THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES CORPORATIONS AMENDMENT (PHOENIXING AND OTHER MEASURES) BILL 2012

Transcription

1 2012 THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES CORPORATIONS AMENDMENT (PHOENIXING AND OTHER MEASURES) BILL 2012 EXPLANATORY MEMORANDUM (Circulated by the authority of the Parliamentary Secretary to the Treasurer, the Hon David Bradbury MP)

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3 Table of contents Glossary... 1 General outline and financial impact... 3 Chapter 1 Chapter 2 Chapter 3 Chapter 4 Winding up by ASIC... 5 Publication Requirements Miscellaneous Amendments Statement of Compatibility with Human Rights Index... 23

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5 Glossary The following abbreviations and acronyms are used throughout this explanatory memorandum. Abbreviation Definition Corporations Act Corporations Act 2001 Bill ASIC Corporations Amendment (Phoenixing and Other Measures) Bill 2012 The Australian Securities and Investments Commission Corporations Regulations Corporations Regulations 2001 Paid Parental Leave Act Paid Parental Leave Act 2010 GEERS General Employee Entitlements and Redundancy Scheme 1

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7 General outline and financial impact Outline The Corporations Amendment (Phoenixing and Other Measures) Bill 2012 (the Bill) amends the Corporations Act 2001 (Corporations Act) to: introduce an administrative process for compulsory external administration to facilitate payment of employee entitlements where a company has been abandoned; include a regulation making power to prescribe methods of publication of notices relating to events before, during and after the external administration of a company; and to make other miscellaneous, minor and technical amendments. Date of effect: The Bill commences on Royal Assent. The Bill does not have retrospective effect. The substantive amendments in Schedules 1 and 2 commence on a single day to be fixed by Proclamation. Proposal announced: Providing the Australian Securities and Investments Commission (ASIC) with an administrative power to wind up a company is an election commitment from the Government s Protecting Workers Entitlement Package announced in July The online publication changes were announced by the Government on 14 December 2011 as part of reforms announced to modernise and harmonise Australia s insolvency system. Financial impact: No impact. The regulation making power contained in the Bill facilitates the prescription of the publication of corporate insolvency notices on a single website to be maintained by ASIC. Regulations will prescribe a fee for the publication of corporate insolvency notices. Compliance cost impact: The reforms to the publication requirements as set out in Part 3 of Schedule 1 of the Bill are expected to ultimately reduce industry advertising costs by approximately $30 million over the next four years. The other measures in the Bill will have no significant impact on business regulation. 3

8 Corporations Amendment (Phoenixing and Other Measures) Bill 2012 Summary of regulation impact statement Regulation impact on business Impact: A Regulation Impact Statement (RIS) was not required for the amendments. Summary of Statement of Compatibility with Human Rights A Statement of Compatibility with Human Rights has been prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act The Bill is compatible with human rights as it does not raise any human rights issues. 4

9 Winding up by ASIC Outline of chapter 1.1 The Corporations Amendment (Phoenixing and Other Measures) Bill 2012 (the Bill) amends the Corporations Act to provide ASIC with a discretionary power to place a company into liquidation where: ASIC otherwise has the power to deregister the company; the company has not paid its annual review fee within one year of the fee being due; ASIC has reinstated the registration of a deregistered company; and ASIC has reason to believe that the company is no longer carrying on business and there is no objection to the company being placed into liquidation. Context of amendments 1.2 The amendments contained in Part 1 of Schedule 1 give effect to the Government s election commitment, as announced as part of the Protecting Workers Entitlements package, to provide ASIC with an administrative power to order the winding up of companies that have been abandoned by their directors. The Protecting Workers Entitlements package was announced by the Prime Minister in July One of the aims of this measure was to assist employees of companies abandoned by their directors to receive payments from the General Employee Entitlements and Redundancy Scheme (GEERS) more expeditiously. 1.3 GEERS is a scheme funded by the Australian Government to assist employees who have lost their employment due to the liquidation or bankruptcy of their employer and who are owed certain employee entitlements. Where the employer is a corporation, a precondition for any payment from GEERS is that the company be placed into liquidation. Although large creditors, such as the Australian Taxation Office, may take steps to place a company into liquidation, this is not always the case. Where the company has limited or no assets and the company has been abandoned by the directors, creditors other than employees may have no incentive to fund the winding up of the company. The cost of placing a company into liquidation can be prohibitive for employees who have incurred losses in wealth due to the failure to receive their entitlements. In cases where companies are abandoned by their directors, ASIC may 5

