Corporations Act 2001 (consolidated as of April 14, 2015), Australia

Corporations Act 2001

No. 50, 2001

Compilation No. 70

Compilation date:                              14 April 2015

Includes amendments up to:            Act No. 36, 2015

Registered:                                         29 April 2015

This compilation is in 5 volumes

Volume 1:       sections 1–260E

Volume 2:       sections 283AA–601DJ

Volume 3:       sections 601EA–742

Volume 4:       sections 760A–1200U

Volume 5:       sections 1274–1549

                        Schedules

                        Endnotes

Each volume has its own contents

 

About this compilation

This compilation

This is a compilation of the Corporations Act 2001 that shows the text of the law as amended and in force on 14 April 2015 (the compilation date).

This compilation was prepared on 24 April 2015.

The notes at the end of this compilation (the endnotes) include information about amending laws and the amendment history of provisions of the compiled law.

Uncommenced amendments

The effect of uncommenced amendments is not shown in the text of the compiled law. Any uncommenced amendments affecting the law are accessible on ComLaw (www.comlaw.gov.au). The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. For more information on any uncommenced amendments, see the series page on ComLaw for the compiled law.

Application, saving and transitional provisions for provisions and amendments

If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes.

Modifications

If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. For more information on any modifications, see the series page on ComLaw for the compiled law.

Self‑repealing provisions

If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes.

  

  

  

Contents

Chapter 2L—Debentures                                                                                       1

Part 2L.1—Requirement for trust deed and trustee                                        1

283AA.................. Requirement for trust deed and trustee................................ 1

283AB................... Trust deed........................................................................... 2

283AC................... Who can be a trustee........................................................... 2

283AD.................. Existing trustee continues to act until new trustee takes office 3

283AE................... Replacement of trustee........................................................ 4

Part 2L.2—Duties of borrower                                                                                     5

283BA................... Duties of borrower............................................................. 5

283BB................... General duties..................................................................... 5

283BC................... Duty to notify ASIC of information related to trustee......... 5

283BCA................ Register relating to trustees for debenture holders.............. 6

283BD................... Duty to replace trustee........................................................ 6

283BE................... Duty to inform trustee about security interests.................... 7

283BF................... Duty to give trustee and ASIC quarterly reports................. 7

283BG................... Exceptions to borrower’s duty to report to trustee and ASIC  10

283BH................... How debentures may be described................................... 10

283BI.................... Offences for failure to comply with statutory duties......... 11

Part 2L.3—Duties of guarantor                                                                                  12

283CA................... Duties of guarantor........................................................... 12

283CB................... General duties................................................................... 12

283CC................... Duty to inform trustee about security interests.................. 12

283CD................... Exceptions to guarantor’s duty to inform trustee.............. 13

283CE................... Offences for failure to comply with statutory duties......... 13

Part 2L.4—Trustee                                                                                                             14

283DA.................. Trustee’s duties................................................................. 14

283DB................... Exemptions and indemnifications of trustee from liability 15

283DC................... Indemnity.......................................................................... 16

Part 2L.5—Meetings of debenture holders                                                          17

283EA................... Borrower’s duty to call meeting........................................ 17

283EB................... Trustee’s power to call meeting........................................ 18

283EC................... Court may order meeting.................................................. 19

Part 2L.6—Civil liability                                                                                                  20

283F...................... Civil liability for contravening this Chapter...................... 20

Part 2L.7—ASIC powers                                                                                                21

283GA.................. ASIC’s power to exempt and modify............................... 21

283GB................... ASIC may approve body corporate to be trustee.............. 22

Part 2L.8—Court                                                                                                                 23

283HA.................. General Court power to give directions and determine questions             23

283HB................... Specific Court powers...................................................... 23

Part 2L.9—Location of other debenture provisions                                       25

283I....................... Signpost to other debenture provisions............................. 25

Chapter 2M—Financial reports and audit                                       26

Part 2M.1—Overview                                                                                                        26

285........................ Overview of obligations under this Chapter..................... 26

285A..................... Overview of obligations of companies limited by guarantee 28

Part 2M.2—Financial records                                                                                      31

286........................ Obligation to keep financial records.................................. 31

287........................ Language requirements..................................................... 31

