Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Hansard source

by leave—I move government amendments (1) to (20) on sheet GZ221 together.

(1) Schedule 1, item 7, page 10 (lines 8 to 31), omit subsection 415D(1), substitute:

Stay on enforcing rights

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

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

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

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

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

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

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

  (ii) the body's financial position;

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

(f) a reason that, in substance, is contrary to this subsection;

if the right arises for that reason by express provision (however described) of a contract, agreement or arrangement.

Note: This result is subject to subsections (5), (6) and (8), and to any order under section 415E.

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

(2) Schedule 1, item 7, page 12 (line 6), at the end of subsection 415D(4), add:

; or (d) is a reason referred to in paragraph (1)(e) or (f).

(3) Schedule 1, item 7, page 13 (lines 1 to 5), omit subsection 415D(8), substitute:

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

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

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

has consented in writing to the enforcement of the right.

(4) Schedule 1, item 7, page 14 (lines 19 and 20), omit "a reason referred to in paragraphs 415D(1)(a) to (d)", substitute "one or more reasons referred to in paragraphs 415D(1)(a) to (f)".

(5) Schedule 1, item 7, page 15 (after line 15), after section 415F, insert:

415FA Self -executing provisions

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

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

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

(2) Sections 415D to 415F also apply in relation to a self-executing provision in a corresponding way to the way they apply in relation to a right. For this purpose, assume those sections apply with such modifications as are necessary, including any prescribed by the regulations for the purposes of this subsection.

Note 1: This subsection achieves the object in subsection (1) by extending the application of all of the outcomes, exceptions and powers in sections 415D to 415F.

Note 2: These modifications include, for example, treating:

(a) a reference that a right cannot be enforced (however described) as including a reference that a self-executing provision cannot start to apply; and

(b) the words "if the right arises for that reason by express provision (however described) of a contract, agreement or arrangement" as being omitted from subsection 415D(1); and

(c) a reference that one or more rights are enforceable as including a reference that one or more self-executing provisions can start to apply; and

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

(3) In this section:

self -executing provision means a provision of a contract, agreement or arrangement that can start to apply automatically:

(a) for one or more reasons; and

(b) without any party to the contract, agreement or arrangement making a decision that the provision should start to apply.

(6) Schedule 1, item 7, page 15 (line 17), omit "415F", substitute "415FA".

(7) Schedule 1, item 8, page 15 (line 27) to page 16 (line 17), omit subsection 434J(1), substitute:

Stay on enforcing rights

(1) A right cannot be enforced against a corporation for:

(a) the reason of the appointment or existence of a managing controller of the whole or substantially the whole of the corporation's property; or

(b) the corporation's financial position, if there is a managing controller of the whole or substantially the whole of the corporation's property; or

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

  (i) the appointing, or possible appointing, of a managing controller of the whole or substantially the whole of the corporation's property; or

  (ii) the corporation's financial position;

if such an appointment is later made for the whole or substantially the whole of the corporation's property; or

(d) a reason that, in substance, is contrary to this subsection;

if the right arises for that reason by express provision (however described) of a contract, agreement or arrangement.

Note: This result is subject to subsections (5) and (7), and to any order under section 434K.

Example: A right to terminate a contract will not be enforceable to the extent that those rights are triggered by the appointment of a managing controller.

(8) Schedule 1, item 8, page 17 (line 13), at the end of subsection 434J(4), add:

; or (d) is a reason referred to in paragraph (1)(c) or (d).

(9) Schedule 1, item 8, page 19 (line 16), omit "a reason referred to in paragraph 434J(1)(a) or (b)", substitute "one or more reasons referred to in paragraphs 434J(1)(a) to (d)".

(10) Schedule 1, item 8, page 20 (after line 3), after section 434L, insert:

434LA Self -executing provisions

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

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

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

(2) Sections 434J to 434L also apply in relation to a self-executing provision in a corresponding way to the way they apply in relation to a right. For this purpose, assume those sections apply with such modifications as are necessary, including any prescribed by the regulations for the purposes of this subsection.

Note 1: This subsection achieves the object in subsection (1) by extending the application of all of the outcomes, exceptions and powers in sections 434J to 434L.

Note 2: These modifications include, for example, treating:

(a) a reference that a right cannot be enforced (however described) as including a reference that a self-executing provision cannot start to apply; and

(b) the words "if the right arises for that reason by express provision (however described) of a contract, agreement or arrangement" as being omitted from subsection 434J(1); and

(c) a reference that one or more rights are enforceable as including a reference that one or more self-executing provisions can start to apply; and

(d) paragraph 434L(2)(b) as alternatively providing that the Court is satisfied that one or more reasons referred to in paragraphs 434J(1)(a) to (d) can cause the self-executing provisions to start to apply.

(3) In this section:

self -executing provision means a provision of a contract, agreement or arrangement that can start to apply automatically:

(a) for one or more reasons; and

(b) without any party to the contract, agreement or arrangement making a decision that the provision should start to apply.

(11) Schedule 1, item 8, page 20 (line 5), omit "434L", substitute "434LA".

