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Bankruptcy proposals

Explains how proposals work and what we consider.

Last updated 29 September 2022

How proposals work

As trustee, you may wish to make a proposal under Part IX and Part X and section 73 of the Bankruptcy Act 1966, such as a debt agreement. We expect any proposal will satisfy the conditions outlined in PS LA 2011/16 Insolvency – collection, recovery and enforcement issues for entities under external administration.

We consider each case on its individual facts; however, in general, we will support an arrangement that:

  • has no adverse features.
  • can provide the Commonwealth with no lesser proportion of the provable debt within a reasonable period than would occur under a bankruptcy.

What we consider

In deciding whether to vote in favour of a Part IX, Part X or section 73 proposal, we consider any legal advice we have.

We also consider:

Reports and proposal

In deciding whether to vote in favour of a proposal, we consider the:

  • contents, comprehensiveness and adequacy of relevant reports
  • statement of affairs or report as to affairs
  • proposal
  • report prepared by the trustee or administrator.

Liabilities and compliance

In deciding whether to vote in favour of a proposal, we consider:

  • any liabilities not yet established, such as unissued assessments or outstanding documents
  • whether the debtor has made appropriate arrangements to meet future tax liabilities as and when they fall due
  • the debtor’s compliance history
  • the compliance history of related parties or entities
  • the extent and seriousness of any tax offences that may have been committed
  • any association between the debtor and other creditors (including associations that involve an assignment of debt)
  • in the case of a debtor who is being less than candid about their financial affairs, the fact that the process may not provide the extensive investigative tools available to a trustee in bankruptcy or liquidator.

Possible outcomes

In deciding whether to vote in favour of a proposal, we consider:

  • the likelihood that the proposals put forward would be achieved
  • the maintenance of any priority the Commissioner may have had in bankruptcy or liquidation
  • any apparent voidable transactions or dispositions that might be unable to be pursued if the proposal were to be accepted
  • the tangible benefit to the Commonwealth revenue that is expected to be gained from any proposed arrangement
  • the manner in which the proposal would distribute a dividend between all classes of creditors or whether the proposal is considered to be unfairly prejudicial or discriminatory.

We also consider other matters that either:

  • are considered to be of public interest
  • reasonably question the fairness and appropriateness of voting in support of proposals.

In particular, we consider if the consequence of those proposals is the removal of statutory powers of investigation, examination or the ability to clawback assets or funds.