288........................ Physical format................................................................. 32

289........................ Place where records are kept............................................. 32

290........................ Director access.................................................................. 33

291........................ Signposts to other relevant provisions.............................. 33

Part 2M.3—Financial reporting                                                                                  35

Division 1—Annual financial reports and directors’ reports               35

292........................ Who has to prepare annual financial reports and directors’ reports          35

293........................ Small proprietary company—shareholder direction.......... 36

294........................ Small proprietary company—ASIC direction................... 36

294A..................... Small company limited by guarantee—member direction. 37

294B...................... Small company limited by guarantee—ASIC direction..... 37

295........................ Contents of annual financial report................................... 38

295A..................... Declaration in relation to listed entity’s financial statements by chief executive officer and chief financial officer............................................................................... 40

296........................ Compliance with accounting standards and regulations.... 42

297........................ True and fair view............................................................. 42

298........................ Annual directors’ report.................................................... 43

299........................ Annual directors’ report—general information................. 44

299A..................... Annual directors’ report—additional general requirements for listed entities           46

300........................ Annual directors’ report—specific information................ 46

300A..................... Annual directors’ report—specific information to be provided by listed companies                54

300B...................... Annual directors’ report—companies limited by guarantee 59

301........................ Audit of annual financial report........................................ 60

Division 2—Half‑year financial report and directors’ report              62

302........................ Disclosing entity must prepare half‑year financial report and directors’ report        62

303........................ Contents of half‑year financial report................................ 62

304........................ Compliance with accounting standards and regulations.... 64

305........................ True and fair view............................................................. 64

306........................ Half‑year directors’ report................................................ 64

Division 3—Audit and auditor’s report                                                            66

307........................ Audit................................................................................. 66

307A..................... Audit to be conducted in accordance with auditing standards  66

307B...................... Audit working papers to be retained for 7 years............... 67

307C...................... Auditor’s independence declaration.................................. 70

308........................ Auditor’s report on annual financial report....................... 73

309........................ Auditor’s report on half‑year financial report................... 74

310........................ Auditor’s power to obtain information............................. 75

311........................ Reporting to ASIC............................................................ 76

312........................ Assisting auditor............................................................... 79

313........................ Special provisions on audit of debenture issuers and guarantors             79

Division 4—Annual financial reporting to members                                 81

314........................ Annual financial reporting to members............................. 81

315........................ Deadline for reporting to members................................... 83

316........................ Member’s choices for annual financial information.......... 84

316A..................... Annual financial reporting to members of companies limited by guarantee              85

317........................ Consideration of reports at AGM..................................... 86

318........................ Additional reporting by debenture issuers........................ 87

Division 5—Lodging reports with ASIC                                                          88

319........................ Lodgment of annual reports with ASIC............................ 88

320........................ Lodgment of half‑year reports with ASIC........................ 88

321........................ ASIC power to require lodgment...................................... 89

322........................ Relodgment if financial statements or directors’ reports amended after lodgment    89

Division 6—Special provisions about consolidated financial statements               91

323........................ Directors and officers of controlled entity to give information 91

323A..................... Auditor’s power to obtain information from controlled entity  91

323B...................... Controlled entity to assist auditor...................................... 91

323C...................... Application of Division to entity that has ceased to be controlled            92

Division 7—Financial years and half‑years                                                    93

323D..................... Financial years and half‑years........................................... 93

Division 8—Disclosure by listed companies of information filed overseas          95

323DA.................. Listed companies to disclose information filed overseas... 95

Part 2M.4—Appointment and removal of auditors                                        96

Division 1—Entities that may be appointed as an auditor for a company or registered scheme            96

324AA.................. Individual auditors, audit firms and authorised audit companies              96

324AB................... Effect of appointing firm as auditor—general................... 96

324AC................... Effect of appointing firm as auditor—reconstitution of firm 97

324AD.................. Effect of appointing company as auditor........................... 98

324AE................... Professional members of the audit team............................ 99

324AF................... Lead and review auditors.................................................. 99

Division 2—Registration requirements                                                           101

324BA................... Registration requirements for appointment of individual as auditor         101

324BB................... Registration requirements for appointment of firm as auditor  101

324BC................... Registration requirements for appointment of company as auditor           103