10 Corporations Amendment (Phoenixing and Other Measures) Bill 2012 choose to exercise its power to place the company into liquidation so that employees of the company can access GEERS. 1.4 In addition, giving ASIC the power to place abandoned companies into liquidation will enable a liquidator to investigate and report on alleged misconduct related to possible phoenixing behaviour; or to investigate and take action in respect of uncommercial transactions entered into by the company s directors prior to deregistration or abandonment of the company. Summary of new law 1.5 Under the new law, ASIC will be granted the power to place abandoned companies into liquidation in each of the four separate and distinct circumstances listed in Part 1 of Schedule ASIC will be able to place a company into liquidation where the company otherwise meets the requirements for ASIC-initiated deregistration of the company. 1.7 ASIC will also be able to place a company into liquidation where ASIC has reinstated the registration of a deregistered company under subsection 601AH(1) of the Corporations Act. 1.8 Finally, ASIC will be able to place a company into liquidation where ASIC has reason to believe that the company is no longer carrying on business, and there is no objection by the directors or company to being wound up once notified of ASIC s intentions. Comparison of key features of new law and current law New law ASIC will be granted a power to order the winding up of a company that has been abandoned in certain circumstances. Current law The Corporations Act provides that creditors and ASIC may apply to the Court for an order to wind up a company. ASIC does not have the power to order the winding up of a company in any circumstances. Detailed explanation of new law 1.9 ASIC will be able to order the winding up of a company where: 6

11 Winding up by ASIC the response to a compliance notice issued by ASIC on the company under section 348A of the Corporations Act is at least six months late; and the company has not lodged any other documents under the Corporations Act in the preceding 18 months; and ASIC has no reason to believe the company is carrying on business; and ASIC has reason to believe that making the order is in the public interest. [Schedule 1, Item 1, subsection 489EA(1)] 1.10 In exercising its power under the new subsection 489EA(1), ASIC will not be acting in the same way, by the same process, or on the same grounds as a Court would be in ordering the winding up of a company. ASIC will be able to take into account policy considerations in ordering the winding up of the company, those considerations may include the ability for employees of the company to access GEERS, or suspicions of possible phoenixing behaviour by the directors of the company ASIC currently has the power to deregister a company if the company s review fee in respect of a review date has not been paid in full at least 12 months after the due date for payment. The Bill provides ASIC with a power to order the winding up of a company under these same circumstances. [Schedule 1, item 1, subsection 489EA(2)] 1.12 ASIC currently has the power to reinstate a company in circumstances where ASIC is satisfied that the company should not have been deregistered. The Bill will provide ASIC with an additional power to place a company into liquidation, once the company is reinstated, where ASIC believes that winding the company up will be in the public interest. [Schedule 1, item 1, subsection 489EA(3)] 1.13 Under the new law, ASIC will also be empowered to place a company into liquidation if ASIC has no reason to believe that the company is carrying on business. Where this is the only indicator that the company has been abandoned, ASIC may only make an order to place the company into liquidation once ASIC has notified the company and each director. The notice must: set out ASIC s intention to make the order to wind the company up; inform the company and directors that they have 10 business days after the receipt of the notice to object in writing to ASIC if they do not wish the company to be wound up; and be sent to the company and directors 20 business days before making the winding up order If the company or its directors object for any reason during that 10 business day period, ASIC cannot use that power to wind the company up. [Schedule 1, item 1, subsection 489EA(4)] 7

