Corporations Act 2001

CHAPTER 5 - EXTERNAL ADMINISTRATION  

PART 5.1 - ARRANGEMENTS AND RECONSTRUCTIONS  

Note: This Part applies to CCIVs with modifications: see Division 2 of Part 8B.6 .

SECTION 410  

410   INTERPRETATION  
A reference in this Part, in relation to a Part 5.1 body, to the directors is a reference to the directors of the body or any one or more of them.

SECTION 411   ADMINISTRATION OF COMPROMISES ETC.  

411(1)    
Where a compromise or arrangement is proposed between a Part 5.1 body and its creditors or any class of them or between a Part 5.1 body and its members or any class of them, the Court may, on the application in a summary way of the body or of any creditor or member of the body, or, in the case of a body being wound up, of the liquidator, order a meeting or meetings of the creditors or class of creditors or of the members of the body or class of members to be convened in such manner, and to be held in such place or places (in this jurisdiction or elsewhere), as the Court directs and, where the Court makes such an order, the Court may approve the explanatory statement required by paragraph 412(1)(a) to accompany notices of the meeting or meetings.

411(1A)    
Where:

(a)    a compromise or arrangement is proposed:


(i) between 30 or more Part 5.1 bodies that are wholly-owned subsidiaries of a holding company and the creditors or a class of the creditors of each of those subsidiaries; and

(ii) between the holding company and the creditors or a class of the creditors of the holding company; and

(b)    the proposed compromise or arrangement in relation to each subsidiary includes a term that orders will be sought under section 413 transferring the whole of the undertaking and of the property and liabilities of the subsidiary to the holding company; and

(c)    the Court is satisfied, on the application in a summary way:


(i) of the holding company or of a creditor of the holding company; or

(ii) if the holding company is being wound up - of the liquidator;
that the number of meetings that would be required between creditors in order to consider the proposed compromises or arrangements would be so great as to result in a significant impediment to the timely and effective consideration by those creditors of the terms of the compromises or arrangements;

the Court may order a meeting or meetings, on a consolidated basis, of the creditors of the holding company and of each of the subsidiaries or of such class or classes of those creditors as the Court determines and, where the Court makes such an order, the Court may approve the explanatory statement required by paragraph 412(1)(a) to accompany notices of the meeting or meetings.


411(1B)    
Where:

(a)    there are fewer than 30 wholly-owned subsidiaries of the holding company but the matters referred to in paragraphs (1A)(b) and (c) are satisfied; and


(b) the Court considers that circumstances exist that would justify its doing so;

the Court may make an order under subsection (1A) in relation to the proposed compromise or arrangement.


411(1C)    
Where an order is made under subsection (1A) in relation to a proposed compromise or arrangement, the succeeding provisions of this Part apply to the compromise or arrangement as if:

(a)    references in this Part to a company included references to all of the Part 5.1 bodies to which the order relates; and

(b)    references in this Part to creditors of a company included references to the creditors of all the Part 5.1 bodies to which the order relates; and

(c)    references in this Part to a class of the creditors of a company were references to the relevant class of creditors of all of the Part 5.1 bodies to which the order relates.

411(2)    
The Court must not make an order pursuant to an application under subsection (1) or (1A) unless:

(a)    14 days notice of the hearing of the application, or such lesser period of notice as the Court or ASIC permits, has been given to ASIC; and

(b)    the Court is satisfied that ASIC has had a reasonable opportunity:


(i) to examine the terms of the proposed compromise or arrangement to which the application relates and a draft explanatory statement relating to the proposed compromise or arrangement; and

(ii) to make submissions to the Court in relation to the proposed compromise or arrangement and the draft explanatory statement.

411(3)    
In subsection (2) , draft explanatory statement , in relation to a proposed compromise or arrangement between a body and its creditors or any class of them or between a body and its members or any class of them, means a statement:

(a)    explaining the effect of the proposed compromise or arrangement and, in particular, stating any material interests of the directors of the body, whether as directors, as members or creditors of the body or otherwise, and the effect on those interests of the proposed compromise or arrangement in so far as that effect is different from the effect on the like interests of other persons; and

(b)    setting out such information as is prescribed and any other information that is material to the making of a decision by a creditor or member of the body whether or not to agree to the proposed compromise or arrangement, being information that is within the knowledge of the directors of the body and has not previously been disclosed to the creditors or members of the body.

