Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (130 of 2020)
Schedule 3 Simplified liquidation
Corporations Act 2001
8 At the end of Division 3 of Part 5.5
Add:
Subdivision B - Simplified liquidation process for creditors' voluntary winding up of an insolvent company
500A Liquidator may adopt the simplified liquidation process
(1) The liquidator may adopt the simplified liquidation process for the purpose of winding up the affairs and distributing the property of a company in a creditors' voluntary winding up, if the liquidator believes on reasonable grounds that the eligibility criteria are met in relation to the company.
(2) However, the liquidator must not adopt the simplified liquidation process if:
(a) more than 20 business days have passed since the day on which the triggering event occurred (see section 489F); or
(b) the liquidator has not given each member and creditor of the company notice in accordance with subsection (3); or
(c) at least 25% in value of the creditors request the liquidator under section 500AB not to follow the simplified liquidation process in relation to the company.
(3) At least 10 business days before adopting the simplified liquidation process, the liquidator must give each member and creditor of the company notice in writing that includes the following:
(a) a statement that the liquidator believes on reasonable grounds that the eligibility criteria for the simplified liquidation process will be met in relation to the company when the process is adopted;
(b) an outline of the simplified liquidation process containing the prescribed information (if any);
(c) a statement that the liquidator will not adopt the simplified liquidation process if at least 25% in value of the creditors direct the liquidator in writing not to do so;
(d) prescribed information on how a creditor may give a direction in writing not to adopt the simplified liquidation process.
500AA Eligibility criteria for the simplified liquidation process
(1) The eligibility criteria for the simplified liquidation process are met in relation to a company if:
(a) a triggering event occurs in relation to the company; and
(b) subsection 497(4) (report on company's business affairs etc.) and section 498 (declaration of eligibility for simplified liquidation process)have been complied with, or are taken to have been complied with, in relation to the company; and
(c) the company will not be able to pay its debts in full within a period not exceeding 12 months after the day on which the triggering event occurs; and
(d) if the regulations prescribe a test for eligibility based on the liabilities of the company - that test is satisfied on the day on which the triggering event occurs; and
(e) no person who:
(i) is a director of the company; or
(ii) has been a director of the company within the 12 months immediately preceding the day on which the triggering event occurs;
has been a director of another company that has undergone restructuring or been the subject of a simplified liquidation processwithin a period prescribed by the regulations, unless exempt under regulations made for the purposes of subsection (2) of this section; and
(f) the company has not undergone restructuring or been the subject of a simplified liquidation process within a period prescribed by the regulations, unless exempt under regulations made for the purposes of subsection (2) of this section; and
(g) the company has given returns, notices, statements, applications or other documents as required by taxation laws (within the meaning of the Income Tax Assessment Act 1997).
(2) The regulations may prescribe:
(a) tests for eligibility based on the liabilities of companies for the purposes of paragraph (1)(d); and
(b) circumstances in which the directors of companies are exempt from the requirement in paragraph (1)(e); and
(c) circumstances in which companies are exempt from the requirement in paragraph (1)(f).
500AB Creditors may request liquidator not to follow the simplified liquidation process
A creditor of a company may, within 20 business days after the day on which a triggering event in relation to the company occurs, give the liquidator of the company notice in writing requesting the liquidator not to follow the simplified liquidation process in relation to the company.
500AC Liquidator must cease to follow the simplified liquidation process
(1) The liquidator of a company must cease to follow the simplified liquidation process:
(a) if the eligibility criteria for the simplified liquidation process are no longer met in relation to a company; or
(b) in other circumstances prescribed by the regulations.
(2) The regulations may deal with the transition from a simplified liquidation process to another process under this Chapter.
(3) Without limiting subsection (2), regulations made for the purposes of that subsection may deal with:
(a) proofs of debts and claims in relation to a company that has ceased to be subject to the simplified liquidation process; and
(b) ranking debts and claims in relation to a company that has ceased to be subject to the simplified liquidation process; and
(c) the identification of contributories in relation to a company that has ceased to be the subject of the simplified liquidation process; and
(d) the declaration and payment of a dividend in the winding up of a company that has ceased to be the subject of the simplified liquidation process; and
(e) giving information, providing reports and producing documents to ASIC in relation to a company that has ceased to be the subject of the simplified liquidation process.
(4) Regulations made for the purposes of subsection (2) may provide that this Act has effect with any modifications prescribed by the regulations.
500AD Working out whether the 25% in value of creditors test met
For the purposes of paragraph 500A(2)(c):
(a) the value of the creditors at a particular time is to be worked out by reference to the value of the creditors' claims against the company that are known at that time; and
(b) the regulations may prescribe creditors that are, or are not, to be taken into account.
500AE Simplified liquidation process
(1) The simplified liquidation process for a creditors' voluntary winding up is the process for a creditors' voluntary winding up set out in this Act, as affected by:
(a) subsection (2); and
(b) regulations made for the purposes of subsection (3).
(2) The following provisions do not apply in the simplified liquidation process:
(a) section 533;
(b) section 75-10 of Schedule 2 (external administrator may convene meetings);
(c) section 75-15 of Schedule 2 (external administrator must convene meeting in certain circumstances);
(d) section 75-20 of Schedule 2 (external administrator must convene meeting if required by ASIC);
(e) Division 80 of Schedule 2 (committees of inspection);
(f) subsections 90-23(1) to (5) and section 90-24 of Schedule 2 (appointment of reviewing liquidator by ASIC, creditors etc.).
(3) The regulations may provide for and in relation to the following:
(a) circumstances in which a transaction is not an unfair preference despite section 588FA;
(b) circumstances in which a transaction is not voidable despite section 588FE;
(c) proofs of debts and claims in relation to a company that is subject to the simplified liquidation process, including:
(i) the preparation and content of formal and informal proofs of debts and claims in relation to the company; and
(ii) the submission of formal and informal proofs of debts and claims to the liquidator of the company; and
(iii) the production of documents and information relating to proofs of debts and claims to the liquidator of the company; and
(iv) withdrawal and variation of proofs of debts and claims in relation to the company; and
(v) the admission and rejection of formal and informal proofs of debts and claims in relation to the company;
(d) the identification of contributories in relation to a company that is the subject of the simplified liquidation process;
(e) the declaration and payment of a dividend in the winding up of a company that is the subject of the simplified liquidation process;
(f) giving information, providing reports and producing documents to ASIC in relation to a company that is the subject of the simplified liquidation process.