australian corporate act 2001

8/12/2019 Australian Corporate Act 2001

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Corporations Act 2001

Act No. 50 of 2001 as amended

This compilation was prepared on 10 April 2006taking into account amendments up to Act No. 17 of 2006

Volume 2includes: Table of ContentsChapters 2L5B (ss. 283AA 601DJ)

The text of any of those amendments not in forceon that date is appended in the Notes section

The operation of amendments that have been incorporated may beaffected by application provisions that are set out in the Notes section


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Contents

Chapter 2LDebentures 1Part 2L.1Requirement for trust deed and trustee 1

283AA Requirement for trust deed and trustee ....................... ....................... 1283AB Trust deed................... ...................... ...................... ...................... .....2283AC Who can be a trustee............... ...................... ...................... ............... 2283AD Existing trustee continues to act until new trustee takes

office ..................... ...................... ...................... ...................... .......... 3283AE Replacement of trustee .................... ...................... ..................... .......3

Part 2L.2Duties of borrower 5283BA Duties of borrower................. ..................... ...................... ................. 5283BB General duties.... ...................... ...................... ...................... .............. 5

283BC Duty to notify ASIC of name of trustee.......... ........................ ........... 5283BD Duty to replace trustee........................ ...................... ....................... ..6283BE Duty to inform trustee about charges......... ...................... .................. 6283BF Duty to give trustee and ASIC quarterly reports................. ............... 6283BG Exceptions .................... ...................... ...................... ...................... ...9283BH How debentures may be described ....................... ....................... ......9283BI Offences for failure to comply with statutory duties ....................... 10

Part 2L.3Duties of guarantor 11283CA Duties of guarantor .................... ...................... ...................... .......... 11283CB General duties..... ...................... ....................... ...................... .......... 11283CC Duty to inform trustee about charges......... ....................... ............... 11283CD Exceptions ..................... ....................... ...................... ..................... 12

283CE Offences for failure to comply with statutory duties ....................... 12

Part 2L.4Trustee 13283DA Trustees duties................... ...................... ...................... ................. 13283DB Exemptions and indemnifications of trustee from liability .............. 14283DC Indemnity .................... ...................... ..................... ...................... ...15

Part 2L.5Meetings of debenture holders 16283EA Borrowers duty to call meeting ..................... ...................... ........... 16283EB Trustees power to call meeting...... ....................... ...................... ....17283EC Court may order meeting..................... ...................... ...................... 17

Part 2L.6Civil liability 19283F Civil liability for contravening this Chapter ........................ ............ 19

Part 2L.7ASIC powers 20283GA ASICs power to exempt and modify .................... ...................... ....20283GB ASIC may approve body corporate to be trustee ......................... ....21


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Part 2L.8Court 22283HA General Court power to give directions and determine

questions..........................................................................................22 283HB Specific Court powers ...................... ....................... ...................... ..22

Part 2L.9Location of other debenture provisions 24283I Signpost to other debenture provisions........... ...................... ........... 24

Chapter 2MFinancial reports and audit 25

Part 2M.1Overview 25285 Overview of obligations under this Chapter ........................ ............ 25

Part 2M.2Financial records 28286 Obligation to keep financial records...................... ....................... ...28287 Language requirements................... ....................... ...................... ....28

288 Physical format.. ....................... ...................... ....................... .......... 29289 Place where records are kept ...................... ....................... .............. 29290 Director access ..................... ....................... ....................... ............. 30291 Signposts to other relevant provisions ................... ...................... ....30

Part 2M.3Financial reporting 32

Division 1Annual financial reports and directors reports 32292 Who has to prepare annual financial reports and directors

reports..............................................................................................32 293 Small proprietary companyshareholder direction .................... ....32294 Small proprietary companyASIC direction.................. ................ 33295 Contents of annual financial report................ ....................... ........... 33

295A Declaration in relation to listed entitys financial statementsby chief executive officer and chief financial officer ...................... 35

296 Compliance with accounting standards and regulations .................. 36297 True and fair view .................... ....................... ...................... .......... 37298 Annual directors report........................ ...................... ..................... 37299 Annual directors reportgeneral information ........................ .......38299A Annual directors reportadditional general requirements

for listed public companies..............................................................39300 Annual directors reportspecific information............ ................... 40300A Annual directors reportspecific information to be

provided by listed companies .................... ....................... ............... 46301 Audit of annual financial report.......... ........................ ..................... 50

Division 2Half-year financial report and directors report 51302 Disclosing entity must prepare half-year financial report anddirectors report .................... ...................... ....................... .............. 51

303 Contents of half-year financial report ....................... ....................... 51304 Compliance with accounting standards and regulations .................. 52


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305 True and fair view .................... ....................... ...................... .......... 52306 Half-year directors report ...................... ...................... ................... 53

Division 3Audit and auditors report 54307 Audit................................................................................................54307A Audit to be conducted in accordance with auditing standards .........54307B Audit working papers to be retained for 7 years ....................... .......55307C Auditors independence declaration ..................... ....................... ....57308 Auditors report on annual financial report ..................... ................ 59309 Auditors report on half-year financial report.... ....................... .......60310 Auditors power to obtain information ...................... ...................... 61311 Reporting to ASIC...... ...................... ...................... ...................... ...61312 Assisting auditor...................... ...................... ....................... ........... 64313 Special provisions on audit of debenture issuers and

guarantors........................................................................................65

Division 4Annual financial reporting to members 66314 Annual financial reporting to members ..................... ...................... 66315 Deadline for reporting to members....................... ........................ ...67316 Members choices for annual financial information ........................ 68317 Consideration of reports at AGM ................... ...................... ........... 69318 Additional reporting by debenture issuers ....................... ................ 69

Division 5Lodging reports with ASIC 71319 Lodgment of annual reports with ASIC.............. ...................... ....... 71320 Lodgment of half-year reports with ASIC ....................... ................ 71321 ASIC power to require lodgment......... ...................... ...................... 71322 Relodgment if financial statements or directors reports

amended after lodgment ..................... ....................... ...................... 72

Division 6Special provisions about consolidated financial

statements 73323 Directors and officers of controlled entity to give

information .................... ...................... ...................... ...................... 73323A Auditors power to obtain information from controlled entity......... 73323B Controlled entity to assist auditor ...................... ....................... .......73323C Application of Division to entity that has ceased to be

controlled.........................................................................................74

Division 7Financial years and half-years 75323D Financial years and half-years ..................... ...................... .............. 75

Division 8Disclosure by listed companies of information filed

overseas 77323DA Listed companies to disclose information filed overseas.... ............. 77


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Division 9Reference of financial report to the Financial

Reporting Panel 78

Subdivision APreliminary 78323EA Financial reports to which Division applies.............. ....................... 78323EB Referral of financial report to Financial Reporting Panel ................ 78

Subdivision BReferral by ASIC 79323EC ASIC may refer financial report to the Financial Reporting

Panel................................................................................................79 323ED ASIC to notify lodging entity of proposed referral.. ........................ 79323EE Lodging entity to respond to ASIC notice ........................ ............... 79323EF Referral to Financial Reporting Panel ...................... ....................... 80

Subdivision CReferral by lodging entity 81323EG Lodging entity may refer financial report to the Financial