411(3A)    
In considering whether to make an order under subsection (1) or (1A) for a meeting to be held outside this jurisdiction, the Court must have regard to where the creditors or members, or the creditors or members included in the class concerned, as the case requires, reside.

411(4)    
A compromise or arrangement is binding on the creditors, or on a class of creditors, or on the members, or on a class of members, as the case may be, of the body and on the body or, if the body is in the course of being wound up, on the liquidator and contributories of the body, if, and only if:

(a)    

at a meeting convened in accordance with an order of the Court under subsection (1) or (1A) :

(i) in the case of a compromise or arrangement between a body and its creditors or a class of creditors - the compromise or arrangement is agreed to by a majority in number of the creditors, or of the creditors included in that class of creditors, present and voting, either in person or by proxy, being a majority whose debts or claims against the company amount in the aggregate to at least 75% of the total amount of the debts and claims of the creditors present and voting in person or by proxy, or of the creditors included in that class present and voting in person or by proxy, as the case may be; and

(ii) in the case of a compromise or arrangement between a body and its members or a class of members - a resolution in favour of the compromise or arrangement is:

(A) unless the Court orders otherwise - passed by a majority in number of the members, or members in that class, present and voting (either in person or by proxy); and

(B) if the body has a share capital - passed by 75% of the votes cast on the resolution; and

(b)    it is approved by order of the Court.


411(5)    
Where the Court orders 2 or more meetings of creditors or of a class of creditors, or 2 or more meetings of members or of a class of members, to be held in relation to the proposed compromise or arrangement:

(a)    

in the case of meetings of creditors - the meetings are, for the purposes of subsection (4) , taken together to constitute a single meeting and the votes in favour of the proposed compromise or arrangement cast at each of the meetings are to be aggregated, and the votes against the proposed compromise or arrangement cast at each of the meetings are to be aggregated, accordingly; or

(b)    

in the case of meetings of members - the meetings are, for the purposes of subsection (4) , taken together to constitute a single meeting and the votes in favour of the proposed compromise or arrangement cast at each of the meetings is [ sic ] to be aggregated, and the votes against the proposed compromise or arrangement cast at each of the meetings is [ sic ] to be aggregated, accordingly.

411(5A)    


If the compromise or arrangement:

(a)    involves creditors of the Part 5.1 body with subordinate claims (within the meaning of subsection 563A(2) ); and

(b)    is approved by the Court;

those creditors are also bound by the compromise or arrangement despite the fact that a meeting of those creditors has not been ordered by the Court under subsection (1) or (1A) .


411(6)    
The Court may grant its approval to a compromise or arrangement subject to such alterations or conditions as it thinks just.

411(6A)    


If:

(a)    the Court has granted its approval to a compromise or arrangement subject to an alteration or condition; and

(b)    the body concerned contravenes:


(i) in the case of an alteration - the provision or provisions of the compromise or arrangement to which the alteration relates; or

(ii) in the case of a condition - the condition; and

(c)    the Court is satisfied that a person suffered loss or damage as a result of the contravention;

the Court may make such order as it thinks just.


411(6B)    


The Court may make either or both of the following orders under subsection (6A) :

(a)    an order that the body concerned pay compensation to the person of such amount as the order specifies;

(b)    an order directing the body concerned to comply with:


(i) in the case of an alteration - the provision or provisions of the compromise or arrangement to which the alteration relates; or

(ii) in the case of a condition - the condition.

411(6C)    


Subsection (6B) does not limit subsection (6A) .

411(7)    
Except with the leave of the Court, a person must not be appointed to administer, and must not administer, a compromise or arrangement approved under this Act between a body and its creditors or any class of them or between a body and its members or any class of them, whether by the terms of that compromise or arrangement or pursuant to a power given by the terms of a compromise or arrangement, if the person:

(a)    

is a secured party in relation to any property (including PPSA retention of title property) of the body; or

(b)    

is an auditor of the body; or

(ba)    

is a director, secretary, senior manager or employee of the body; or

(c)    

is a director, secretary, senior manager or employee of a body corporate that is a secured party in relation to any property (including PPSA retention of title property) of the body; or

(d)    is not a registered liquidator; or

(e)    

is a director, secretary, senior manager or employee of a body corporate related to the body; or

(f)    unless ASIC directs in writing that this paragraph does not apply in relation to the person in relation to the body - has at any time within the last 12 months been an officer or promoter of the body or of a related body corporate.


