ASIC Corporate Insolvency Update - Issue 26
Issue 26, December 2022
On 17 February 2020, the Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 (the Bill) received Royal Assent, and introduced the creditor-defeating disposition as a voidable transaction defined under section 588FDB of the Corporations Act 2001 (Corporations Act), and voidable under section 588FE(6B).
In addition, the Bill introduced a new administrative power for ASIC, under section 588FGAA of the Corporations Act, to make orders in relation to creditor-defeating dispositions.
Liquidators should be mindful of the timeframes in section 588FGAA(2) which provides that a liquidator may request ASIC to make one or more orders during a period beginning on the relation back day and ending on the later of:
- three years after the relation back day, and
- 12 months after the first appointment of a liquidator in relation to winding up the company.
To be a ‘creditor-defeating disposition’, the transaction must also have been entered into on or after 18 February 2020.
Information Sheet 261 ASIC orders about creditor-defeating dispositions sets out factors it will take into account when considering a liquidator’s request.
We recently reviewed notices published on the Published Notices Website (PNW) by registered liquidators (RLs) acting in the role of a restructuring plan practitioner, and noted that the way the status of the company and/or the role selected by RLs was presented was inconsistent.
Notice templates on the PNW provide dropdowns which list all available options for each set of notices.
When preparing notices for publication by a restructuring plan practitioner, we ask RLs to select the following options:
- Company status: Registered
- Role type: Restructuring plan practitioner
No action is required to be taken for notices already published.
We ask that RLs ensure future notices conform with the above guidance.
To ensure the information on the public company register is complete, registered liquidators (RLs) should ask whether their appointor (if appointed as a controller) or the applicant (if appointed in a court winding up) has lodged the following required notices with ASIC and, if not, remind them of their obligation to do so:
Form 504 Notification that a person has been appointed controller/entered into possession etc must be lodged by a person who:
- obtains an order for the appointment of a receiver of property of a company
- appoints such a receiver under power contained in an instrument, or
- appoints another person to enter into possession, or take control, for the purpose of enforcing a security interest other than as a receiver (section 427(1) and (1A) of the Corporations Act).
Form 504 must be lodged with ASIC within seven days after obtaining the order or making the appointment.
If the appointor does not lodge a Form 504, the controller must do so (section 4271B), as well as lodge their Form 505 Notification of appointment or cessation of an external administrator within 14 days of becoming a controller of property of a corporation.
Court appointed liquidator
The applicant for the winding up of a company must lodge an office copy of the court order within seven days after the court makes the order.
Form 105 Cover page for office copy of court order must be lodged with an office copy of a court order that bears an originally stamped seal or an electronic seal of the registry of the court: section 470(2)(a) of the Corporations Act and regulation 1.0.21 of the Corporations Regulations 2001.
For further guidance, refer to the relevant flowcharts in Information Sheet 29 External administration, controller appointments and schemes of arrangement: Most commonly lodged forms:
- court-appointed liquidator: Flowchart 3
- receiver/receiver and manager: Flowchart 8 and Flowchart 9 respectively
- controller (other than a receiver, receiver and manager, or managing controller): Flowchart 10
- managing controller (other than receiver and manager): Flowchart 11.
We are improving the quality and useability of our published insolvency statistics on the ASIC website. We have obtained feedback from key stakeholders before settling on the new format to report on these statistics.
We have combined our historically published Series 1 and Series 2 insolvency statistics into a single corporate insolvency statistical dataset. The insolvency statistics will be published weekly (two weeks in arrears). Users can download the new dataset to undertake further statistical analysis.
Key changes you will see in our newly published dataset include:
- data from 1 July 2021 is now available
- separate tables for Series 1 and Series 2 derived from the underlying dataset
- users can filter statistics/tables on a monthly, quarterly and annual (financial year) basis by industry, appointment type or principal place of business
- users can source the underlying data by double-clicking a cell in a table
- base year comparisons are available for appointment type only
- location is now available down to postcode level
- location is now based on principal place of business rather than place of incorporation.