324BD................... Exception from registration requirement for proprietary company           105

324BE................... Exception from registration requirement—reviewing financial reports of companies limited by guarantee........................................................................................ 106

Division 3—Auditor independence                                                                    107

Subdivision A—General requirement                                                               107

324CA................... General requirement for auditor independence—auditors 107

324CB................... General requirement for auditor independence—member of audit firm    111

324CC................... General requirement for auditor independence—director of audit company             114

324CD................... Conflict of interest situation............................................ 118

Subdivision B—Specific requirements                                                             120

324CE................... Auditor independence—specific requirements for individual auditor       120

324CF................... Auditor independence—specific requirements for audit firm 125

324CG................... Auditor independence—specific requirements for audit company           131

324CH................... Relevant relationships..................................................... 140

324CI.................... Special rule for retiring partners of audit firms and retiring directors of authorised audit companies       147

324CJ.................... Special rule for retiring professional member of audit company              147

324CK................... Multiple former audit firm partners or audit company directors               148

Subdivision C—Common provisions                                                                149

324CL................... People who are regarded as officers of a company for the purposes of this Division              149

Division 4—Deliberately disqualifying auditor                                           151

324CM.................. Deliberately disqualifying auditor................................... 151

Division 5—Auditor rotation for listed companies                                   153

324DA.................. Limited term for eligibility to play significant role in audit of a listed company or listed registered scheme........................................................................................ 153

324DAA............... Directors may extend eligibility term.............................. 154

324DAB................ Requirements for directors to approve extension of eligibility term         155

324DAC................ Notifications about approval to extend eligibility term.... 156

324DAD............... Approval ineffective unless it complies with requirements 157

324DB................... Individual’s rotation obligation....................................... 157

324DC................... Audit firm’s rotation obligation...................................... 157

324DD.................. Audit company’s rotation obligation............................... 159

Division 6—Appointment, removal and fees of auditors for companies               162

Subdivision A—Appointment of company auditors                                      162

325........................ Appointment of auditor by proprietary company............ 162

327A..................... Public company auditor (initial appointment of auditor). 162

327B...................... Public company auditor (annual appointments at AGMs to fill vacancies)              162

327C...................... Public company auditor (appointment to fill casual vacancy) 165

327D..................... Appointment to replace auditor removed from office...... 165

327E...................... ASIC may appoint public company auditor if auditor removed but not replaced     166

327F...................... ASIC’s general power to appoint public company auditor 167

327G..................... Restrictions on ASIC’s powers to appoint public company auditor         167

327H..................... Effect on appointment of public company auditor of company beginning to be controlled by a corporation........................................................................................ 168

327I....................... Remaining auditors may act during vacancy................... 168

328A..................... Auditor’s consent to appointment................................... 168

328B...................... Nomination of auditor..................................................... 169

Subdivision B—Removal and resignation of company auditors               170

329........................ Removal and resignation of auditors............................... 170

330........................ Effect of winding up on office of auditor........................ 173

Subdivision C—Company auditors’ fees and expenses                                173

331........................ Fees and expenses of auditors........................................ 173

Division 7—Appointment, removal and fees of auditors for registered schemes             174

Subdivision A—Appointment of registered scheme auditors                      174

331AAA............... Registered scheme auditor (initial appointment of auditor) 174

331AAB................ Registered scheme auditor (appointment to fill vacancy) 176

331AAC................ ASIC’s power to appoint registered scheme auditor....... 176

331AAD............... Remaining auditors may act during vacancy................... 176

Subdivision B—Removal and resignation of registered scheme auditors 177

331AC................... Removal and resignation of auditors............................... 177

331AD.................. Effect of winding up on office of auditor........................ 178

Subdivision C—Fees and expenses of auditors                                               179

331AE................... Fees and expenses of auditors........................................ 179

Part 2M.4A—Annual transparency reports for auditors                         180

332........................ Meaning of transparency reporting auditor and transparency reporting year       180

332A..................... Transparency reporting auditors must publish annual transparency reports             180

332B...................... Content of annual transparency report............................ 181

332C...................... Extension of period for publication of annual transparency report           181

332D..................... Exemption orders—applications by transparency reporting auditors       182