411(8)    
Paragraph (7)(d) does not apply in relation to a body corporate authorised by or under a law of a State or Territory in this jurisdiction to administer the compromise or arrangement concerned.

411(8A)    
Subsection (7) does not disqualify a person from administering a compromise or arrangement under an appointment validly made before 1 January 1991.

411(9)    
Where a person is or persons are appointed by, or under a power given by, the terms of a compromise or arrangement, to administer the compromise or arrangement:

(a)    

sections 422A , 422B and 425 , subsections 427(2) and (4) and sections 428 , 432 and 434 apply in relation to that person or those persons as if:

(i) the appointment of the person or persons to administer the compromise or arrangement were an appointment of the person or persons as a receiver and manager, or as receivers and managers, of property of the body; and

(ii) a reference in any of those sections or subsections to a receiver, or to a receiver of property, of a corporation were a reference to that person or to those persons; and

(b)    Subdivision B (court powers to inquire and make orders) of Division 90 of Schedule 2 applies in relation to that person or those persons as if:


(i) the appointment of the person or persons to administer the compromise or arrangement were an appointment of the person or persons as an external administrator of the body; and

(ii) a reference in that Subdivision to an external administration were a reference to the administration of the compromise or arrangement; and

(iii) a reference in that Subdivision to an external administrator were a reference to that person or to those persons.

411(10)    
An order of the Court made for the purposes of paragraph (4)(b) does not have any effect until an office copy of the order is lodged with ASIC, and upon being so lodged, the order takes effect, or is taken to have taken effect, on and from the date of lodgment or such earlier date as the Court determines and specifies in the order.


411(11)    
Subject to subsection (12) , a copy of every order of the Court made for the purposes of paragraph (4)(b) must be annexed to every copy of the constitution of the body issued after the order has been made.

411(12)    
The Court may, by order, exempt a body from compliance with subsection (11) or determine the period during which the body must comply with that subsection.

411(13)    
Where a compromise or arrangement referred to in subsection (1) or (1A) (whether or not for the purposes of or in connection with a scheme for the reconstruction of a body or bodies or the amalgamation of any 2 or more bodies) has been proposed, the directors of the body must:

(a)    if a meeting of the members of the body by resolution so directs - instruct such accountants or solicitors or both as are named in the resolution to report on the proposals and send their report or reports to the directors as soon as practicable; and

(b)    if a report or reports is or are obtained pursuant to paragraph (a) - make the report or reports available at the registered office of the body for inspection by the shareholders and creditors of the body at least 7 days before the day of the meeting ordered by the Court to be convened as provided in subsection (1) or (1A) , as the case may be.

411(14)    
If default is made in complying with subsection (11) , the body contravenes this subsection.

411(15)    
If default is made in complying with subsection (13) , each director of the body contravenes this subsection.

411(16)    
Where no order has been made or resolution passed for the winding up of a Part 5.1 body and a compromise or arrangement has been proposed between the body and its creditors or any class of them, the Court may, in addition to exercising any of its other powers, on the application in a summary way of the body or of any member or creditor of the body, restrain further proceedings in any action or other civil proceeding against the body except by leave of the Court and subject to such terms as the Court imposes.

411(17)    
The Court must not approve a compromise or arrangement under this section unless:

(a)    it is satisfied that the compromise or arrangement has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6 ; or

(b)    there is produced to the Court a statement in writing by ASIC stating that ASIC has no objection to the compromise or arrangement;

but the Court need not approve a compromise or arrangement merely because a statement by ASIC stating that ASIC has no objection to the compromise or arrangement has been produced to the Court as mentioned in paragraph (b).


SECTION 412   INFORMATION AS TO COMPROMISE WITH CREDITORS  

412(1)    
Where a meeting is convened under section 411 , the body must:

(a)    with every notice convening the meeting that is sent to a creditor or member, send a statement (in this section called the explanatory statement ):


(i) explaining the effect of the compromise or arrangement and, in particular, stating any material interests of the directors, whether as directors, as members or creditors of the body or otherwise, and the effect on those interests of the compromise or arrangement in so far as that effect is different from the effect on the like interests of other persons; and

(ii) setting out such information as is prescribed and any other information that is material to the making of a decision by a creditor or member whether or not to agree to the compromise or arrangement, being information that is within the knowledge of the directors and has not previously been disclosed to the creditors or members; and

(b)    

in every notice convening the meeting that is given by advertisement or that is published in the prescribed manner, include either a copy of the explanatory statement or a notification of the place at which and the manner in which creditors or members entitled to attend the meeting may obtain copies of the explanatory statement.

