Explanatory Memorandum
(Circulated by the authority of the Attorney-General, the Honourable Robert McClelland MP)SCHEDULE 1 - Corporations Act 2001
Clarify references to registrable charges
Items 1, 2 and 13
4. The Corporations Act provides that there can be constructive knowledge of documents lodged with ASIC which relate to charges that are registrable under the Corporations Act (s 130).
5. However, because after the registration commencement time (RCT) the Corporations Act will no longer require the lodgement of charge notices for registration, charges may no longer be registrable (in terms of the definition in the Corporations Act).
6. While this amendment will delete the constructive knowledge provision, the second part of item 13 will retain the rule in s 130 after the RCT in relation to charges that were registrable charges and registered with ASIC before the RCT.
Retain the existing liability of receivers and voluntary administrators for transactions entered into by the company before their appointment
Items 3, 4 and 6
7. The Corporations Act currently provides that controllers and voluntary administrators are personally liable for payments owing under certain transactions entered into by a company before the commencement of the receivership or administration, unless the controller or voluntary administrator specifically disclaims the transaction (s 419A and 443B).
8. The 2010 PPS Act removed a receiver's liability for these transactions in respect of retention of title property and also removed the administrator's ability to avoid liability for transactions in respect of retention of title property (PPSA retention of title property is personal property that is used or occupied by, or in the possession of a corporation where the corporation does not have title to the property and a PPSA security interest is attached to the property, within the meaning of the PPS Act and the corporation is the grantor of the PPSA security interest).
9. Therefore, these measures amend s 419A and s 443B so that receivers and administrators would continue to be liable and be able to disclaim transactions in respect of retention of title property to the same extent as they can for other property. That is, the status quo would apply to all future secured transactions, including those in respect of retention of title property.
Retain existing arrangements for the enforcement of liens and pledges
Item 5
10. Currently, the holder of a pledge or lien against a company may enforce their lien or pledge by selling the secured property, applying the proceeds towards the amount owed under the lien or pledge, and paying the balance to the company (s 441JA). However, the holder of the pledge or lien may only exercise this power if the pledge or lien is not subordinate to another security interest.
11. The 2010 PPS Act replaced s 441JA with a new s 441EA, which replaced references to liens and pledges with the term possessory security interests. However, the new s 441EA failed to retain the requirement that the lien or pledge not be subordinate to another security interest.
12. The proposed amendment to s 441EA would retain the requirement that the lien or pledge may only be enforced if it is not subordinate to another security interest.
Removing vesting of security interests that are registered late under a foreign law
Items 7, 8, 9, 10 and 11
13. Existing s 266 of the Corporations Act encourages the registration of company charges, as the failure to do so could result in a charge becoming void.
14. Because Chapter 2K of the Corporations Act has been repealed (it will be replaced with Chapter 5 of the PPS Act, s 266 will be replaced with s 588FL, which will have the same purpose as s 266.
15. Section 588FL(2) applies where a security interest has been registered in Australia and provides that a security interest will vest in the grantor where they have not been perfected by registration within six months of the winding up of the company, an administrator being appointed or a deed of company arrangement being executed. Section 588FL(3) is analogous to s 588FL(2) but applies where a security interest has been registered under the law of another country before the company enters into certain forms of external administration.
16. However, it would be preferable for the consequences for failing to register on a foreign register to be determined by the jurisdiction that established the registration requirement. Therefore this measure repeals s 588FL(3).
Clarify that the Bill does not affect a secured party's capacity to appoint a company administrator under a transitional security agreement (or veto the appointment)
Item 13
17. Under the Corporations Act, persons with a charge over the whole or substantially the whole of a company's assets have the power to appoint an administrator to the company.
18. However, it may not be clear that the transitional arrangements under the 2010 PPS Act retain the status quo and that a person who currently has a charge over the whole or substantially the whole of the company property would have a security interest over the whole or substantially the whole of the company property after the RCT, and retain their right to appoint an administrator.
19. The inclusion of this proposed provision in the Corporations Act would clarify that, when determining whether a person has a charge arising under a security agreement entered into before the RCT, PPSA retention of title property is to be disregarded.
Minor technical amendments
Item 12
20. This amendment corrects an incorrect section reference.