332E...................... Exemption orders—class orders for transparency reporting auditors       183

332F...................... Exemption orders—criteria for orders............................ 183

332G..................... Offences by members of audit firm................................ 184

Part 2M.5—Accounting and auditing standards                                            185

334........................ Accounting standards..................................................... 185

335........................ Equity accounting........................................................... 185

336........................ Auditing standards.......................................................... 185

337........................ Interpretation of accounting and auditing standards........ 186

338........................ Evidence of text of accounting standard or auditing standard.. 186

Part 2M.6—Exemptions and modifications                                                       188

340........................ Exemption orders—companies, registered schemes and disclosing entities             188

341........................ Exemption orders—class orders for companies, registered schemes and disclosing entities    188

342........................ Exemption orders—criteria for orders for companies, registered schemes and disclosing entities           189

342AA.................. Exemption orders—non‑auditor members and former members of audit firms; former employees of audit companies....................................................................... 190

342AB................... Exemption orders—class orders for non‑auditor members etc.                191

342AC................... Exemption orders—criteria for orders for non‑auditor members etc.       191

342A..................... ASIC’s power to modify the operation of section 324DA 192

342B...................... Auditor to notify company or registered scheme of section 342A declaration         193

343........................ Modification by regulations............................................ 194

Part 2M.7—Sanctions for contraventions of Chapter                                195

344........................ Contravention of Part 2M.2 or 2M.3, or of certain provisions of Part 2M.4           195

Chapter 2N—Updating ASIC information about companies and registered schemes                                                                                                                       196

Part 2N.1—Review date                                                                                                 196

345A..................... Review date.................................................................... 196

345B...................... Company or responsible entity may change review date. 197

345C...................... When choice has effect................................................... 197

Part 2N.2—Extract of particulars                                                                           198

346A..................... ASIC must give an extract of particulars each year......... 198

346B...................... ASIC may ask questions................................................ 198

346C...................... Requirements in relation to an extract of particulars........ 198

Part 2N.3—Solvency resolution                                                                                 200

347A..................... Directors must pass a solvency resolution after each review date            200

347B...................... Notice to ASIC............................................................... 200

347C...................... Payment of review fee is taken to be a representation by the directors that the company is solvent         201

Part 2N.4—Return of particulars                                                                            202

348A..................... ASIC may give a return of particulars............................ 202

348B...................... ASIC may ask questions................................................ 202

348C...................... ASIC may require a solvency resolution and statement.. 202

348D..................... General requirements in relation to a return of particulars 203

Part 2N.5—Notice by proprietary companies of changes to ultimate holding company                205

349A..................... Proprietary companies must notify ASIC of changes to ultimate holding company 205

349B...................... Another company becomes an ultimate holding company 205

349C...................... A company ceases to be an ultimate holding company... 205

349D..................... Ultimate holding company changes its name.................. 206

Chapter 2P—Lodgments with ASIC                                                     207

350........................ Forms for documents to be lodged with ASIC............... 207

351........................ Signing documents lodged with ASIC........................... 208

352........................ Documents lodged with ASIC electronically.................. 208

353........................ Electronic lodgment of certain documents....................... 209

354........................ Telephone notice of certain changes................................ 209

Chapter 5—External administration                                                    210

Part 5.1—Arrangements and reconstructions                                                  210

410........................ Interpretation................................................................... 210

411........................ Administration of compromises etc................................ 210

412........................ Information as to compromise with creditors.................. 218

413........................ Provisions for facilitating reconstruction and amalgamation of Part 5.1 bodies       220

414........................ Acquisition of shares of shareholders dissenting from scheme or contract approved by majority           222

415........................ Notification of appointment of scheme manager and power of Court to require report            226

Part 5.2—Receivers, and other controllers, of property of corporations                227

416........................ Definitions...................................................................... 227

417........................ Application of Part.......................................................... 227

418........................ Persons not to act as receivers........................................ 228

418A..................... Court may declare whether controller is validly acting.... 228

419........................ Liability of controller...................................................... 229

419A..................... Liability of controller under pre‑existing agreement about property used by corporation         230

420........................ Powers of receiver.......................................................... 231

420A..................... Controller’s duty of care in exercising power of sale...... 234