412(2)    
In the case of a creditor whose debt does not exceed $200, paragraph (1)(a) does not apply unless the Court otherwise orders but the notice convening the meeting that is sent to such a creditor must specify a place at which a copy of the explanatory statement can be obtained on request and, where the creditor makes such a request, the body must as soon as practicable comply with the request.

412(3)    
Where the compromise or arrangement affects the rights of debenture holders, the explanatory statement must specify any material interests of the trustees for the debenture holders, whether as such trustees, as members or creditors of the body or otherwise, andthe effect on those interests of the compromise or arrangement in so far as that effect is different from the effect on the like interests of other persons.

412(4)    


Where a notice given by advertisement, or published in the prescribed manner, includes a notification that copies of the explanatory statement can be obtained in a particular manner, every creditor or member entitled to attend the meeting must, on making application in that matter, be furnished by the body free of charge with a copy of the explanatory statement.

412(5)    
Each person who is a director or trustee for debenture holders must give notice to the body of such matters relating to the person as are required to be included in the explanatory statement.

412(6)    
In the case of a compromise or arrangement that is not, or does not include, a compromise or arrangement between a Part 5.1 body and its creditors or any class of them, the body must not send out an explanatory statement pursuant to subsection (1) unless a copy of that statement has been registered by ASIC.


412(7)    
Where an explanatory statement sent out under subsection (1) is not required by subsection (6) to be registered by ASIC, the Court must not make an order approving the compromise or arrangement unless it is satisfied that ASIC has had a reasonable opportunity to examine the explanatory statement and to make submissions to the Court in relation to that statement.


412(8)    
Where a copy of an explanatory statement is lodged with ASIC for registration under subsection (6) , ASIC must not register the copy of the statement unless the statement appears to comply with this Act and ASIC is of the opinion that the statement does not contain any matter that is false in a material particular or materially misleading in the form or context in which it appears.


412(9)    
Where a body contravenes this section, a person involved in the contravention contravenes this subsection.

412(10)    
It is a defence to a prosecution for a contravention of this section if it is proved that the contravention was due to the failure of a person (other than the defendant), being a director of the body or a trustee for debenture holders of the body, to supply for the purposes of the explanatory statement particulars of the person ' s interests.

SECTION 413   PROVISIONS FOR FACILITATING RECONSTRUCTION AND AMALGAMATION OF PART 5.1 BODIES  

413(1)    
Where an application is made to the Court under this Part for the approval of a compromise or arrangement and it is shown to the Court that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of a Part 5.1 body or Part 5.1 bodies or the amalgamation of 2 or more Part 5.1 bodies and that, under the scheme, the whole or any part of the undertaking or of the property of a body concerned in the scheme (in this section called the transferor body ) is to be transferred to a company (in this section called the transferee company ), the Court may, either by the order approving the compromise or arrangement or by a later order, provide for all or any of the following matters:

(a)    the transfer to the transferee company of the whole or a part of the undertaking and of the property or liabilities of the transferor body;

(b)    the allotting or appropriation by the transferee company of shares, debentures, policies or other interests in that company that, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person;

(c)    the continuation by or against the transferee company of any legal proceedings pending by or against the transferor body;

(d)    if the transferor body is a company - the deregistration by ASIC, without winding up, of the transferor body;

(e)    the provision to be made for any persons who, within such time and in such manner as the Court directs, dissent from the compromise or arrangement;

(f)    the transfer or allotment of any interest in property to any person concerned in the compromise or arrangement;

(g)    such incidental, consequential and supplemental matters as are necessary to ensure that the reconstruction or amalgamation is fully and effectively carried out.


413(2)    


Where an order made under this section provides for the transfer of property or liabilities, then, by virtue of the order, that property is transferred to and vests in, and those liabilities are transferred to and become the liabilities of, the transferee company, free, in the case of any particular property if the order so directs, from any security interest that is, by virtue of the compromise or arrangement, to cease to have effect.

413(3)    
Where an order is made under this section, each body to which the order relates must, within 14 days after the making of the order, lodge with ASIC an office copy of the order.