Reporting Panel with ASICs consent ....................... ...................... 81323EH Lodging entity to apply to ASIC for consent to proposed

referral ....................... ...................... ....................... ...................... ...82323EI Referral to Financial Reporting Panel ...................... ....................... 83

Subdivision DFinancial Reporting Panel dealing with reference 83323EJ Financial Reporting Panel to obtain submissions from ASIC

and lodging entity............................................................................83323EK Financial Reporting Panel to consider and report on financial

report referred to it under section 323EC or 323EG........ ................ 84323EL Power of Financial Reporting Panel to dismiss referral................... 85323EM Court, or tribunal of fact, may have regard to Financial

Reporting Panel report.....................................................................85

Part 2M.4Appointment and removal of auditors 86

Division 1Entities that may be appointed as an auditor for a

company or registered scheme 86324AA Individual auditors, audit firms and authorised audit

companies........................................................................................86 324AB Effect of appointing firm as auditorgeneral ......................... ........86324AC Effect of appointing firm as auditorreconstitution of firm........... 87324AD Effect of appointing company as auditor ..................... .................... 88324AE Professional members of the audit team .................... ...................... 89324AF Lead and review auditors......... ....................... ...................... ........... 89

Division 2Registration requirements 90324BA Registration requirements for appointment of individual as

auditor ....................... ...................... ....................... ...................... ...90324BB Registration requirements for appointment of firm as auditor ......... 90324BC Registration requirements for appointment of company as

auditor ....................... ...................... ....................... ...................... ...92


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324BD Exception from registration requirement for proprietarycompany ..................... ...................... ...................... ...................... ...93

Division 3Auditor independence 95Subdivision AGeneral requirement 95

324CA General requirement for auditor independenceauditors ............... 95324CB General requirement for auditor independencemember of

audit firm.........................................................................................98324CC General requirement for auditor independencedirector of

audit company .................... ...................... ...................... ............... 101324CD Conflict of interest situation ....................... ....................... ............ 105

Subdivision BSpecific requirements 106324CE Auditor independencespecific requirements for individual

auditor ....................... ...................... ....................... ...................... .106324CF Auditor independencespecific requirements for audit firm........ 111

324CG Auditor independencespecific requirements for auditcompany ..................... ....................... ....................... ..................... 117324CH Relevant relationships ...................... ....................... ...................... 124324CI Special rule for retiring partners of audit firms and retiring

directors of authorised audit companies ....................... ................. 129324CJ Special rule for retiring professional member of audit

company ..................... ....................... ....................... ..................... 130324CK Multiple former audit firm partners or audit company

directors.........................................................................................130

Subdivision CCommon provisions 131324CL People who are regarded as officers of a company for the

purposes of this Division ..................... ....................... ................... 131

Division 4Deliberately disqualifying auditor 133324CM Deliberately disqualifying auditor ..................... ........................ ....133

Division 5Auditor rotation for listed companies 135324DA Limited term for eligibility to play significant role in audit of

a listed company or listed registered scheme.................................135324DB Individuals rotation obligation ...................... ....................... ........ 135324DC Audit firms rotation obligation...................... ....................... ........ 136324DD Audit companys rotation obligation ..................... ........................ 137

Division 6Appointment, removal and fees of auditors for

companies 140

Subdivision AAppointment of company auditors 140325 Appointment of auditor by proprietary company ..................... .....140327A Public company auditor (initial appointment of auditor) ............... 140327B Public company auditor (annual appointments at AGMs to

fill vacancies) .................... ....................... ...................... ............... 140327C Public company auditor (appointment to fill casual vacancy) .......142327D Appointment to replace auditor removed from office.................. ..142


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327E ASIC may appoint public company auditor if auditorremoved but not replaced ........................ ....................... ............... 143

327F ASICs general power to appoint public company auditor ............ 144327G Restrictions on ASICs powers to appoint public company

auditor ....................... ...................... ....................... ...................... .144327H Effect on appointment of public company auditor of

company beginning to be controlled by a corporation...................145327I Remaining auditors may act during vacancy ......................... ........ 145328A Auditors consent to appointment.. ....................... ........................ .145328B Nomination of auditor ...................... ...................... ...................... .146

Subdivision BRemoval and resignation of company auditors 147329 Removal and resignation of auditors ..................... ........................ 147330 Effect of winding up on office of auditor ..................... ................. 149

Subdivision CCompany auditors fees and expenses 149331 Fees and expenses of auditors...................... ....................... ........... 149

Division 7Appointment, removal and fees of auditors for

registered schemes 150

Subdivision AAppointment of registered scheme auditors 150331AAA Registered scheme auditor (initial appointment of auditor)...........150331AAB Registered scheme auditor (appointment to fill vacancy)..............152331AAC ASICs power to appoint registered scheme auditor......................152331AAD Remaining auditors may act during vacancy ......................... ........ 152

Subdivision BRemoval and resignation of registered scheme

auditors 152331AC Removal and resignation of auditors ..................... ........................ 152331AD Effect of winding up on office of auditor ..................... ................. 154

Subdivision CFees and expenses of auditors 154331AE Fees and expenses of auditors...................... ....................... ........... 154

Part 2M.5Accounting and auditing standards 155334 Accounting standards .................... ...................... ...................... ....155335 Equity accounting...................... ...................... ...................... ........ 155336 Auditing standards......... ...................... ....................... ................... 155337 Interpretation of accounting and auditing standards ...................... 156338 Evidence of text of accounting standard or auditing standard ....... 156

Part 2M.6Exemptions and modifications 158340 ASICs power to make specific exemption orders................ ......... 158

341 ASICs power to make class orders....................... ........................ 158342 Criteria for specific exemption orders and class orders ................. 159342A ASICs power to modify the operation of section 324DA........... ..160342B Auditor to notify company or registered scheme of

section 342A declaration .................... ....................... .................... 161


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343 Modification by regulations............. ....................... ....................... 162

Part 2M.7Sanctions for contraventions of Chapter 163

344 Contravention of Part 2M.2 or 2M.3 ...................... ....................... 163

Chapter 2NUpdating ASIC information about companies

and registered schemes 164

Part 2N.1Review date 164345A Review date .................... ...................... ...................... ................... 164345B Company or responsible entity may change review date............... 165345C When choice has effect....... ...................... ....................... .............. 165

Part 2N.2Extract of particulars 166346A ASIC must give an extract of particulars each year ...................... .166346B ASIC may ask questions....... ....................... ....................... ........... 166

346C Requirements in relation to an extract of particulars ..................... 166

Part 2N.3Solvency resolution 168347A Directors must pass a solvency resolution after each review

date ...................... ....................... ...................... ....................... ...... 168347B Notice to ASIC ................... ...................... ...................... ............... 168347C Payment of review fee is taken to be a representation by the

directors that the company is solvent.............................................168

Part 2N.4Return of particulars 170348A ASIC may give a return of particulars ....................... .................... 170348B ASIC may ask questions....... ....................... ....................... ........... 170348C ASIC may require a solvency resolution and statement ................ 170