(12) Schedule 1, item 14, page 21 (lines 3 to 19), omit subsection 451E(1), substitute:

Stay on enforcing rights

(1) A right cannot be enforced against a company for:

(a) the reason that the company has come or is under administration; or

(b) the company's financial position, if the company is under administration; or

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

  (i) the company coming, or possibly coming, under administration; or

  (ii) the company's financial position;

if the company later comes under administration; or

(d) a reason that, in substance, is contrary to this subsection;

if the right arises for that reason by express provision (however described) of a contract, agreement or arrangement.

Note: This result is subject to subsections (5) and (7), and to any order under section 451F.

Example: A right to terminate a contract will not be enforceable to the extent that those rights are triggered by the company coming under administration.

(13) Schedule 1, item 14, page 22 (line 18), at the end of subsection 451E(4), add:

; or (d) is a reason referred to in paragraph (1)(c) or (d).

(14) Schedule 1, item 14, page 23 (lines 7 to 9), omit subsection 451E(7), substitute:

(7) Subsection (1) does not apply to the right to the extent that:

(a) the administrator of the company; or

(b) if a liquidator of the company is appointed after the administration ends—the liquidator;

has consented in writing to the enforcement of the right.

(15) Schedule 1, item 14, page 24 (lines 7 and 8), omit "a reason referred to in paragraph 451E(1)(a) or (b)", substitute "one or more reasons referred to in paragraphs 451E(1)(a) to (d)".

(16) Schedule 1, item 14, page 24 (after line 26), after section 451G, insert:

451GA Self -executing provisions

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

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

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

(2) Sections 451E to 451G also apply in relation to a self-executing provision in a corresponding way to the way they apply in relation to a right. For this purpose, assume those sections apply with such modifications as are necessary, including any prescribed by the regulations for the purposes of this subsection.

Note 1: This subsection achieves the object in subsection (1) by extending the application of all of the outcomes, exceptions and powers in sections 451E to 451G.

Note 2: These modifications include, for example, treating:

(a) a reference that a right cannot be enforced (however described) as including a reference that a self-executing provision cannot start to apply; and

(b) the words "if the right arises for that reason by express provision (however described) of a contract, agreement or arrangement" as being omitted from subsection 451E(1); and

(c) a reference that one or more rights are enforceable as including a reference that one or more self-executing provisions can start to apply; and

(d) paragraph 451G(2)(b) as alternatively providing that the Court is satisfied that one or more reasons referred to in paragraphs 451E(1)(a) to (d) can cause the self-executing provisions to start to apply.

(3) In this section:

self -executing provision means a provision of a contract, agreement or arrangement that can start to apply automatically:

(a) for one or more reasons; and

(b) without any party to the contract, agreement or arrangement making a decision that the provision should start to apply.

(17) Schedule 1, item 14, page 24 (line 28), omit "451G", substitute "451GA".

(18) Schedule 1, item 15, page 25 (line 4), omit "415D to 415F, 434J to 434L,", substitute "415D to 415FA, 434J to 434LA,".

(19) Schedule 1, item 16, page 25 (line 7), omit "451E to 451G,", substitute "451E to 451GA,".

(20) Schedule 1, item 17, page 25 (line 10), after "under", insert ", or self-executing provisions of,".

I also table an explanatory memorandum relating to the government amendments I have moved to this bill. The government is moving these amendments in response to submissions received during the Senate committee's review of the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017. I would like to thank all those who contributed to the Senate committee process and note that the committee recommended that the bill be passed.

However, the government considers that certain technical amendments are warranted to ensure the bill operates as intended. These amendments apply only to the operation of the stay on ipso facto clauses in part 2, schedule 1, of the bill. That part provides for stay against the enforcement of rights that it amend or terminate an agreement because of a formal restructure. The amendments amend the application of the stay on the enforcement of applicable rights under an ipso facto clause to (1) strengthen the anti-avoidance mechanisms to ensure that parties cannot contract around the stay, (2) extend the right to consent in writing to an enforcement of a stay to a liquidator who is subsequently appointed following an administration or scheme of arrangements and (3) clarify that the stay also applies to self-executing ipso facto clauses.

The anti-avoidance mechanism has been strengthened by adding an additional integrity provision and clarifying that regulations can be used to address other attempts to circumvent the operation of the stay. The bill already provides for an administrator and a person administering a compromise arrangement to be able to consent in writing to lift the stay on the enforcement of rights under applicable ipso facto clauses. These amendments extend that right to a liquidator who is subsequently appointed to the company should the company be wound up. This prevents an illogical and unintended outcome where an administrator has agreed to the operation of an ipso facto clause, only to have the arrangement fall away on the appointment of a liquidator. When the stay operates, it prevents the enforcement of contractual rights against a company undertaking a formal restructure. In some cases, an ipso facto clause will operate automatically on the occurrence of a certain event, without a decision by a party to the contract being made to enforce that right. For example, the entire contract will automatically terminate if one party enters into external administration. This results in all of the restructuring company's rights being extinguished and, thus, negatively impacts on the prospects of a successful restructure or sale of the business as a going concern. The amendments clarify that such self-executing clauses will also be caught by the stay on ipso facto clauses, as originally intended.

This is a bill that promotes a culture of entrepreneurship and innovation to drive business growth, global success and help save local jobs. These amendments are necessary to ensure that the provisions in the bill operate as they were intended to operate. I've already tabled the explanatory memorandum.