413(4)    
In this section:

liabilities
includes duties of any description, including duties that are of a personal character or are incapable under the general law of being assigned or performed vicariously.

property
includes rights and powers of any description, including rights and powers that are of a personal character and are incapable under the general law of being assigned or performed vicariously.


SECTION 414   ACQUISITION OF SHARES OF SHAREHOLDERS DISSENTING FROM SCHEME OR CONTRACT APPROVED BY MAJORITY  

414(1)    
In this section:

dissenting shareholder
, in relation to a scheme or contract, means a shareholder who has not assented to the scheme or contract or who has failed to transfer his, her or its shares in accordance with the scheme or contract.

excluded shares
, in relation to a scheme or contract involving a transfer to a person of shares in a class of shares in a company, means shares in that class that, when the offer relating to the scheme or contract is made, are held by:


(a) in any case - the person or a nominee of the person; or


(b) if the person is a body corporate - a subsidiary of the body.


414(2)    


Where a scheme or contract (not being a scheme or contract arising out of the making of offers under a takeover bid) involving a transfer of shares in a class of shares in a company (in this section called the transferor company ) to a person (in this section called the transferee ) has, within 4 months after the making of the offer relating to the scheme or contract by the transferee, been approved by members holding shares in that class carrying at least 90% of the votes attached to shares in that class (other than excluded shares), the transferee may, within 2 months after the offer has been so approved, give notice, in accordance with the requirements mentioned in subsection (10B) (if applicable), to a dissenting shareholder that the transferee wishes to acquire the shares held by that shareholder.

414(3)    
Where such a notice is given, then, unless the Court orders otherwise on an application by a dissenting shareholder made within one month after the day on which the notice was given or within 14 days after a statement is supplied under subsection (7) to a dissenting shareholder, whichever is the later, the transferee is entitled and bound, subject to this section, to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders are to be transferred to the transferee.

414(4)    
Where alternative terms were offered to the approving shareholders, the dissenting shareholder is entitled to elect not later than the end of one month after the date on which the notice is given under subsection (2) or 14 days after a statement is supplied under subsection (7) , whichever is the later, which of those terms he, she or it prefers and, if he, she or it fails to make the election within the time allowed by this subsection, the transferee may, unless the Court otherwise orders, determine which of those terms is to apply to the acquisition of the shares of the dissenting shareholder.

414(5)    
Despite subsections (3) and (4) , if the number of votes attached to the excluded shares is more than 10% of the votes attached to the excluded shares and the shares (other than excluded shares) to be transferred under the scheme or contract, those subsections do not apply unless:

(a)    the transferee offers the same terms to all holders of the shares (other than excluded shares) to be transferred under the scheme or contract; and

(b)    the holders who approve the scheme or contract hold shares to which are attached at least 90% of the votes attached to the shares (other than excluded shares) to be transferred under the scheme or contract and are also at least 75% in number of the holders of those shares.

414(6)    
For the purposes of paragraph (5)(b) , 2 or more persons registered as holding shares jointly are to be counted as one person.

414(7)    
When a notice is given under subsection (2) , the dissentingshareholder may, by written notice given to the transferee within one month after the day on which the notice was given under subsection (2) , ask for a statement in writing of the names and addresses of all other dissenting shareholders as shown in the register of members.

414(8)    
Where a notice is given under subsection (7) , the transferee must comply with it.

414(9)    
Where, under a scheme or contract referred to in subsection (2) , the transferee becomes beneficially entitled to shares in the transferor company which, together with any other shares in the transferor company to which the transferee or, where the transferee is a body corporate, a body corporate related to the transferee is beneficially entitled, have attached to them at least 90% of the votes attached to the shares included in the class of shares concerned, then:

(a)    

the transferee must, within one month after the date on which he, she or it becomes beneficially entitled to those shares (unless in relation to the scheme or contract he, she or it has already complied with this requirement), give notice of the fact, in accordance with the requirements mentioned in subsection (10B) (if applicable), to the holders of the remaining shares included in that class who, when the notice was given, had not assented to the scheme or contract or been given notice by the transferee under subsection (2) ; and

(b)    such a holder may, within 3 months after the giving of the notice to him, her or it by notice to the transferee, require the transferee to acquire his, her or its share and, where alternative terms were offered to the approving shareholders, elect which of those terms he, she or it will accept.