12 Corporations Amendment (Phoenixing and Other Measures) Bill The obligation on ASIC to notify directors or the company does not extend to circumstances where ASIC does not possess information such as contact details for the directors or the company. This includes circumstances when ASIC has unsuccessfully attempted to contact directors based on information that ASIC has. [Schedule 1, item 1, subsection 489EA(5)] 1.16 ASIC is also required to give notice of its intention to make the order on the ASIC database and once it has made the order, publish the order in the prescribed manner. [Schedule 1, item 1, subsection 489EA(6)] 1.17 ASIC is not able to make a winding up order under this Part if an application has been filed in the Court and the Court is yet to deal with the application. If the Court has heard the application to wind the company up and not made a winding up order, or has otherwise dismissed the application to wind the company up, ASIC s powers to wind up a company are not limited by this clause. [Schedule 1, item 1, subsection 489EA(7)] 1.18 Only directors that fall within paragraph (a) of the definition of director contained in section 9 of the Corporations Act need to be notified by ASIC. These are directors who are formally appointed to being directors of the company. [Schedule 1, item 1, subsection 489EA(8)] 1.19 Each of the powers that ASIC has that are listed in subsections 489EA(1) to (4) are distinct powers which are separate from each other. For ASIC to use any of its powers under each of subsections 489EA(1) to (4), only the requirements of each sub clause need to be satisfied. If the requirements of one of the subsections are not met, this does not in any way prevent ASIC using its powers in circumstances where one of the other subsections in section 489EA otherwise permits ASIC to wind a company up. [Schedule 1, item 1, subsection 489EA(9)] 1.20 If ASIC exercises its powers to wind up a company under the new law, the company is deemed to have passed a special resolution under existing section 491 of the Corporations Act that the company be wound up voluntarily. The resolution is deemed to have been made on the day that ASIC uses its administrative power to order the winding up and does not require a declaration of solvency to have been made under existing section 494 of the Corporations Act. A meeting of creditors under existing subsection 497(1) of the Corporations Act is not required where the winding up has been ordered by ASIC. [Schedule 1, item 1, section 489EB] 1.21 If ASIC exercises its power to order that a company be wound up, it may appoint a liquidator to administer the winding up of the company. Where ASIC orders the winding up of a company under its new power, the statutory powers of the liquidator appointed to wind the company up will not be limited in any way. ASIC will be able to 8

13 Winding up by ASIC determine the liquidator s remuneration and in so doing will not be restricted in how it may choose to structure the remuneration of the liquidator. ASIC must obtain the consent of the liquidator before appointing the liquidator. ASIC may fill any vacancy in the office of liquidator, with a liquidator who has provided consent in writing to being appointed as a liquidator. [Schedule 1, item 1, section 489EC] 1.22 Currently, the company, a director or member of the company, or a liquidator may apply to ASIC and lodge an application to deregister the company. Applications for deregistration can only be made when: all of the company s members agree to the deregistration; the company is no longer carrying on business; the company does not have debts; and the other circumstances listed in existing subsection 601AA(2) of the Corporations Act apply. Although ASIC can request information in relation to the company, ASIC must deregister the company unless it is aware of a failure to comply with these obligations Under the new law, ASIC will be able to refuse an application to voluntarily deregister a company where ASIC decides that it is more appropriate for the company to be placed into liquidation. Once the company is in liquidation, the liquidator could investigate the affairs of the company. [Schedule 1, item 2, section 601AA] 1.24 ASIC has the power to initiate a deregistration in the circumstances listed in existing subsections 601AB(1) and 601AB(2). The Bill provides ASIC with the power to refuse to exercise its power to initiate the deregistration of a company where ASIC chooses to use its powers to make an order placing the company into liquidation. [Schedule 1, item 3, section 601AB] 1.25 Section 1317B of the Corporations Act provides that any decision by ASIC that is not excluded by section 1317C is subject to merits review. The Bill excludes any decision by ASIC to order a winding up from being subject to merits review. A person aggrieved at an order by ASIC to wind up a company can apply to the Court for orders to stay or terminate the winding up under existing section 482 of the Corporations Act. [Schedule 1, item 4, subsection 1317C(c)] 1.26 Whilst it is preferable for decisions that affect the rights of individuals to be subject to merits review by the Administrative Appeals Tribunal, once a company is placed into liquidation the process gives third parties proprietary rights which would be affected by any decision regarding the legality of the decision to commence the winding up. In relation to any dispute concerning proprietary rights, a court is the appropriate forum for determining an individual s property rights as opposed to an administrative tribunal. Similar decisions made by ASIC, including deregistering a company, are currently not subject to merits review. 9