348D General requirements in relation to a return of particulars ............ 171Part 2N.5Notice by proprietary companies of changes to

ultimate holding company 173349A Proprietary companies must notify ASIC of changes to

ultimate holding company ....................... ...................... ................ 173349B Another company becomes an ultimate holding company ............ 173349C A company ceases to be an ultimate holding company ................. 173349D Ultimate holding company changes its name ....................... ......... 174

Chapter 2PLodgments with ASIC 175350 Forms for documents to be lodged with ASIC ...................... ........ 175351 Signing documents lodged with ASIC.................... ...................... .176

352 Documents lodged with ASIC electronically.................... ............. 176353 Electronic lodgment of certain documents ....................... ............. 176354 Telephone notice of certain changes...... ........................ ................ 177


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Chapter 5External administration 178

Part 5.1Arrangements and reconstructions 178410 Interpretation ..................... ....................... ...................... ............... 178411 Administration of compromises etc. ....................... ....................... 178412 Information as to compromise with creditors ....................... ......... 184413 Provisions for facilitating reconstruction and amalgamation

of Part 5.1 bodies...........................................................................186414 Acquisition of shares of shareholders dissenting from

scheme or contract approved by majority......................................188415 Notification of appointment of scheme manager and power

of Court to require report...............................................................191

Part 5.2Receivers, and other controllers, of property of

corporations 193

416 Definitions.....................................................................................193417 Application of Part .................... ...................... ....................... ....... 193418 Persons not to act as receivers .................... ....................... ............ 193418A Court may declare whether controller is validly acting ................. 194419 Liability of controller .................... ...................... ...................... ....194419A Liability of controller under pre-existing agreement about

property used by corporation ...................... ....................... ............ 195420 Powers of receiver .................... ....................... ...................... ........ 197420A Controllers duty of care in exercising power of sale .................... 198420B Court may authorise managing controller to dispose of

property despite prior charge ...................... ........................ ........... 199420C Receivers power to carry on corporations business during

winding up.....................................................................................200

421 Controllers duties in relation to bank accounts and financialrecords ...................... ....................... ....................... ...................... .201

421A Managing controller to report within 2 months aboutcorporations affairs.......................................................................202

422 Reports by receiver..... ...................... ...................... ...................... .203423 Supervision of controller ...................... ...................... ................... 204424 Controller may apply to Court....................... ........................ ........ 205425 Courts power to fix receivers remuneration ...................... .......... 205426 Controller has qualified privilege in certain cases ....................... ..206427 Notification of matters relating to controller ........................ ......... 206428 Statement that receiver appointed or other controller acting ......... 207429 Officers to report to controller about corporations affairs ............ 208

430 Controller may require reports.................... ........................ ........... 210431 Controller may inspect books .................... ....................... ............. 211432 Lodging controllers accounts ....................... ....................... ......... 211433 Payment of certain debts, out of property subject to floating

charge, in priority to claims under charge ......................... ............ 212


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434 Enforcing controllers duty to make returns ...................... ............ 215434A Court may remove controller for misconduct .................... ............ 215434B Court may remove redundant controller ....................... ................. 215

434C Effect of sections 434A and 434B ...................... ....................... ....216

Part 5.3AAdministration of a companys affairs with a view

to executing a deed of company arrangement 218

Division 1Preliminary 218435A Object of Part...................... ...................... ...................... ............... 218435B Definitions.....................................................................................218435C When administration begins and ends .................... ...................... .218

Division 2Appointment of administrator and first meeting of

creditors 220436A Company may appoint administrator if board thinks it is or

will become insolvent....................................................................220436B Liquidator may appoint administrator ....................... .................... 220436C Chargee may appoint administrator.................... ....................... ....220436D Company already under administration ..................... .................... 221436E Purpose and timing of first meeting of creditors................... ......... 221436F Functions of committee of creditors ...................... ....................... .221436G Membership of committee....................... ...................... ................ 222

Division 3Administrator assumes control of companys affairs 223437A Role of administrator.................... ....................... ...................... ....223437B Administrator acts as companys agent ..................... .................... 223437C Powers of other officers suspended .................... ....................... ....223437D Only administrator can deal with companys property .................. 224

437E Order for compensation where officer involved in voidtransaction .................... ...................... ....................... .................... 225

437F Effect of administration on companys members ......................... .225

Division 4Administrator investigates companys affairs 226438A Administrator to investigate affairs and consider possible

courses of action............................................................................226438B Directors to help administrator ....................... ....................... ........ 226438C Administrators rights to companys books ....................... ............ 227438D Reports by administrator ..................... ....................... ................... 228

Division 5Meeting of creditors decides companys future 229439A Administrator to convene meeting and inform creditors ............... 229439B Conduct of meeting ...................... ...................... ....................... ....230439C What creditors may decide ....................... ....................... .............. 230

Division 6Protection of companys property during

administration 231440A Winding up company ....................... ...................... ....................... 231


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440B Charge unenforceable .................... ..................... ...................... .....231440C Owner or lessor cannot recover property used by company .......... 231440D Stay of proceedings ..................... ...................... ...................... ...... 232

440E Administrator not liable in damages for refusing consent ............. 232440F Suspension of enforcement process....................... ........................ 232440G Duties of court officer in relation to property of company ............ 232440H Lis pendens taken to exist............ ....................... ........................ ...234440J Administration not to trigger liability of director or relative

under guarantee of companys liability..........................................234

Division 7Rights of chargee, owner or lessor 236441A Where chargee acts before or during decision period.................... 236441B Where enforcement of charge begins before administration.......... 237441C Charge on perishable property..... ....................... ....................... ....237441D Court may limit powers of chargee etc. in relation to charged

property ................... ...................... ...................... ...................... ....238

441E Giving a notice under a charge ....................... ....................... ........ 239441F Where recovery of property begins before administration............. 239441G Recovering perishable property....................... ...................... ........ 239441H Court may limit powers of receiver etc. in relation to

property used by company.... ....................... ...................... ............ 239441J Giving a notice under an agreement about property ...................... 240441K Effect of Division ...................... ...................... ...................... ........ 240

Division 8Powers of administrator 241442A Additional powers of administrator ...................... ....................... ..241442B Dealing with property subject to a floating charge that has

crystallised.....................................................................................241 442C When administrator may dispose of encumbered property...... ......241

442D Administrators powers subject to powers of chargee,receiver etc. ...................... ....................... ...................... ................ 242

442E Administrator has qualified privilege ........................ .................... 242442F Protection of persons dealing with administrator ..................... .....242

Division 9Administrators liability and indemnity for debts of

administration 244

Subdivision ALiability 244443A General debts...................... ...................... ....................... .............. 244443B Payments for property used or occupied by, or in the

possession of, the company ..................... ...................... ................ 244443BA Certain taxation liabilities............. ....................... ...................... ....246

443C Administrator not otherwise liable for companys debts ............... 246Subdivision BIndemnity 246

443D Right of indemnity............ ...................... ....................... ................ 246443E Right of indemnity has priority over other debts ....................... ....247443F Lien to secure indemnity ..................... ....................... ................... 248