414(10)    
Where a shareholder gives notice under paragraph (9)(b) with respect to his, her or its shares, the transferee is entitled and bound to acquire those shares:

(a)    on the terms on which under the scheme or contract the shares of the approving shareholders were transferred to him, her or it and, where alternative terms were offered to those shareholders, on the terms for which the shareholder has elected, or where he, she or it has not so elected, for whichever of the terms the transferee determines; or

(b)    on such other terms as are agreed or as the Court, on the application of the transferee or of the shareholder, thinks fit to order.

414(10A)    


Without limiting the manner in which a notice mentioned in subsection (2) or paragraph (9)(a) may be given to a shareholder, the notice may be given to the shareholder personally.

414(10B)    


If a notice mentioned in subsection (2) or paragraph (9)(a) is given to a shareholder:

(a)    by sending the notice in a physical form in accordance with paragraph 110D(1)(a) ; or

(b)    by sending information in a physical form in accordance with paragraph 110D(1)(b) ;

the notice or information must be sent by prepaid post to the shareholder ' s address shown in the books of the transferor company.


414(11)    
Subsections (12) and (13) apply where a notice has been given under subsection (1) unless the Court, on an application made by the dissenting shareholder, orders to the contrary.

414(12)    
The transferee must, within 14 days after:

(a)    the end of one month after the day on which the notice was given; or

(b)    the end of 14 days after a statement under subsection (7) is supplied; or

(c)    if an application has been made to the Court by a dissenting shareholder - the application is disposed of;

whichever last happens:

(d)    send a copy of the notice to the transferor company together with an instrument of transfer that relates to the shares that the transferee is entitled to acquire under this section and is executed, on the shareholder ' s behalf, by a person appointed by the transferee and, on the transferee ' s own behalf, by the transferee; and

(e)    pay, allot or transfer to the transferor company the consideration for the shares.

414(13)    
When the transferee has complied with subsection (12) , the transferor company must register the transferee as the holder of the shares.

414(14)    
All sums received by the transferor company under this section must be paid into a separate bank account and those sums, and any other consideration so received, must be held by that company in trust for the several persons entitled to the shares in respect of which they were respectively received.

414(15)    
Where a sum or other property received by a company under this section has been held in trust by the company for a person for at least 2 years (whether or not that period began before the commencement of this Act), the company must, before the end of 10 years after the day on which the sum was paid, or the consideration was allotted or transferred, to the company, pay the sum or transfer the consideration, and any accretions to it and any property that may become substituted for it or for part of it, to ASIC to be dealt with under Part 9.7 .

SECTION 415   NOTIFICATION OF APPOINTMENT OF SCHEME MANAGER AND POWER OF COURT TO REQUIRE REPORT  

415(1)    
Within 14 days after being appointed to administer a compromise or arrangement approved under this Part, a person must lodge a notice in writing of the appointment.


415(2)    
Where an application is made to the Court under this Part in relation to a proposed compromise or arrangement, the Court may:

(a)    before making any order on the application, require ASIC or another person specified by the Court to give to the Court a report as to the terms of the compromise or arrangement or of the scheme for the purposes of or in connection with which the compromise or arrangement has been proposed, the conduct of the officers of the body or bodies concerned and any other matters that, in the opinion of ASIC or that person, ought to be brought to the attention of the Court;

(b)    in deciding the application, have regard to anything contained in the report; and

(c)    make such order or orders as to the payment of the costs of preparing and giving the report as the Court thinks fit.

SECTION 415A   OUTCOME OF VOTING AT CREDITORS ' MEETING DETERMINED BY RELATED ENTITY - COURT POWERS  

415A(1)    
Subsection (3) applies if, on the application of a creditor of a Part 5.1 body, the Court is satisfied of the following matters:


(a) a proposed resolution has been voted on at a meeting of creditors, or of a class of creditors, of the body held under this Part;


(b) that, if the vote or votes that a particular related creditor, or particular related creditors, of the body cast on the proposed resolution had been disregarded for the purposes of determining whether or not the proposed resolution was passed, the proposed resolution:


(i) if it was in fact passed - would not have been passed; or

(ii) if in fact it was not passed - would have been passed;

or the question would have had to be decided on a casting vote;


(c) that the passing of the proposed resolution, or the failure to pass it, as the case requires:


(i) is contrary to the interests of the creditors as a whole or of that class of creditors as a whole, as the case may be; or

(ii) has prejudiced, or is reasonably likely to prejudice, the interests of the creditors who voted against the proposed resolution, or for it, as the case may be, to an extent that is unreasonable having regard to the matters in subsection (2).