14 Corporations Amendment (Phoenixing and Other Measures) Bill 2012 Application and transitional provisions 1.27 ASIC can exercise its power under the new provisions after the commencement of Schedule 1 of the Bill. 10

15 Publication Requirements Context of amendments 2.1 There are significant costs to the administration of insolvent companies in complying with the current statutory obligations to publish corporate insolvency notices in state and territory, or national newspapers or in the ASIC gazette. In contrast, electronic publication of notices provides a more effective and efficient manner to bring information to the attention of people who may have an interest in the fact that a company has entered into external administration, or that events are occurring in a specific external administration. 2.2 A transition from newspaper notices to electronic publication on a single website administered by ASIC was recommended by the Corporations and Markets Advisory Committee in its 2008 report, Issues in External Administration. 2.3 The amendments to the requirement for the publication of corporate insolvency notices in newspapers were announced by the then Minister for Financial Services, Superannuation and Corporate Law in January The amendments to the requirement for the gazettal of corporate insolvency notices and the establishment of the corporate insolvency notices website were jointly announced by the Parliamentary Secretary to the Treasurer and the Attorney-General on 14 December Regulations will prescribe a fee for the publication of corporate insolvency notices on a single website administered by ASIC. It is expected that the transfer to electronic publication of notices will result in savings to the industry, as it will replace the current requirement to place advertisements in newspapers and Gazettes. 2.5 This Bill facilitates the prescription of the publication of corporate insolvency notices on the single website. Summary of new law 2.6 During the course of an external administration there are a range of events that creditors and other stakeholders are required to be made aware of. In addition to obligations to inform known creditors of these events, petitioning creditors and liquidators are required to notify the public so as to provide the highest chance that all interested parties are afforded the opportunity to avail themselves of their rights during an external administration. This public disclosure is currently conducted 11

16 Corporations Amendment (Phoenixing and Other Measures) Bill 2012 through advertisements in state-wide or national newspapers of the state or territory in which the administration takes place. 2.7 Public notices are also required to be published in the ASIC gazette in relation to certain events, including: the final meeting of the liquidation; the passing of a company resolution to voluntarily wind up a company; and when ASIC intends to deregister a company. 2.8 The Bill will amend the Corporations Act to repeal these requirements and instead create a regulation making power to facilitate the future provision of all external administration notices via a single website. 2.9 Future amending regulations to the Corporations Regulations will mandate the publication of notices on a single corporate insolvency notices website administered by ASIC. Comparison of key features of new law and current law New law Petitioning creditors and liquidators will be required to publish notices of certain external administration events in a prescribed manner. The prescribed manner will be as defined in the Corporations Regulations. Current law The Corporations Act requires petitioning creditors and liquidators to publish notices of certain external administration events in the print media or ASIC gazette. Detailed explanation of new law 2.10 The Bill amends numerous provisions in the Corporations Act that require the publication of notices of events in external administrations. The new law provides that where these notices have previously been required to be: caused to be published in newspapers or on the ASIC gazette, that they will now be required to be published in a prescribed manner ; or published in newspapers or on the ASIC gazette, that they will now be required to be published in a prescribed manner The petitioning creditor or liquidator obligated to publish, or arrange for the publication of, the notice in the circumstances will now be required to lodge the notice with ASIC. Once lodged with ASIC, ASIC must publish the notice in accordance with the amending regulations to be made to the Corporations Regulations. 12