420B...................... Court may authorise managing controller to dispose of property despite prior security interest               234

420C...................... Receiver’s power to carry on corporation’s business during winding up                236

421........................ Managing controller’s duties in relation to bank accounts and financial records      237

421A..................... Managing controller to report within 2 months about corporation’s affairs             238

422........................ Reports by receiver or managing controller.................... 238

423........................ Supervision of controller................................................ 240

424........................ Controller may apply to Court........................................ 241

425........................ Court’s power to fix receiver’s remuneration................. 241

426........................ Controller has qualified privilege in certain cases........... 243

427........................ Notification of matters relating to controller.................... 244

428........................ Statement that receiver appointed or other controller acting 245

429........................ Officers to report to controller about corporation’s affairs 245

430........................ Controller may require reports........................................ 247

431........................ Controller may inspect books......................................... 248

432........................ Lodging controller’s accounts......................................... 249

433........................ Property subject to circulating security interest—payment of certain debts to have priority     250

434........................ Enforcing controller’s duty to make returns.................... 253

434A..................... Court may remove controller for misconduct.................. 253

434B...................... Court may remove redundant controller.......................... 254

434C...................... Effect of sections 434A and 434B.................................. 255

434D..................... Appointment of 2 or more receivers of property of a corporation            255

434E...................... Appointment of 2 or more receivers and managers of property of a corporation     255

434F...................... Appointment of 2 or more controllers of property of a corporation         256

434G..................... Appointment of 2 or more managing controllers of property of a corporation         256

Part 5.3A—Administration of a company’s affairs with a view to executing a deed of company arrangement                                                                                                       257

Division 1—Preliminary                                                                                          257

435A..................... Object of Part.................................................................. 257

435B...................... Definitions...................................................................... 257

435C...................... When administration begins and ends............................. 257

Division 2—Appointment of administrator and first meeting of creditors          260

436A..................... Company may appoint administrator if board thinks it is or will become insolvent 260

436B...................... Liquidator may appoint administrator............................. 260

436C...................... Secured party may appoint administrator........................ 261

436D..................... Company already under administration........................... 261

436DA.................. Declarations by administrator—indemnities and relevant relationships    261

436E...................... Purpose and timing of first meeting of creditors............. 263

436F...................... Functions of committee of creditors................................ 264

436G..................... Membership of committee.............................................. 264

Division 3—Administrator assumes control of company’s affairs   266

437A..................... Role of administrator...................................................... 266

437B...................... Administrator acts as company’s agent........................... 266

437C...................... Powers of other officers suspended................................ 266

437D..................... Only administrator can deal with company’s property.... 267

437E...................... Order for compensation where officer involved in void transaction         268

437F...................... Effect of administration on company’s members............ 269

Division 4—Administrator investigates company’s affairs                  272

438A..................... Administrator to investigate affairs and consider possible courses of action            272

438B...................... Directors to help administrator........................................ 272

438C...................... Administrator’s rights to company’s books.................... 273

438D..................... Reports by administrator................................................. 274

438E...................... Administrator’s accounts................................................ 275

Division 5—Meeting of creditors decides company’s future               277

439A..................... Administrator to convene meeting and inform creditors. 277

439B...................... Conduct of meeting......................................................... 279

439C...................... What creditors may decide.............................................. 279

Division 6—Protection of company’s property during administration  280

440A..................... Winding up company...................................................... 280

440B...................... Restrictions on exercise of third party property rights.... 280

440D..................... Stay of proceedings........................................................ 282

440E...................... Administrator not liable in damages for refusing consent 282

440F...................... Suspension of enforcement process................................ 282

440G..................... Duties of court officer in relation to property of company 282

440H..................... Lis pendens taken to exist............................................... 284

440J....................... Administration not to trigger liability of director or relative under guarantee of company’s liability        284

440JA.................... Property subject to a banker’s lien—exemption from this Division         285

Division 7—Rights of secured party, owner or lessor                            287

Subdivision A—General                                                                                       287

441........................ Application of Division.................................................. 287

Subdivision B—Property subject to security interests                                  287

441AA.................. Application of Subdivision—PPSA security interests.... 287

441A..................... Secured party acts before or during decision period....... 287