Note: ‘Base year’ is the average of the number of appointments for the 2017, 2018 and 2019 financial years.
In the future, we will not be publishing separate statistics (currently Series 1A, 1B and 2A, 2B). All information contained in these separate statistics is retained in the new corporate insolvency statistical dataset.
Our historical Series 1, 1A, 1B and 2, 2A, 2B can still be accessed on our website.
A registered liquidator appointed to a formal external administration or controller appointment is under no statutory requirement to directly engage with eligible officers of the company about the requirement to have a director ID. However, if the registered liquidator identifies that a person is not complying with the director ID requirements, they should consider reporting that to either (or both) ASIC and the Registrar of the Australian Business Registry Services (ABRS).
In Issue 25 (September 2022) we stated that there are no different requirements for directors of companies in external administration to have a director ID – that is, if the person is an eligible officer of a company in external administration or that has a controller appointed, they will need to apply for a director ID in accordance with the prescribed timeframes for all other eligible officers.
For directors of companies regulated by ASIC and registered under the Corporations Act 2001, the prescribed timeframes are:
- new directors appointed on or after 5 April 2022 must apply before being appointed
- directors appointed on or before 31 October 2021 had until 30 November 2022 to apply (ABRS had stated it will not take further action if the application was lodged by 14 December)
- new directors appointed for the first time between 1 November 2021 and 4 April 2022 had 28 days from their appointment to apply.
We note that the ABRS has released draft Corporations (Eligible Officer Exclusion - non-individuals and resigned directors) Determination 2022 for public consultation. Although the legislative instrument is subject to final determination, under this instrument, directors who were directors before 4 April 2021, or became directors between 4 April 2021 and 31 October 2021 but resigned from all their director roles on or before 30 November 2022, would not be expected to apply for a director ID.
ASIC continues to engage with operators of various registered liquidator (RL)’s websites about links to ASIC information sheets and/or ASIC’s website which do not comply with the conditions set out on the ASIC webpage Copyright and linking to our websites (the conditions).
ASIC information sheets located on the ASIC website are subject to the conditions and are updated from time to time. When an ASIC information sheet is updated with new content, the link to the webpage version of the information sheet does not change. When the name of the webpage changes, our system automatically redirects the old page name to the new page name. So, PDF versions of ASIC information sheets are superseded by up-to-date webpages on the ASIC website from time to time.
Examples of non-compliant links on RLs’ websites identified by ASIC include:
- links to outdated PDF versions of ASIC information sheets
- links to PDF versions of ASIC information sheets that are created from the ASIC webpage
- links containing the unauthorised use of ASIC’s logo (a registered trademark)
- links to ASIC’s websites and ASIC’s Published Notices website which direct website consumers within the navigation of the RL’s website, not in a separate window or browser.
If RLs wish to provide links to ASIC information sheets for the benefit of website consumers:
- they should provide the link to the webpage that is relevant to a particular ASIC information sheet, and
- to comply with the conditions, the links must direct website users to the ASIC website in a separate window or browser, not within the navigation of the RL’s website.
This ensures website users are always provided with relevant and up-to-date information.
You should refer to the ASIC webpage Copyright and linking to our websites for further details.
Similarly, the conditions apply to any ASIC information sheets in reports to creditors which are sent electronically. RLs are required to provide a link to ASIC information sheets which is located on the ASIC website. RLs should not create their own PDF versions from the ASIC webpage and must never reproduce ASIC’s logo without express approval from ASIC. For notices and reports sent in hard copy, RLs should provide the full web address.
We ask RLs to regularly review and maintain their websites, and other online platforms such as Facebook pages.
Insolvency activity is up 73.1% for the financial year to 20 November 2022 compared to the same period in the previous financial year. However, activity is still 12% down on the base-level equivalent (which is the average of three years pre-COVID).
For more detail, see our Series 1 and 2 statistics.
Email support and contact details for ASIC team members for each state are available on the Contacts page.