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Division 10Execution and effect of deed of company

arrangement 249

444A Effect of creditors resolution..................... ....................... ............ 249444B Execution of deed ..................... ....................... ...................... ........ 250444C Creditor etc. not to act inconsistently with deed before its

execution ....................... ...................... ....................... ................... 250444D Effect of deed on creditors.................. ....................... .................... 251444E Protection of companys property from persons bound by

deed ..................... ...................... ...................... ...................... ........ 251444F Court may limit rights of secured creditor or owner or lessor .......252444G Effect of deed on company, officers and members... ..................... 253444H Extent of release of companys debts ..................... ....................... 253

Division 11Variation, termination and avoidance of deed 254445A Variation of deed by creditors ....................... ....................... ......... 254

445B Court may cancel variation..................... ....................... ................ 254445C When deed terminates ....................... ...................... ...................... 254445D When Court may terminate deed .................... ...................... ......... 254445E Creditors may terminate deed and resolve that company be

wound up.......................................................................................255445F Meeting of creditors to consider proposed variation or

termination of deed........................................................................256445G When Court may void or validate deed ...................... ................... 257445H Effect of termination or avoidance ..................... ....................... ....257

Division 12Transition to creditors voluntary winding up 258446A Administrator becomes liquidator in certain cases ....................... .258446B Regulations may provide for transition in other cases ................... 259

Division 13Powers of Court 261447A General power to make orders.. ....................... ....................... ....... 261447B Orders to protect creditors during administration ..................... .....261447C Court may declare whether administrator validly appointed ......... 262447D Administrator may seek directions ....................... ........................ .262447E Supervision of administrator of company or deed ......................... 262447F Effect of Division ...................... ...................... ...................... ........ 263

Division 14Qualifications of administrators 264448A Appointee must consent.................... ...................... ....................... 264448B Administrator must be registered liquidator ...................... ............ 264448C Disqualification of person connected with company ..................... 264448D Disqualification of insolvent under administration..... ................... 266

Division 15Removal, replacement and remuneration of

administrator 267449A Appointment of administrator cannot be revoked............. ............. 267449B Court may remove administrator .................... ....................... ........ 267


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449C Vacancy in office of administrator of company............. ................ 267449D Vacancy in office of administrator of deed of company

arrangement...................................................................................268 449E Remuneration of administrator ....................... ....................... ........ 269

Division 16Notices about steps taken under Part 270450A Appointment of administrator..................... ....................... ............ 270450B Execution of deed of company arrangement.................. ................ 270450C Failure to execute deed of company arrangement..................... .....271450D Termination of deed of company arrangement ...................... ........ 271450E Notice in public documents etc. of company....................... .......... 271450F Effect of contravention of this Division......................... ................ 272

Division 17Miscellaneous 273451A Appointment of 2 or more administrators of company .................. 273451B Appointment of 2 or more administrators of deed of

company arrangement....................................................................273451C Effect of things done during administration of company............. ..274451D Time for doing act does not run while act prevented by this

Part ....................... ...................... ....................... ...................... ...... 274

Part 5.4Winding up in insolvency 275

Division 1When company to be wound up in insolvency 275459A Order that insolvent company be wound up in insolvency ............ 275459B Order made on application under section 234, 462 or 464 ............ 275459C Presumptions to be made in certain proceedings ....................... ....275459D Contingent or prospective liability relevant to whether

company solvent............................................................................276

Division 2Statutory demand 277459E Creditor may serve statutory demand on company... ..................... 277459F When company taken to fail to comply with statutory

demand ....................... ...................... ....................... ...................... 278

Division 3Application to set aside statutory demand 279459G Company may apply... ...................... ...................... ...................... .279459H Determination of application where there is a dispute or

offsetting claim..............................................................................279459J Setting aside demand on other grounds ...................... ................... 280459K Effect of order setting aside demand ...................... ....................... 281459L Dismissal of application ..................... ....................... .................... 281459M Order subject to conditions..................... ....................... ................ 281

459N Costs where company successful................. ....................... ........... 281Division 4Application for order to wind up company in

insolvency 282459P Who may apply for order under section 459A............... ................ 282


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Division 3General powers of Court 306482 Power to stay or terminate winding up ...................... .................... 306

483 Delivery of property to liquidator....................... ....................... ....306484 Appointment of special manager .................... ....................... ........ 308485 Claims of creditors and distribution of property....................... .....308486 Inspection of books by creditors and contributories ...................... 309486A Court may make order to prevent officer or related entity

from avoiding liability to company ....................... ....................... .309486B Warrant to arrest person who is absconding, or who has dealt

with property or books, in order to avoid obligations inconnection with winding up .................... ........................ .............. 311

487 Power to arrest absconding contributory ...................... ................. 311488 Delegation to liquidator of certain powers of Court ...................... 312489 Powers of Court cumulative ....................... ....................... ............ 312

Part 5.5Voluntary winding up 313Division 1Resolution for winding up 313

490 When company cannot wind up voluntarily ......................... ......... 313491 Circumstances in which company may be wound up

voluntarily ...................... ...................... ...................... ................... 313493 Effect of voluntary winding up..... ....................... ...................... ....313494 Declaration of solvency ...................... ....................... .................... 314

Division 2Members voluntary winding up 316495 Liquidators .................... ....................... ...................... ................... 316496 Duty of liquidator where company turns out to be insolvent ......... 316

Division 3Creditors voluntary winding up 319

497 Meeting of creditors ...................... ...................... ...................... ....319498 Power to adjourn meeting........................ ...................... ................ 321499 Liquidators .................... ....................... ...................... ................... 321500 Execution and civil proceedings ...................... ...................... ........ 322

Division 4Voluntary winding up generally 323501 Distribution of property of company ...................... ...................... .323502 Appointment of liquidator ....................... ...................... ................ 323503 Removal of liquidator. ...................... ...................... ...................... .323504 Review of liquidators remuneration ...................... ....................... 323505 Acts of liquidator valid etc. ..................... ....................... ............... 323506 Powers and duties of liquidator ...................... ...................... ......... 324507 Power of liquidator to accept shares etc. as consideration for

sale of property of company ....................... ....................... ............ 325508 Annual meeting of creditors ....................... ....................... ............ 326509 Final meeting and deregistration .................... ........................ ....... 327510 Arrangement: when binding on creditors ..................... ................. 328


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511 Application to Court to have questions determined or powersexercised........................................................................................329

512 Costs..............................................................................................329

Part 5.6Winding up generally 330

Division 1Preliminary 330513 Application of Part .................... ...................... ....................... ....... 330

Division 1AWhen winding up taken to begin 331513A Winding up ordered by the Court ...................... ....................... .....331513B Voluntary winding up....................... ....................... ...................... 331513C Section 513C day in relation to an administration under

Part 5.3A........................................................................................332513D Validity of proceedings in earlier winding up ....................... ........ 332

Division 2Contributories 333

514 Where Division applies ....................... ....................... ................... 333515 General liability of contributory ...................... ...................... ........ 333516 Company limited by shares .................... ....................... ................ 333517 Company limited by guarantee.................... ....................... ........... 333518 Company limited both by shares and by guarantee ...................... .333519 Exceptions for former unlimited company ...................... .............. 334520 Past member: later debts....... ....................... ....................... ........... 334521 Person ceasing to be a member a year or more before

winding up.....................................................................................334522 Present members to contribute first ....................... ........................ 334523 Past member of former unlimited company............... .................... 334524 Past member of former limited company.................. ..................... 335