441B...................... Where enforcement of security interest begins before administration       289

441C...................... Security interest in perishable property........................... 290

441D..................... Court may limit powers of secured party etc. in relation to secured property           290

441E...................... Giving a notice under a security agreement etc............... 291

441EA................... Sale of property subject to a possessory security interest 291

Subdivision C—Property not subject to security interests                           292

441EB................... Scope of Subdivision...................................................... 292

441F...................... Where recovery of property begins before administration 293

441G..................... Recovering perishable property...................................... 293

441H..................... Court may limit powers of receiver etc. in relation to property used by company    293

441J....................... Giving a notice under an agreement about property........ 294

Division 8—Powers of administrator                                                               295

442A..................... Additional powers of administrator................................ 295

442B...................... Dealing with property subject to circulating security interests  295

442C...................... When administrator may dispose of encumbered property 296

442CA................... Property subject to a possessory security interest—inspection or examination by potential purchasers etc......................................................................................... 298

442CB................... Property subject to a security interest or to a retention of title clause—administrator’s duty of care in exercising power of sale.................................................................. 298

442CC................... Proceeds of sale of property........................................... 299

442D..................... Administrator’s powers subject to powers of secured party, receiver or controller  301

442E...................... Administrator has qualified privilege.............................. 302

442F...................... Protection of persons dealing with administrator............ 302

Division 9—Administrator’s liability and indemnity for debts of administration            304

Subdivision A—Liability                                                                                      304

443A..................... General debts.................................................................. 304

443B...................... Payments for property used or occupied by, or in the possession of, the company 304

443BA................... Certain taxation liabilities................................................ 306

443C...................... Administrator not otherwise liable for company’s debts. 307

Subdivision B—Indemnity                                                                                   307

443D..................... Right of indemnity.......................................................... 307

443E...................... Right of indemnity has priority over other debts............. 308

443F...................... Lien to secure indemnity................................................. 310

Division 10—Execution and effect of deed of company arrangement 311

444A..................... Effect of creditors’ resolution......................................... 311

444B...................... Execution of deed........................................................... 312

444C...................... Creditor etc. not to act inconsistently with deed before its execution        312

444D..................... Effect of deed on creditors.............................................. 313

444DA.................. Giving priority to eligible employee creditors................. 314

444DB................... Superannuation contribution debts not admissible to proof 315

444E...................... Protection of company’s property from persons bound by deed              316

444F...................... Court may limit rights of secured creditor or owner or lessor  317

444G..................... Effect of deed on company, officers and members......... 318

444GA.................. Transfer of shares........................................................... 319

444H..................... Extent of release of company’s debts.............................. 319

444J....................... Guarantees and indemnities............................................ 319

Division 11—Variation, termination and avoidance of deed              320

445A..................... Variation of deed by creditors......................................... 320

445B...................... Court may cancel variation.............................................. 320

445C...................... When deed terminates..................................................... 320

445CA................... When creditors may terminate deed................................ 321

445D..................... When Court may terminate deed..................................... 321

445E...................... Creditors may terminate deed and resolve that company be wound up    322

445F...................... Meeting of creditors to consider proposed variation or termination of deed             322

445FA................... Notice of termination of deed.......................................... 323

445G..................... When Court may void or validate deed........................... 324

445H..................... Effect of termination or avoidance.................................. 324

Division 11A—Deed administrator’s accounts                                           325

445J....................... Deed administrator’s accounts........................................ 325

Division 12—Transition to creditors’ voluntary winding up              327

446A..................... Administrator becomes liquidator in certain cases.......... 327

446B...................... Regulations may provide for transition in other cases..... 328

446C...................... Liquidator may require submission of a report about the company’s affairs            329

Division 13—Powers of Court                                                                             332

447A..................... General power to make orders........................................ 332

447B...................... Orders to protect creditors during administration............ 332

447C...................... Court may declare whether administrator validly appointed 333

447D..................... Administrator may seek directions.................................. 333

447E...................... Supervision of administrator of company or deed.......... 333

447F...................... Effect of Division........................................................... 334

Division 14—Qualifications of administrators                                            335

448A..................... Appointee must consent.................................................. 335

448B...................... Administrator must be registered liquidator.................... 335

448C...................... Disqualification of person connected with company....... 335