17 Publication Requirements 2.12 The prescribed manner will be determined through regulations to be made to the Corporations Act. A new regulation making power to define the prescribed manner is established in the Bill. [Schedule 1, item 26, section 1367A] 2.13 Under existing section 411 of the Corporations Act, a Court may make orders to approve a compromise or arrangement between a company, or other registrable body, and its creditors or members. The Court may also make orders requiring a meeting of the creditors, or members, to be held in order to consider the compromise or arrangement in any way that the Court deems appropriate If a meeting is ordered by the Court under section 411, notice of the time, date and purpose of the meeting is to be published in a newspaper advertisement which includes an explanatory statement setting out the details of the proposed compromise or arrangement, or details of where a copy of the explanatory statement can be viewed The Bill will amend the Corporations Act to provide that in addition to being able to be provided by advertisement, the notice of the section 411 meeting can be published in the prescribed manner. The retention of the ability to advertise notices of meetings in newspapers relating to compromises and arrangements is appropriate as these meetings may not relate to companies in external administration, but rather commercial restructures of solvent companies. [Schedule 1, item 5, paragraph 412(1)(b] 2.16 If an advertisement of a meeting to consider a compromise or arrangement provides that the explanatory statement can be viewed in a particular manner, the explanatory statement must be provided free of charge. This requirement to provide the explanatory statement will apply whether the notice of the meeting is advertised or published in the prescribed manner. [Schedule 1, item 6, subsection 412(4)] 2.17 Part 5.3A of the Corporations Act establishes a scheme for the appointment of a registered liquidator to administer a potentially insolvent company s affairs with a view to executing a deed of company arrangement that maximises the chances of the company continuing in existence or, where this is not possible, to maximise the return to creditors and members of the company. Where a liquidator is appointed to administer a company under Part 5.3A, the liquidator (known as an administrator) must convene an initial meeting of creditors within eight business days Currently, an administrator must cause notice of the meeting of creditors to be published in the print media at least five days prior to the creditors meeting. The Bill amends the Corporations Act to provide that the administrator must cause a notice setting out prescribed information to be published in the prescribed manner. [Schedule 1, item 7, paragraph 436E(3)(b)] 13

18 Corporations Amendment (Phoenixing and Other Measures) Bill An administrator is required to convene a meeting of creditors within a period of 20 or 25 business days, as determined by existing subsection 439A(5) of the Corporations Act, of the commencement of the administration. The purpose of the meeting is to provide an opportunity for the creditors to decide whether to: enter into a deed of company arrangement; end the administration by placing the company back in the hands of the directors; or place the company into liquidation To give the best opportunity for all creditors to be aware of the meeting, the administrator must provide written notice to all known creditors, and cause notice of the meeting to be published in a national newspaper. The Bill amends the Corporations Act to provide that rather than this notice being required to be published in the print media, the notice setting out information about the meeting must be published in the prescribed manner. [Schedule 1, item 8, paragraph 439A(3)(b)] 2.21 Where the creditors of a company in administration resolve at the conclusion of the administration to wind up the company, or the company fails to comply with the deed of company arrangement within the statutory timeframe, the company is taken to have passed a special resolution that it be wound up voluntarily. Currently, the liquidator must lodge a notice of the winding up with ASIC and, 15 days after that lodgement, cause notice of the meeting to be published in a national newspaper. The Bill amends the Corporations Act to provide that rather than this notice being published in the print media, the notice setting out prescribed information about the meeting must be published in the prescribed manner. [Schedule 1, item 9, paragraph 446A(5)(b)] 2.22 If an administrator of a company needs to be replaced, the entity or person who appointed the administrator is able to appoint a replacement. Following the appointment of the replacement, a meeting of creditors must be convened to give the creditors as a whole an opportunity to appoint a different liquidator. Notice of the meeting must be given directly to all known creditors, and a notice published in the print media. The Bill amends the Corporations Act to provide that rather than this notice being published in the print media, the notice setting out prescribed information about the meeting must be published in the prescribed manner. [Schedule 1, item 10, paragraph 449C(5)(b)] 2.23 Following an administrator s appointment to a company, the administrator must lodge notice of their appointment with ASIC by the end of the day of their appointment and publish notice of their appointment in the print media within three business days. The Bill amends the Corporations Act to provide that rather than this notice being published in the print media, the notice setting out prescribed information about the meeting must be published in the prescribed manner. [Schedule 1, item 11, paragraph 450A(1)(b)] 14