526 Liability on certain contracts ................... ....................... ............... 335527 Nature of contributorys liability .................... ....................... ........ 335528 Death of contributory ...................... ...................... ....................... .335529 Bankruptcy of contributory ...................... ....................... .............. 335

Division 3Liquidators 337530A Officers to help liquidator................ ....................... ...................... .337530B Liquidators rights to companys books .................... .................... 338530C Warrant to search for, and seize, companys property or

books ..................... ...................... ....................... ....................... .... 339531 Books to be kept by liquidator..... ....................... ....................... ....340532 Disqualification of liquidator............... ...................... .................... 340533 Reports by liquidator ..................... ...................... ...................... ....342

534 Prosecution by liquidator of delinquent officers andmembers ..................... ...................... ...................... ...................... .343

535 When liquidator has qualified privilege.............. ....................... ....344536 Supervision of liquidators............ ....................... ........................ ...344537 Notice of appointment and address of liquidator .......................... .345


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xviii Corporations Act 2001

538 Regulations relating to money etc. received by liquidator...... .......345539 Liquidators accounts .................... ...................... ...................... ....346540 Liquidator to remedy defaults............. ....................... .................... 347

Division 4General 348

541 Notification that company is in liquidation ....................... ............ 348542 Books of company..................... ...................... ....................... ....... 348543 Investment of surplus funds on general account ........................ ....349544 Unclaimed money to be paid to ASIC.................... ...................... .349545 Expenses of winding up where property insufficient.......... ........... 350546 Resolutions passed at adjourned meetings of creditors and

contributories.................................................................................351 547 Meetings to ascertain wishes of creditors or contributories ........... 351

Division 5Committees of inspection 352548 Convening of meetings by liquidator for appointment of

committee of inspection.................................................................352549 Proceedings of committee of inspection ........................ ................ 353550 Vacancies on committee of inspection ...................... .................... 353551 Member of committee not to accept extra benefit ........................ .354552 Powers of Court where no committee of inspection ...................... 354

Division 6Proof and ranking of claims 355

Subdivision AAdmission to proof of debts and claims 355553 Debts or claims that are provable in winding up ....................... ....355553A Member cannot prove debt unless contributions paid................... .356553AA Selling shareholder cannot prove debt unless documents

given..............................................................................................356 553B Insolvent companiespenalties and fines not generally

provable................... ...................... ...................... ...................... ....356553C Insolvent companiesmutual credit and set-off ......................... ..356553D Debts or claims may be proved formally or informally ................. 357553E Application of Bankruptcy Act to winding up of insolvent

company ..................... ....................... ....................... ..................... 357

Subdivision BComputation of debts and claims 358554 General rulecompute amount as at relevant date ....................... 358554A Determination of value of debts and claims of uncertain

value ................... ....................... ...................... ....................... ....... 358554B Discounting of debts payable after relevant date ...................... .....359554C Conversion into Australian currency of foreign currency

debts or claims...............................................................................359

Subdivision CSpecial provisions relating to secured creditors ofinsolvent companies 360

554D Application of Subdivision..................... ....................... ................ 360554E Proof of debt by secured creditor................ ....................... ............ 360554F Redemption of security by liquidator .................... ........................ 361


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Corporations Act 2001 xix

554G Amendment of valuation .................... ........................ ................... 362554H Repayment of excess ..................... ...................... ...................... ....362554J Subsequent realisation of security ...................... ....................... ....363

Subdivision DPriorities 363

555 Debts and claims proved to rank equally except as otherwiseprovided............ ...................... ...................... ...................... ........... 363

556 Priority payments....................... ...................... ...................... ........ 363558 Debts due to employees.................... ....................... ...................... 367559 Debts of a class to rank equally ....................... ...................... ........ 368560 Advances for company to make priority payments in respect

of employees..................................................................................368561 Priority of employees claims over floating charges.................... ..369562 Application of proceeds of contracts of insurance........................ .369562A Application of proceeds of contracts of reinsurance...................... 369563 Provisions relating to injury compensation............. ....................... 371563AA Seller under a buy-back agreement...... ....................... ................... 372563A Members debts to be postponed until other debts and claims

satisfied..........................................................................................372 563AAA Redemption of debentures.............................................................372

Subdivision EMiscellaneous 373563B Interest on debts and claims from relevant date to date of

payment ...................... ....................... ....................... ..................... 373563C Debt subordination .................... ...................... ....................... ....... 373564 Power of Court to make orders in favour of certain creditors........ 374

Division 7Effect on certain transactions 375565 Undue preference ..................... ...................... ....................... ........ 375

566 Effect of floating charge ....................... ...................... ................... 375567 Liquidators right to recover in respect of certain transactions...... 376

Division 7ADisclaimer of onerous property 378568 Disclaimer by liquidator; application to Court by party to

contract..........................................................................................378 568A Liquidator must give notice of disclaimer ........................ ............. 379568B Application to set aside disclaimer before it takes effect..... .......... 380568C When disclaimer takes effect..... ...................... ....................... ....... 381568D Effect of disclaimer ................... ...................... ...................... ........ 382568E Application to set aside disclaimer after it has taken effect ........... 382568F Court may dispose of disclaimed property ..................... ............... 383

Division 7BEffect on enforcement process against companys

property 384569 Executions, attachments etc. before winding up... ......................... 384570 Duties of sheriff after receiving notice of application ................... 385


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xx Corporations Act 2001

Division 9Co-operation between Australian and foreign courts

in external administration matters 388

580 Definitions.....................................................................................388581 Courts to act in aid of each other ....................... ....................... .....388

Part 5.7Winding up bodies other than companies 390582 Application of Part .................... ...................... ....................... ....... 390583 Winding up Part 5.7 bodies ...................... ...................... ............... 390585 Insolvency of Part 5.7 body..................... ....................... ............... 391586 Contributories in winding up of Part 5.7 body....................... ........ 392587 Power of Court to stay or restrain proceedings......................... .....392588 Outstanding property of defunct registrable body ........................ .393

Part 5.7BRecovering property or compensation for the

benefit of creditors of insolvent company 394

Division 1Preliminary 394588D Secured debt may become unsecured ........................ .................... 394588E Presumptions to be made in recovery proceedings ........................ 394588F Certain taxation liabilities taken to be debts ...................... ............ 396

Division 2Voidable transactions 398588FA Unfair preferences .................... ...................... ....................... ........ 398588FB Uncommercial transactions ..................... ....................... ............... 399588FC Insolvent transactions ...................... ...................... ...................... ..399588FD Unfair loans to a company....................... ...................... ................ 400588FDA Unreasonable director-related transactions....................................400588FE Voidable transactions ...................... ...................... ...................... ..402

588FF Courts may make orders about voidable transactions..... ............... 403588FG Transaction not voidable as against certain persons ...................... 405588FGA Directors to indemnify Commissioner of Taxation if certain

payments set aside .................... ....................... ...................... ........ 406588FGB Defences in proceedings under section 588FGA...........................407588FH Liquidator may recover from related entity benefit resulting

from insolvent transaction ...................... ........................ ............... 408588FI Creditor who gives up benefit of unfair preference may

prove for preferred debt ....................... ....................... ................... 409588FJ Floating charge created within 6 months before relation-back

day.................................................................................................410

