declaration under subparagraph (1)(a)(i) expires, if extended under paragraph (2)(b); and

(c) be in writing; and

(d) if there is a prescribed form for the declaration - be in the prescribed form.

Giving ASIC copies of declarations under this section

(4) If the directors of a company publish notice of a declaration as mentioned in subparagraph (1)(a)(ii) or (2)(b)(iii), they must give ASIC a copy of the declaration no later than 5 business days after doing so.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

When does a company cease to be eligible for temporary restructuring relief?

(5) A company ceases to be eligible for temporary restructuring relief if:

(a) the declaration under subparagraph (1)(a)(i) under which the company was eligible for temporary restructuring relief expires; or

(b) the directors of the company fail to comply with subsection (4); or

(c) a small business restructuring practitioner for the company is appointed under section 453B; or

(d) an administrator of the company is appointed under section 436A, 436B or 436C; or

(e) a liquidator, or provisional liquidator, is appointed to wind up the company; or

(f) the company publishes notice under subsection 458F(1) or (2) that the company is not, or is not to be treated as, eligible for temporary restructuring relief; or

(g) the Court orders under section 458G that the company is not eligible for temporary restructuring relief.

458F Directors declare company not eligible for temporary restructuring relief

(1) The directors of a company contravene this subsection if:

(a) there are not reasonable grounds to believe either or both of the following:

(i) that the company is insolvent, or is likely to become insolvent before the declaration under subparagraph 458E(1)(a)(i) expires;

(ii) that the eligibility criteria for restructuring would be met in relation to the company if a restructuring practitioner were appointed on the day on which notice of the declaration under subparagraph 458E(1)(a)(i) is published, or on any day afterwards on which the declaration has not expired; and

(b) one or more of the directors becomes aware of that fact; and

(c) the directors do not, within 5 business days after one or more of the directors becoming aware of that fact:

(i) make a declaration in writing that the company is not eligible for temporary restructuring relief; and

(ii) publish notice of the declaration in the prescribed manner; and

(iii) give ASIC a copy of the declaration.

Note: This subsection is a civil penalty provision (see section 1317E).

(2) The directors of a company may:

(a) make a declaration in writing that the company is not to be treated as eligible for temporary restructuring relief for any other reason; and

(b) publish notice of the declaration in the prescribed manner.

(3) If the directors of a company make a declaration under paragraph (2)(a), the directors must give ASIC a copy of the declaration within 5 business days after doing so.

458G Court order that company not eligible for temporary restructuring relief

(1) The Court may order that a company is not eligible for temporary restructuring relief if there are not reasonable grounds to believe any of the following:

(a) the company is insolvent, or is likely to become insolvent before the declaration under paragraph 458E(1)(a) expires;

(b) the eligibility criteria for restructuring would be met in relation to the company if a restructuring practitioner were appointed on any day after notice of the declaration made under subparagraph 458E(1)(a)(i) is published on which the declaration has not expired;

(c) the company has taken all reasonable steps to appoint a restructuring practitioner;

(d) the company will take all reasonable steps to appoint a restructuring practitioner before the expiry of the declaration made by the company under subsection 458E(1).

(2) The Court may make an order under subsection (1):

(a) on the application of:

(i) a creditor of the company; or

(ii) ASIC; or

(b) on the Court's own initiative.

(3) If the Court makes an order in relation to a company under subsection (1), the directors of the company must within 5 business days after the order is made:

(a) publish notice of the order in the prescribed manner; and

(b) give ASIC a copy of the order.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(4) Nothing in this section limits the power of the Court to make an order that a company is not eligible for temporary restructuring relief for any other reason.

458H Obligation on registered liquidator to report

A registered liquidator contravenes this section if:

(a) the directors of a company have published under subparagraph 458E(1)(a)(ii) notice of a declaration under subparagraph 458E(1)(a)(i) that has not expired; and

(b) the registered liquidator suspects that there are not reasonable grounds to believe either or both of the following:

(i) the company is insolvent, or is likely to become insolvent before the declaration under subparagraph 458E(1)(a)(i) expires;

(ii) the eligibility criteria for restructuring would be met in relation to the company if a restructuring practitioner were appointed on the day on which notice of the declaration made under subparagraph 458E(1)(a)(i) is published, or on any day afterwards on which the declaration has not expired; and

(c) the company has not ceased to be eligible for temporary restructuring relief under subsection 458E(5); and

(d) the registered liquidator does not give ASIC notice in writing setting out the registered liquidator's reasons for forming the suspicion mentioned in paragraph (b) of this section, within 5 business days after first forming the suspicion.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).