415A(2)    
The matters are:


(a) the benefits resulting to the related creditor, or to some or all of the related creditors, from the resolution, or from the failure to pass the proposed resolution, as the case may be; and


(b) the nature of the relationship between the related creditor and the body, or of the respective relationships between the related creditors and the body; and


(c) any other relevant matter.

415A(3)    
The Court may make one or more of the following:


(a) if the proposed resolution was passed - an order setting aside the resolution;


(b) an order that the proposed resolution be considered and voted on at a meeting of the creditors of the body, or of that class of creditors, as the case may be, convened and held as specified in the order;


(c) an order directing that the related creditor is not, or such of the related creditors as the order specifies are not, entitled to vote on:


(i) the proposed resolution; or

(ii) a resolution to amend or vary the proposed resolution;


(d) such other orders as the Court thinks necessary.

415A(4)    
In this section:

related creditor
, in relation to a Part 5.1 body, in relation to a vote, means a person who, when the vote was cast, was a related entity, and a creditor, of the body.


SECTION 415B   INTERIM ORDER ON APPLICATION UNDER SECTION 415A  

415B(1)    
If:


(a) an application under subsection 415A(1) has not yet been determined; and


(b) the Court is of the opinion that it is desirable to do so;

the Court may make such interim orders as it thinks appropriate.


415B(2)    
An interim order must be expressed to apply until the application is determined, but may be varied or discharged.

SECTION 415C  

415C   ORDER UNDER SECTION 415A DOES NOT AFFECT ACT ALREADY DONE PURSUANT TO RESOLUTION  
An act done pursuant to a resolution as in force before the making, under section 415A , of an order setting aside or varying the resolution, is as valid and binding on and after the making of the order as if the order had not been made.

SECTION 415D   STAY ON ENFORCING RIGHTS MERELY BECAUSE OF A PROCEEDING UNDER THIS PART ETC.  


Stay on enforcing rights

415D(1)    
A right cannot be enforced against a body for:


(a) the reason that the body, if it is a disclosing entity, has publicly announced that it will be making an application under section 411 for the purpose of avoiding being wound up in insolvency; or


(b) the reason that the body is the subject of an application under section 411 ; or


(c) the reason that the body is the subject of a compromise or arrangement approved under this Part as a result of an application under section 411 ; or


(d) the body ' s financial position, if the body is the subject of such an announcement, application, compromise or arrangement; or


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


(i) the making, or possible making, of such an announcement, application, compromise or arrangement about the body; or

(ii) the body ' s financial position;

if such an announcement, application, compromise or arrangement is later made about the body; or


(f) 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), (6) and (8), and to any order under section 415E .

Example: A right to terminate a contract will not be enforceable to the extent that those rights are triggered by the body becoming the subject of such an announcement, application, compromise or arrangement.



Period of the stay

415D(2)    
The right cannot be enforced as described in subsection (1) during the period (the stay period ) that:


(a) starts:


(i) if the body makes an announcement referred to in paragraph (1)(a) - when the announcement is made; or

(ii) otherwise - when the application under section 411 is made; and


(b) ends:


(i) if the body makes an announcement referred to in paragraph (1)(a), and fails to make the announced application within the next 3 months or within any period ordered under subsection (3) for the body - at the end of the longer of those periods; or

(ii) when the application under section 411 is withdrawn or when the Court dismisses the application; or

(iii) unless subparagraph (iv) applies - at the end of any compromise or arrangement approved under this Part as a result of the application under section 411 ; or

(iv) if such a compromise or arrangement ends because of a resolution or order for the body to be wound up - when the body ' s affairs have been fully wound up.

415D(3)    
The Court may order a longer period than the 3 months otherwise applying under subparagraph (2)(b)(i) for the body if the Court is satisfied that the longer period is appropriate having regard to the interests of justice.

Enforcing rights after the stay for reasons relating to earlier circumstances

415D(4)    
The right is unenforceable against the body indefinitely after the end of the stay period to the extent that a reason for seeking to enforce the right:


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


(b) is the body having been the subject of any of the following before the end of the stay period:


(i) an announcement referred to in paragraph (1)(a);

(ii) an application under section 411 ;

(iii) a compromise or arrangement approved under this Part as a result of an application under section 411 ; 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)(e) or (f).