Division 3Directors duty to prevent insolvent trading 412588G Directors duty to prevent insolvent trading by company.............. 412588H Defences........................................................................................414

Division 4Director liable to compensate company 416

Subdivision AProceedings against director 416


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Corporations Act 2001 xxi

588J On application for civil penalty order, Court may ordercompensation.................................................................................416

588K Criminal court may order compensation............... ........................ .416588L Enforcement of order under section 588J or 588K ........................ 417588M Recovery of compensation for loss resulting from insolvent

trading ....................... ...................... ....................... ...................... .417588N Avoiding double recovery ....................... ....................... ............... 418588P Effect of sections 588J, 588K and 588M.... ....................... ............ 418588Q Certificates evidencing contravention .................... ...................... .418

Subdivision BProceedings by creditor 419588R Creditor may sue for compensation with liquidators consent....... 419588S Creditor may give liquidator notice of intention to sue for

compensation.................................................................................419 588T When creditor may sue for compensation without

liquidators consent ................... ...................... ...................... ........ 420

588U Events preventing creditor from suing................ ....................... ....420Division 5Liability of holding company for insolvent trading

by subsidiary 421588V When holding company liable .................... ....................... ............ 421588W Recovery of compensation for loss resulting from insolvent

trading ....................... ...................... ....................... ...................... .421588X Defences........................................................................................422

Division 6Application of compensation under Division 4 or 5 424588Y Application of amount paid as compensation ...................... .......... 424

Division 7Person managing a corporation while disqualified

may become liable for corporations debts 425

588Z Court may make order imposing liability ...................... ................ 425

Part 5.8Offences 426589 Interpretation and application ..................... ....................... ............ 426590 Offences by officers of certain companies................ ..................... 429592 Incurring of certain debts; fraudulent conduct ....................... ........ 431593 Powers of Court....... ...................... ...................... ...................... ....433594 Certain rights not affected ...................... ........................ ............... 434595 Inducement to be appointed liquidator etc. of company ................ 435596 Frauds by officers ...................... ....................... ...................... ....... 435

Part 5.8AEmployee entitlements 437596AA Object and coverage of Part................ ....................... .................... 437596AB Entering into agreements or transactions to avoid employee

entitlements ...................... ...................... ....................... ................ 438596AC Person who contravenes section 596AB liable to compensate

for loss...........................................................................................439596AD Avoiding double recovery ....................... ....................... ............... 439


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xxii Corporations Act 2001

596AE Effect of section 596AC ................... ...................... ...................... .440596AF Employee may sue for compensation with liquidators

consent...........................................................................................440 596AG Employee may give liquidator notice of intention to sue for

compensation.................................................................................440 596AH When employee may sue for compensation without

liquidators consent ................... ...................... ...................... ........ 441596AI Events preventing employee from suing................... ..................... 441

Part 5.9Miscellaneous 443

Division 1Examining a person about a corporation 443596A Mandatory examination ...................... ........................ ................... 443596B Discretionary examination... ....................... ....................... ............ 443596C Affidavit in support of application under section 596B................. 444596D Content of summons..... ...................... ...................... ..................... 444

596E Notice of examination ..................... ....................... ...................... .444596F Court may give directions about examination ...................... ......... 445597 Conduct of examination.................. ....................... ....................... .445597A When Court is to require affidavit about corporations

examinable affairs .................... ....................... ...................... ........ 448597B Costs of unnecessary examination or affidavit ........................ ......449

Division 2Orders against a person in relation to a corporation 450598 Order against person concerned with corporation ........................ .450

Division 3Provisions applying to various kinds of external

administration 452600A Powers of Court where outcome of voting at creditors

meeting determined by related entity.............................................452600B Review by Court of resolution of creditors passed on casting

vote of person presiding at meeting...............................................453600C Courts powers where proposed resolution of creditors lost

as casting vote of person presiding at meeting ..................... ......... 454600D Interim order on application under section 600A, 600B or

600C ....................... ...................... ....................... ...................... ....455600E Order under section 600A or 600B does not affect act

already done pursuant to resolution ....................... ........................ 455600F Limitation on right of suppliers of essential services to insist

on payment as condition of supply ..................... ........................ ...455

Chapter 5ADeregistration, and transfer of registration, of

companies 457

Part 5A.1Deregistration 457601AA Deregistrationvoluntary.............................................................457601AB DeregistrationASIC initiated ...................... ....................... ........ 458601AC Deregistrationfollowing amalgamation or winding up .............. 459


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Corporations Act 2001 xxiii

601AD Effect of deregistration ....................... ....................... .................... 459601AE What ASIC does with the property.... ........................ .................... 460601AF ASICs power to fulfil outstanding obligations of

deregistered company....................................................................461601AG Claims against insurers of deregistered company...................... ....462601AH Reinstatement .................... ....................... ....................... .............. 462

Part 5A.2Transfer of registration 464601AI Transferring registration ...................... ....................... ................... 464601AJ Applying to transfer registration.......... ....................... ................... 464601AK ASIC makes transfer of registration declaration....................... .....464601AL ASIC to deregister company............. ....................... ...................... 465

Chapter 5BBodies corporate registered as companies, and

registrable bodies 466

Part 5B.1Registering a body corporate as a company 466

Division 1Registration 466601BA Bodies corporate may be registered as certain types of

companies......................................................................................466 601BB Bodies registered as proprietary companies................... ................ 466601BC Applying for registration under this Part ........................ ............... 467601BD ASIC gives body ACN, registers as company and issues

certificate.......................................................................................471 601BE Registered office................ ...................... ....................... ............... 471601BF Name .................... ...................... ...................... ...................... ....... 471601BG Constitution .................... ...................... ....................... .................. 472601BH Modifications of constitution............... ...................... .................... 472601BJ ASIC may direct company to apply for Court approval for

modifications of constitution ...................... ....................... ............ 472601BK Establishing registers and minute books..... ....................... ............ 473601BL Registration of registered bodies ..................... ...................... ........ 473

Division 2Operation of this Act 474601BM Effect of registration under this Part...... ........................ ................ 474601BN Liability of members on winding up................ ...................... ........ 474601BP Bearer shares ...................... ...................... ...................... ............... 474601BQ References in pre-registration contracts and other documents

to par value in existing contracts and documents...........................475601BR First AGM ...................... ...................... ...................... ................... 476601BS Modification by regulations............. ....................... ....................... 476

Part 5B.2Registrable bodies 477

Division 1Registrable Australian bodies 477601CA When a registrable Australian body may carry on business in

this jurisdiction and outside its place of origin ...................... ........ 477


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xxiv Corporations Act 2001

601CB Application for registration .................... ....................... ................ 477601CC Cessation of business etc. ..................... ....................... .................. 478

Division 2Foreign companies 481601CD When a foreign company may carry on business in this

jurisdiction........... ...................... ....................... ....................... ...... 481601CE Application for registration .................... ....................... ................ 481601CF Appointment of local agent ..................... ...................... ................ 482601CG Local agent: how appointed...... ....................... ....................... ....... 482601CH Local agent: how removed ...................... ....................... ............... 483601CJ Liability of local agent............... ....................... ...................... ....... 483601CK Balance-sheets and other documents ...................... ....................... 484601CL Cessation of business etc. ..................... ....................... .................. 486601CM Register of members of foreign company....... ....................... ........ 488601CN Register kept under section 601CM................... ........................ ....489