19 Publication Requirements 2.24 Where an application to wind up a company is made to the Court, the applicant must notify ASIC that the application has been made, serve a copy of the application on the company, and advertise the application in print media in accordance with the relevant Court rules. The Bill amends the Corporations Act to provide that rather than advertise the application as required by the Court rules, that the notice setting out the prescribed information about the application must be published in the prescribed manner. [Schedule 1, item 12, paragraph 465A(c)] 2.25 A company may voluntarily resolve to be wound up upon the passage of a special resolution of the company s members, unless an application for the winding up of the company has been filed, an order for the winding up of the company has been made, or the company is an active trustee company. Where a company so resolves to wind up, it must lodge a copy of the resolution with ASIC within seven days, and publish a notice of the passing of the resolution in the ASIC Gazette within 21 days of the resolution. The Bill amends the Corporations Act to repeal the requirement to publish the gazettal of the notice and replaces it with a requirement to publish the notice setting out prescribed information in the prescribed manner. [Schedule 1, item 13, paragraph 491(2)(b)] 2.26 The liquidator of a company placed into a creditors voluntary winding up must convene a meeting of the company s creditors within 11 days after the day of the meeting of the company at which the resolution for the winding up of the company was passed. This initial meeting is an opportunity for the creditors to remove the liquidator and appoint a replacement. The liquidator is required to give at least seven days notice of the meeting and send the creditors prescribed information. The liquidator is also required to publish notice of the meeting in a daily state-wide newspaper in each state or territory in which the company is carrying on business, or has in the past two years. The advertisement must be published between 7 and 14 days before the meeting. The Bill amends the Corporations Act to provide that rather than this notice being published in the print media, the liquidator must arrange for the notice setting out the prescribed information about the meeting to be published in the prescribed manner. [Schedule 1, item 14, paragraph 497(2)(d)] 2.27 The creditors in a creditors voluntary winding up may resolve to adjourn the initial meeting to a day not later than 21 days after the original meeting. If the meeting is adjourned, the company must ensure notice of the new date is published in the print media, unless the adjournment is less than eight days. The Bill amends the Corporations Act to provide that rather than requiring this notice to be published in the print media, the company must publish the notice setting out information about the meeting in the prescribed manner. [Schedule 1, item 15, subsection 498(3)] 2.28 At the completion of a creditors voluntary winding up, the liquidator must hold a final joint meeting of the creditors and members to 15

20 Corporations Amendment (Phoenixing and Other Measures) Bill 2012 give an account of how the liquidation has been conducted and how company property has been disposed of. The liquidator must advertise the details of the final meeting in the ASIC gazette at least one month before the meeting. The Bill amends the Corporations Act to provide that rather than the notice being gazetted, the notice must be published in the prescribed manner. [Schedule 1, item 16, subsection 509(2)] 2.29 A liquidator of a company may disclaim certain types of company property. Where the liquidator seeks to disclaim property that he or she suspects other persons may have an interest in, and the liquidator is unable to notify the potentially interested person, the liquidator must ensure notice of the disclaimer is published in the print media. The Bill amends the Corporations Act to provide that rather than requiring this notice to be published in the print media, the company must publish the notice setting out information about the meeting in the prescribed manner. [Schedule 1, item 17, subsection 568A(2)] 2.30 Part 5.8 of the Corporations Act sets out a range of offences for company officers relating to companies that have entered into external administration, a compromise or arrangement with the creditors of a company, or have ceased to carry on business. For the purposes of Part 5.8 of the Corporations Act, a company is taken to have ceased to carry on business where ASIC has gazetted a notice of deregistration of the company and two months have passed since the notice was published. As the Bill amends the publication requirements for the deregistration of companies to no longer be published in the gazette, but rather in the prescribed manner, the definition of ceased to carry on business in Part 5.8 is amended in line with the new publication requirements. [Schedule 1, item 18, paragraph 589(3)(a)] 2.31 ASIC may deregister a company if an application for deregistration is made by the company, a director or member of the company, or a liquidator of the company. If ASIC decides to deregister the company, ASIC must give notice of the proposed deregistration on the ASIC database and in the gazette. After two months have passed, ASIC may deregister the company. The Corporations Act will be amended so that ASIC will be required to given notice of the deregistration on the database and publish the notice of the proposed deregistration in the prescribed manner. [Schedule 1, item 19, paragraph 601AA(4)] 2.32 ASIC may initiate the deregistration of a company where a company has ignored notices sent to it by the regulator, has not lodged any documents with the regulator, and ASIC has no reason to believe the company is carrying on business. Where ASIC seeks to deregister a company on its own initiative, it must gazette its intentions to deregister the company. The Bill replaces the current requirement to gazette the notice with a requirement to publish the notice of the deregistration in the prescribed manner. [Schedule 1, item 21, subsection 601AB(3)] 16