448D..................... Disqualification of insolvent under administration.......... 337

Division 15—Removal, replacement and remuneration of administrator           338

449A..................... Appointment of administrator cannot be revoked........... 338

449B...................... Court may remove administrator..................................... 338

449C...................... Vacancy in office of administrator of company.............. 338

449CA................... Declarations by administrator—indemnities and relevant relationships    340

449D..................... Vacancy in office of administrator of deed of company arrangement       342

449E...................... Remuneration of administrator........................................ 342

Division 16—Notices about steps taken under Part                                 346

450A..................... Appointment of administrator......................................... 346

450B...................... Execution of deed of company arrangement................... 347

450C...................... Failure to execute deed of company arrangement............ 347

450D..................... Termination of deed of company arrangement................ 347

450E...................... Notice in public documents etc. of company................... 347

450F...................... Effect of contravention of this Division.......................... 348

Division 17—Miscellaneous                                                                                   349

451A..................... Appointment of 2 or more administrators of company... 349

451B...................... Appointment of 2 or more administrators of deed of company arrangement            349

451C...................... Effect of things done during administration of company 350

451D..................... Time for doing act does not run while act prevented by this Part             350

Part 5.4—Winding up in insolvency                                                                       351

Division 1—When company to be wound up in insolvency                  351

459A..................... Order that insolvent company be wound up in insolvency 351

459B...................... Order made on application under section 234, 462 or 464 351

459C...................... Presumptions to be made in certain proceedings............. 351

459D..................... Contingent or prospective liability relevant to whether company solvent 352

Division 2—Statutory demand                                                                             353

459E...................... Creditor may serve statutory demand on company......... 353

459F...................... When company taken to fail to comply with statutory demand                354

Division 3—Application to set aside statutory demand                          356

459G..................... Company may apply....................................................... 356

459H..................... Determination of application where there is a dispute or offsetting claim 356

459J....................... Setting aside demand on other grounds.......................... 358

459K...................... Effect of order setting aside demand............................... 358

459L...................... Dismissal of application.................................................. 358

459M..................... Order subject to conditions............................................. 358

459N..................... Costs where company successful................................... 358

Division 4—Application for order to wind up company in insolvency 359

459P...................... Who may apply for order under section 459A................ 359

459Q..................... Application relying on failure to comply with statutory demand              360

459R...................... Period within which application must be determined...... 360

459S...................... Company may not oppose application on certain grounds 361

459T...................... Application to wind up joint debtors in insolvency......... 361

Part 5.4A—Winding up by the Court on other grounds                           362

461........................ General grounds on which company may be wound up by Court           362

462........................ Standing to apply for winding up................................... 363

464........................ Application for winding up in connection with investigation under ASIC Act        364

Part 5.4B—Winding up in insolvency or by the Court                               365

Division 1A—Preliminary                                                                                      365

465........................ Definitions...................................................................... 365

Division 1—General                                                                                                  366

465A..................... Notice of application....................................................... 366

465B...................... Substitution of applicants................................................ 366

465C...................... Applicant to be given notice of grounds for opposing application           367

466........................ Payment of preliminary costs etc.................................... 367

467........................ Court’s powers on hearing application........................... 368

467A..................... Effect of defect or irregularity on application under Part 5.4 or 5.4A       369

467B...................... Court may order winding up of company that is being wound up voluntarily         370

468........................ Avoidance of dispositions of property, attachments etc.. 370

468A..................... Effect of winding up on company’s members................ 371

469........................ Application to be lis pendens.......................................... 374

470........................ Certain notices to be lodged............................................ 374

Division 1A—Effect of winding up order                                                       376

471........................ Effect on creditors and contributories............................. 376

471A..................... Powers of other officers suspended during winding up. 376

471B...................... Stay of proceedings and suspension of enforcement process.. 377

471C...................... Secured creditor’s rights not affected.............................. 377

Division 2—Court‑appointed liquidators                                                       378

472........................ Court to appoint official liquidator.................................. 378

473........................ General provisions about liquidators.............................. 379

474........................ Custody and vesting of company’s property.................. 382

475........................ Report as to company’s affairs to be submitted to liquidator 383

476........................ Preliminary report by liquidator...................................... 385