601CP Notifying ASIC about register kept under section 601CM.... ........490601CQ Effect of right to acquire shares compulsorily ....................... ........ 490601CR Index of members and inspection of registers ...................... ......... 491601CS Certificate as to shareholding ...................... ....................... ........... 491

Division 3Bodies registered under this Part 492601CT Registered office................ ...................... ....................... ............... 492601CU Certificate of registration...... ...................... ....................... ............ 492601CV Notice of certain changes .................... ....................... ................... 493601CW Bodys name etc. must be displayed at office and place of

business ................... ...................... ...................... ...................... ....493601CX Service of documents on registered body ...................... ................ 494601CY Power to hold land...... ...................... ....................... ...................... 496

Division 4Register of debenture holders for non-companies 497601CZA Certain documents are debentures ...................... ........................ ...497601CZB Register of debenture holders to be maintained by

non-companies...............................................................................497 601CZC Location of register........................................................................497601CZD Application of sections 173 to 177 ..................... ....................... ....498

Part 5B.3Names of registrable Australian bodies and foreign

companies 499601DA Reserving a name ...................... ...................... ...................... ........ 499601DB Acceptable abbreviations.......... ....................... ....................... ....... 499601DC When a name is available .................... ....................... ................... 500

601DD Registered Australian bodies and registered foreigncompanies can carry on business with some names only...............501601DE Using a name and ARBN .................... ....................... ................... 501601DF Exception to requirement to have ARBN on receipts .................... 502


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Corporations Act 2001 xxv

601DG Regulations may exempt from requirement to set outinformation on documents.............................................................502

601DH Notice of name change must be given to ASIC..................... ........ 503601DJ ASICs power to direct a registered name be changed .................. 503


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Debentures Chapter 2L

Requirement for trust deed and trustee Part 2L.1

Section 283AA

Corporations Act 2001 1

Chapter 2LDebentures

Part 2L.1Requirement for trust deed and trustee

283AA Requirement for trust deed and trustee

(1) Before a body:

(a) makes an offer of debentures in this jurisdiction that needsdisclosure to investors under Chapter 6D, or does not needdisclosure to investors under Chapter 6D because ofsubsection 708(14) (disclosure document exclusion fordebenture roll overs) or section 708A (sale offers that do not

need disclosure); or(b) makes an offer of debentures in this jurisdiction or elsewhere

as consideration for the acquisition of securities under anoff-market takeover bid; or

(c) issues debentures in this jurisdiction or elsewhere under acompromise or arrangement under Part 5.1 approved at ameeting held as a result of an order under subsection 411(1)or (1A);

regardless of where any resulting issue, sale or transfer occurs, thebody must enter into a trust deed that complies with section 283ABand appoint a trustee that complies with section 283AC.

Note: For rules about when an offer of debentures will need disclosure toinvestors under Chapter 6D, see sections 706, 707, 708 and 708A.

(1A) An offence based on subsection (1) is an offence of strict liability.

Note: For strict l iability, see section 6.1 of the Criminal Code.

(2) The body may revoke the trust deed after it has repaid all amountspayable under the debentures in accordance with the debenturesterms and the trust deed.

(3) The body must comply with this Chapter.

Note: Sections 168 and 601CZB require a register of debenture holders to beset up and kept.


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Chapter 2L Debentures

Part 2L.1 Requirement for trust deed and trustee

Section 283AB

2 Corporations Act 2001

283AB Trust deed

(1) The trust deed must provide that the following are held in trust bythe trustee for the benefit of the debenture holders:

(a) the right to enforce the borrowers duty to repay;

(b) any charge or security for repayment;

(c) the right to enforce any other duties that the borrower andany guarantor have under:

(i) the terms of the debentures; or

(ii) the provisions of the trust deed or this Chapter.

Note: For information about the duties that the borrower and any guarantorbody have under this Chapter, see sections 283BB to 283CE.

(2) An offence based on subsection (1) is an offence of strict liability.


283AC Who can be a trustee

Who can be trustee

(1) The trustee must be:

(a) the Public Trustee of any State or Territory; or

(b) a body corporate authorised by a law of any State orTerritory to take in its own name a grant of probate of thewill, or letters of administration of the estate, of a deceased

person; or(c) a body corporate registered under theLife Insurance Act

1995; or

(d) an Australian ADI; or

(e) a body corporate, all of whose shares are held beneficially bya body corporate or bodies corporate of the kind referred toin paragraph (b), (c) or (d) if that body or those bodies:

(i) are liable for all of the liabilities incurred, or to beincurred, by the trustee as trustee; or

(ii) have subscribed for and beneficially hold shares in thetrustee and there is an uncalled liability of at least

$500,000 in respect of those shares that can only becalled up if the trustee becomes anexternally-administered body corporate (seesection 254N); or


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Requirement for trust deed and trustee Part 2L.1

Section 283AD


(f) a body corporate approved by ASIC (see section 283GB).

Note: Section 283BD provides that if the borrower becomes aware that the

trustee cannot be a trustee, the trustee must be replaced.

Circumstances in which a person cannot be trustee

(2) A person may only be appointed or act as trustee (except to theextent provided for by section 283AD) if the appointment or actingwill not result in a conflict of interest or duty. This subsection isnot intended to affect any rule of law or equity.

(3) An offence based on subsection (1) or (2) is an offence of strictliability.


283AD Existing trustee continues to act until new trustee takes office

An existing trustee continues to act as the trustee until a newtrustee is appointed and has taken office as trustee, despite any ruleof law or equity to the contrary.

Note: This section applies even if the existing trustee resigns.

283AE Replacement of trustee

Related party of existing trustee may be appointed as a new trustee

(1) In addition to any other powers of appointment under the terms ofthe debentures or provisions of the trust deed, the borrower mayappoint a body corporate that is related to the existing trustee astrustee in place of the existing trustee if:

(a) the body corporate can be a trustee under section 283AC; and

(b) the existing trustee consents in writing to the appointment.

The appointment has effect despite any terms of the debentures orprovisions of the trust deed.

Appointment by Court

(2) The Court may:

(a) appoint a person who may be a trustee under section 283ACas trustee on the application of the borrower, a debentureholder or ASIC if:

(i) a trustee has not been validly appointed; or


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Part 2L.1 Requirement for trust deed and trustee

Section 283AE


(ii) the trustee has ceased to exist; or

(b) terminate the existing trustees appointment and appoint a

person who may be a trustee under section 283AC as trusteein the existing trustees place on the application of the

borrower, the existing trustee, a debenture holder or ASIC if:

(i) the existing trustee cannot be trustee undersection 283AC; or

(ii) the existing trustee fails, or refuses, to act.


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Duties of borrower Part 2L.2

Section 283BF


Subsequent quarters

(3) Each of the subsequent quarters are periods of 3 months. Thetrustee may allow a particular quarter to be a period of less than 3months if the trustee is satisfied that special circumstances justifydoing so.