21 Publication Requirements 2.33 Subsection 601AB(4), subsection 601AB(5), and subparagraph 1351(4)(a)(i) will be amended to reflect the change in paragraph numbers as a result of other amendments in the Bill. [Schedule 1, item 22, subsection 601AB(4); Schedule 1, item 23, subsection 601AB(5); Schedule 1, item 24, subparagraph 1351(4)(a)(i)] 2.34 The heading for section 601AB(1) mistakenly refers to the ASIC rather than ASIC. The Bill will amend the heading of section 601AB(1) to refer to ASIC only. [Schedule 1, item 20, subsection 601AB(1)] 2.35 Part 9.10 of the Corporations Act sets out circumstances when fees are, and are not, payable to the Commonwealth. A deregistered company is not required to pay its review fee where the publication of the company s deregistration in the ASIC gazette falls around the review date for the company. As this Bill replaces the requirement to publish in the gazette with a requirement to publish in a prescribed manner, subparagraph 1351(4)(a)(ii) will be amended to make appropriate reference to that form of publication. [Schedule 1, item 25, subparagraph 1351(4)(a)(ii)] Application and transitional provisions 2.36 The provisions will apply to events that occur after the commencement of Schedule 1 of the Bill. 17

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23 Miscellaneous Amendments Context of amendments 3.1 The Australian Government introduced the Paid Parental Leave scheme in The Department of Families, Housing, Community Services and Indigenous Affairs (FAHCSIA) administers the Government s scheme. 3.2 Paid parental leave payments can either be paid to eligible employees through their employer, making them a paid parental leave employer, or FAHCSIA through the Family Assistance Office. Where a company enters into external administration, it is no longer appropriate for the paid parental leave payments to be made by the paid parental leave employer. 3.3 FAHCSIA will generally be notified of a liquidator s appointment to a company as they will be a creditor. However, FAHCSIA may not be a creditor when, for example, an employee has been paid all funds provided by FAHCSIA owing to them by their employer at the time insolvency occurs. The amendment will provide that FAHCSIA be notified of an insolvency practitioner s appointment, even when they are not a creditor. 3.4 The new law allows FAHCSIA to determine whether to continue paying paid parental leave payments to the company or to make the paid parental leave payments directly to the employee. Summary of new law 3.5 The new law imposes an obligation on receivers, administrators and liquidators to advise the Secretary of FAHCSIA where a company to which they are appointed is a paid parental leave employer. 3.6 The Bill also empowers the Court to validate any action of a reinstated company that took place from when the company was deregistered, until it was reinstated by ASIC. The Court currently has an equivalent ability to validate any action where the reinstatement of the company has been ordered by the Court. 19