Application must be made to avoid insolvency

415D(5)    
However, subsection (1) does not apply, and is taken never to have applied, if the application under section 411 fails to state that it is being made for the purpose of the body avoiding being wound up in insolvency.

Rights not subject to the stay

415D(6)    
Subsection (1) does not apply to the right if it is:


(a) a right under a contract, agreement or arrangement entered into after the day the order (if any) approving under this Part a compromise or arrangement as a result of the application takes effect; 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 (7)(a); or


(c) a right of a kind:


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

(ii) declared under paragraph (7)(b); or


(d) a right of a kind declared under paragraph (7)(c), and the circumstances specified in that declaration exist.

Note: For paragraph (a), subsection 411(10) sets out when the order takes effect.


415D(7)    
For the purposes of subsection (6), 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.

415D(8)    
If the application under section 411 results in the approval under this Part of a compromise or arrangement, subsection (1) does not apply to the right to the extent that:


(a) the person appointed to administer the compromise or arrangement; or


(b) if a liquidator of the body is appointed after the start of the stay period - the liquidator;

has consented in writing to the enforcement of the right.



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

415D(9)    
If:


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


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

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


SECTION 415E   LIFTING THE STAY  

415E(1)    
The Court may order that subsection 415D(1) does not apply for one or more rights against a body if the Court is satisfied:


(a) that the relevant compromise or arrangement:


(i) to be applied for; or

(ii) applied for; or

(iii) approved;

under this Part is not for the purpose of the body avoiding being wound up in insolvency; or


(b) that this is appropriate in the interests of justice.

415E(2)    
The order may also provide that the holder of those rights may choose to enforce those rights from the earlier of:


(a) the day any announcement referred to in paragraph 415D(1)(a) was made by the body; and


(b) the day any application under section 411 was made for the compromise or arrangement.

415E(3)    
An application for the order may be made by the holder of those rights.

SECTION 415F   ORDER FOR RIGHTS TO BE ENFORCEABLE ONLY WITH LEAVE OF THE COURT  


Orders

415F(1)    
The Court may order that one or more rights under a contract, agreement or arrangement are enforceable against a body 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.


415F(2)    
The Court may make the order (the stay order ) if:


(a) the body is the subject of any of the following:


(i) an announcement referred to in paragraph 415D(1)(a) ;

(ii) an application under section 411 (the section 411 application );

(iii) a compromise or arrangement approved under this Part as a result of a section 411 application; 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 415D(1)(a) to (f); and


(c) an application for the stay order is:


(i) if the body has made an announcement referred to in paragraph 415D(1)(a) , but not yet a section 411 application - made by the body; or

(ii) if the body has made a section 411 application, but a resulting compromise or arrangement is yet to be approved under this Part - included in the section 411 application; or

(iii) if a compromise or arrangement has been approved under this Part as a result of the section 411 application - made by the person appointed to administer the compromise or arrangement; and


(d) in a case where the body has made a section 411 application - the section 411 application states it is being made for the purpose of the body avoiding being wound up in insolvency.

415F(3)    
A stay order must specify the period for which it applies. In working out the period, the Court must have regard to:


(a) subsections 415D(2) , (3) and (4) ; and


(b) the interests of justice.

415F(4)    
Subsection (1) does not apply to a right referred to in subsection 415D(6) or (8) .

Interim orders

415F(5)    
Before deciding an application for a stay order, the Court may grant an interim order for one or more rights under a contract, agreement or arrangement not to be enforced against a body.

415F(6)    
The Court must not require an applicant for a stay order to give an undertaking as to damages as a condition of granting an interim order.

SECTION 415FA   SELF-EXECUTING PROVISIONS  

415FA(1)    
The object of subsection (2) is to ensure that a self-executing provision:


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


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

415FA(2)    
Sections 415D to 415F also apply in relation to a self-executing provision in a corresponding way to the way they apply inrelation 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 415D to 415F .

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 415D(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 415F(2)(b) as alternatively providing that the Court is satisfied that one or more reasons referred to in paragraphs 415D(1)(a) to (f) can cause the self-executing provisions to start to apply.

  • 415FA(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.


    SECTION 415G  

    415G   WHEN OTHER LAWS PREVAIL - CERTAIN OTHER COMMONWEALTH ACTS  


    If there is any inconsistency between sections 415D to 415FA 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 .