Content of quarterly report

(4) The report for a quarter must include details of:

(a) any failure by the borrower and each guarantor to complywith the terms of the debentures or the provisions of the trustdeed or this Chapter during the quarter; and

(b) any event that has happened during the quarter that has

caused, or could cause, 1 or more of the following:(i) any amount deposited or lent under the debentures to

become immediately payable;

(ii) the debentures to become immediately enforceable;

(iii) any other right or remedy under the terms of thedebenture or provisions of the trust deed to becomeimmediately enforceable; and

(c) any circumstances that have occurred during the quarter thatmaterially prejudice:

(i) the borrower, any of its subsidiaries, or any of theguarantors; or

(ii) any security or charge included in or created by thedebentures or the trust deed; and

(d) any substantial change in the nature of the business of theborrower, any of its subsidiaries, or any of the guarantors thathas occurred during the quarter; and

(e) any of the following events that happened in the quarter:

(i) the appointment of a guarantor;

(ii) the cessation of liability of a guarantor body for thepayment of the whole or part of the money for which itwas liable under the guarantee;

(iii) a change of name of a guarantor (if this happens, the

report must also disclose the guarantors new name);and

(f) the net amount outstanding on any advances at the end of thequarter if the borrower has created a charge where:


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Part 2L.2 Duties of borrower

Section 283BF


(i) the total amount to be advanced on the security of thecharge is indeterminate; and

(ii) the advances are merged in a current account withbankers, trade creditors or anyone else; and

(g) any other matters that may materially prejudice any securityor the interests of the debenture holders.

Note: Paragraph (f)the borrower has a duty to inform the trustee aboutcharges as they are created (see section 283BE).

(5) If the borrower has deposited money with, or lent money to, arelated body corporate during the quarter, the report must alsoinclude details of:

(a) the total of the money deposited with, or lent to, the relatedbody corporate during the quarter (see subsection (7)); and

(b) the total amount of money owing to the borrower at the endof the quarter in respect of the deposits or loans to the related

body corporate.

Disregard any amount that the borrower deposits with an ADI inthe normal course of the borrowers business.

(6) If the borrower has assumed a liability of a related body corporateduring the quarter, the report must also include details of the extentof the liability assumed during the quarter and the extent of theliability as at the end of the quarter.

(7) For the purposes of subsections (5) and (6), the report:

(a) must distinguish between deposits, loans and assumptions ofliability that are secured and those that are unsecured; and

(b) may exclude any deposit, loan or assumption of liability onbehalf of the related body corporate if it has:

(i) guaranteed the repayment of the debentures of theborrower; and

(ii) secured the guarantee by a charge over all of itsproperty in favour of the trustee.

Formalities

(8) The report must:(a) be made in accordance with a resolution of the directors; and

(b) specify the date on which the report is made.


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Duties of borrower Part 2L.2

Section 283BG


283BG Exceptions

Sections 283BE and 283BF do not apply in respect of the borrowerwhile:

(a) it is under external administration; or

(b) a receiver, or a receiver and manager, of property of theborrower has been appointed and has not ceased to act underthat appointment.

283BH How debentures may be described

(1) The borrower may describe or refer to the debentures in:

(a) any disclosure in relation to the offer of the debentures; or

(b) any other document constituting or relating to the offer of thedebentures; or

(c) the debentures themselves;

only in accordance with the following table:

How debentures may be described

Item Description When description may be used

1 mortgage debenture only if the circumstances set out in

subsection (2) are satisfied

2 debenture only if the circumstances set out in

subsection (2) or (3) are satisfied

3 unsecured note or

unsecured deposit note

in any other case

(1A) The borrower commits an offence if it intentionally or recklesslycontravenes subsection (1).

When debentures can be called mortgage debentures or debentures

(2) The borrower may describe or refer to the debentures as:

(a) mortgage debentures; or

(b) debentures;

if:

(c) the repayment of all money that has been, or may be,deposited or lent under the debentures is secured by a firstmortgage given to the trustee over land vested in the

borrower or in any of the guarantors; and


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Part 2L.2 Duties of borrower

Section 283BI


(d) the mortgage has been registered, or is a registrable mortgagethat has been lodged for registration, in accordance with the

law relating to the registration of mortgages of land in theplace where the land is situated; and

(e) the total amount of that money and of all other liabilities (ifany) secured by the mortgage of that land ranking equallywith the liability to repay that money does not exceed 60% ofthe value of the borrowers or guarantors interest in that landas shown in the valuation included in the disclosuredocument for the debentures.

When debentures can be called debentures

(3) The borrower may describe or refer to the debentures as debentures

if:(a) the repayment of all money that has been, or may be,

deposited or lent under the debentures has been secured by acharge in favour of the trustee over the whole or any part ofthe tangible property of the borrower or of any of theguarantors; and

(b) the tangible property that constitutes the security for thecharge is sufficient and is reasonably likely to be sufficient tomeet the liability for the repayment of all such money and allother liabilities that:

(i) have been or may be incurred; and

(ii) rank in priority to, or equallywith, that liability.

283BI Offences for failure to comply with statutory duties

The borrower commits an offence if it intentionally or recklesslycontravenes section 283BB, 283BC, 283BD, 283BE, 283BF or283EA.


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Part 2L.3 Duties of guarantor

Section 283CD


283CD Exceptions

Section 283CC does not apply in respect of the guarantor while:(a) it is under external administration; or

(b) a receiver, or a receiver and manager, of property of theguarantor has been appointed and has not ceased to act underthat appointment.

283CE Offences for failure to comply with statutory duties

The guarantor commits an offence if it intentionally or recklesslycontravenes paragraph 283CB(b) or section 283CC.


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Trustee Part 2L.4

Section 283DA


Part 2L.4Trustee

283DA Trustees duties

The trustee of a trust deed entered into under section 283AA must:

(a) exercise reasonable diligence to ascertain whether theproperty of the borrower and of each guarantor that is orshould be available (whether by way of security orotherwise) will be sufficient to repay the amount deposited orlent when it becomes due; and

(b) exercise reasonable diligence to ascertain whether the

borrower or any guarantor has committed any breach of:(i) the terms of the debentures; or

(ii) the provisions of the trust deed or this Chapter; and

(c) do everything in its power to ensure that the borrower or aguarantor remedies any breach known to the trustee of:

(i) any term of the debentures; or

(ii) any provision of the trust deed or this Chapter;

unless the trustee is satisfied that the breach will notmaterially prejudice the debenture holders interests or anysecurity for the debentures; and

(d) ensure that the borrower and each guarantor complies with

Part 2K to the extent that it applies to the debentures; and

(e) notify ASIC as soon as practicable if:

(i) the borrower has not complied with section 283BE,283BF or subsection 318(1) or (4); or

(ii) a guarantor has not complied with section 283CC; and

(f) notify ASIC and the borrower as soon as practicable if thetrustee discovers that it cannot be a trustee undersection 283AC; and

(g) give the debenture holders a statement explaining the effectof any proposal that the borrower submits to the debentureholders before any meeting that:

(i) the Court calls in relation to a scheme under subsection411(1) or (1A); or

(ii) the trustee calls under subsection 283EB(1); and


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Part 2L.4 Trustee

Section 283DB


(h) comply with any directi