24 Corporations Amendment (Phoenixing and Other Measures) Bill 2012 Comparison of key features of new law and current law New law A liquidator, receiver or administrator must advise the Secretary of FAHCSIA that they have been appointed to a body corporate that is a paid parental leave employer. The Court can validate actions taken in respect of a company from it s deregistration to its reinstatement if either ASIC or the Court reinstates the registration of the company. Current law There is no obligation on a liquidator, receiver or administrator to advise FAHCSIA that they have been appointed to a body corporate that is a paid parental leave employer. The Court can only validate anything done by a company from it s deregistration to its reinstatement if the Court reinstates the registration of the company. Detailed explanation of new law 3.7 The new law introduces the phrase paid parental leave employer into the Corporations Act. The term is defined in section 9 of the Corporations Act by reference to the new section 600AA of the Corporations Act introduced by Schedule 1, item 28 of the Bill. [Schedule 1, item 27, section 9] 3.8 The new law establishes a statutory duty on receivers, administrators and liquidators to notify the Secretary of FAHCSIA upon their appointment to a company that is a paid parental leave employer. A company will be considered a paid parental leave employer where the company is obliged to make a payment under section 72 of the Paid Parental Leave Act [Schedule 1, item 28, section 600AA] 3.9 While FAHCSIA will generally be notified of a liquidator s appointment as a result of their rights as a creditor of the company, FAHCSIA may not always be owed funds by a paid parental leave employer. For example, when an employee has been paid all funds provided by FAHCSIA owing to them by their employer at the time the insolvency occurs. The Bill ensures that FAHCSIA will be made aware that a paid parental leave employer is under external administration, regardless of whether FAHCSIA is owed debts by the employer The Bill amends the Corporations Act to provide the Court with the power to make directions and otherwise validate actions taken during a period of deregistration of a company that has had its registration reinstated by ASIC. Currently, the Court is only empowered to make directions and validate anything done in respect of a company during a period of deregistration where the company has been reinstated by the Court. [Schedule 1, item 29, subsection 601AH(3)] 20

25 Statement of Compatibility with Human Rights Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 Corporations Amendment (Phoenixing and Other Measures) Bill 2012 This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act Overview of the Bill The Bill amends the Corporations Act 2001 (Corporations Act) to: introduce an administrative process for compulsory external administration to facilitate payment of employee entitlements and address phoenix company activity; include a regulation making power to prescribe methods of publication of notices relating to events before, during and after the external administration of a company; and to make other miscellaneous, minor and technical amendments Human rights implications The Bill does not engage any of the applicable rights or freedoms. Conclusion The Bill is compatible with human rights as it does not raise any human rights issues. 21

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27 Index Schedule 1: Amendments Bill reference Paragraph number Item 1, subsection 489EA(1) 1.9 Item 1, subsection 489EA(2) 1.11 Item 1, subsection 489EA(3) 1.12 Item 1, subsection 489EA(4) 1.14 Item 1, subsection 489EA(5) 1.15 Item 1, subsection 489EA(6) 1.16 Item 1, subsection 489EA(7) 1.17 Item 1, subsection 489EA(8) 1.18 Item 1, subsection 489EA(9) 1.19 Item 1, section 489EB 1.20 Item 1, section 489EC 1.21 Item 2, section 601AA 1.23 Item 3, section 601AB 1.24 Item 4, subsection 1317C(c) 1.25 Item 5, paragraph 412(1)(b 2.15 Item 6, subsection 412(4) 2.16 Item 7, paragraph 436E(3)(b) 2.18 Item 8, paragraph 439A(3)(b) 2.20 Item 9, paragraph 446A(5)(b) 2.21 Item 10, paragraph 449C(5)(b) 2.22 Item 11, paragraph 450A(1)(b) 2.23 Item 12, paragraph 465A(c) 2.24 Item 13, paragraph 491(2)(b) 2.25 Item 14, paragraph 497(2)(d) 2.26 Item 15, subsection 498(3) 2.27 Item 16, subsection 509(2) 2.28 Item 17, subsection 568A(2) 2.29 Item 18, paragraph 589(3)(a) 2.30 Item 19, paragraph 601AA(4) 2.31 Item 20, subsection 601AB(1)

28 Corporations Amendment (Phoenixing and Other Measures) Bill 2012 Item 21, subsection 601AB(3) 2.32 Item 22, subsection 601AB(4); Schedule 1, item 23, subsection 601AB(5); Schedule 1, item 24, subparagraph 1351(4)(a)(i) 2.33 Item 25, subparagraph 1351(4)(a)(ii) 2.35 Item 26, section 1367A 2.12 Item 27, section Item 28, section 600AA 3.8 Item 29, subsection 601AH(3)