477........................ Powers of liquidator....................................................... 385

478........................ Application of property; list of contributories................. 388

479........................ Exercise and control of liquidator’s powers.................... 389

480........................ Release of liquidator and deregistration of company....... 390

481........................ Orders for release or deregistration................................. 390

Division 3—General powers of Court                                                             392

Subdivision A—General powers                                                                         392

482........................ Power to stay or terminate winding up........................... 392

483........................ Delivery of property to liquidator................................... 394

484........................ Appointment of special manager..................................... 395

485........................ Claims of creditors and distribution of property............. 396

486........................ Inspection of books by creditors and contributories....... 396

486A..................... Court may make order to prevent officer or related entity from avoiding liability to company 396

486B...................... Warrant to arrest person who is absconding, or who has dealt with property or books, in order to avoid obligations in connection with winding up..................... 399

487........................ Power to arrest absconding contributory........................ 399

488........................ Delegation to liquidator of certain powers of Court........ 400

489........................ Powers of Court cumulative........................................... 400

Subdivision B—Procedures relating to section 486B warrants                 401

489A..................... Arrest of person subject to warrant................................. 401

489B...................... Procedure after arrest...................................................... 401

489C...................... Procedure on remand on bail.......................................... 401

489D..................... Court’s power to make orders under section 486A, 598 or 1323            402

489E...................... Jurisdiction under this Subdivision................................. 402

Part 5.4C—Winding up by ASIC                                                                            403

489EA................... ASIC may order the winding up of a company.............. 403

489EB................... Deemed resolution that company be wound up voluntarily 404

489EC................... Appointment of liquidator............................................... 405

Part 5.5—Voluntary winding up                                                                              406

Division 1A—Preliminary                                                                                      406

489F...................... Definitions...................................................................... 406

Division 1—Resolution for winding up                                                            407

490........................ When company cannot wind up voluntarily.................... 407

491........................ Circumstances in which company may be wound up voluntarily             407

493........................ Effect of voluntary winding up....................................... 407

493A..................... Effect of voluntary winding up on company’s members 408

494........................ Declaration of solvency.................................................. 410

Division 2—Members’ voluntary winding up                                              413

495........................ Liquidators...................................................................... 413

496........................ Duty of liquidator where company turns out to be insolvent 414

Division 3—Creditors’ voluntary winding up                                             416

497........................ Meeting of creditors........................................................ 416

498........................ Power to adjourn meeting............................................... 417

499........................ Liquidators...................................................................... 418

500........................ Execution and civil proceedings...................................... 421

Division 4—Voluntary winding up generally                                               422

501........................ Distribution of property of company.............................. 422

502........................ Appointment of liquidator............................................... 422

503........................ Removal of liquidator..................................................... 422

504........................ Review of liquidator’s remuneration............................... 422

505........................ Acts of liquidator valid etc.............................................. 423

506........................ Powers and duties of liquidator...................................... 424

506A..................... Declarations by liquidator—relevant relationships.......... 425

507........................ Power of liquidator to accept shares etc. as consideration for sale of property of company     427

508........................ Annual obligations of liquidator—meeting or report...... 428

509........................ Final meeting and deregistration..................................... 430

510........................ Arrangement: when binding on creditors........................ 431

511........................ Application to Court to have questions determined or powers exercised 432

Part 5.6—Winding up generally                                                                               433

Division 1—Preliminary                                                                                          433

513........................ Application of Part.......................................................... 433

513AA.................. Definitions...................................................................... 433

Division 1A—When winding up taken to begin                                          434

513A..................... Winding up ordered by the Court................................... 434

513B...................... Voluntary winding up..................................................... 434

513C...................... Section 513C day in relation to an administration under Part 5.3A          435

513D..................... Validity of proceedings in earlier winding up................. 435

Division 2—Contributories                                                                                    437

514........................ Where Division applies................................................... 437

515........................ General liability of contributory...................................... 437

516........................ Company limited by shares............................................. 437

517........................ Company limited by guarantee........................................ 437

518........................ Company limited both by shares and by guarantee......... 437

519........................ Exceptions for former unlimited company...................... 438

520........................ Past member: later debts................................................. 438

521........................ Person ceasing to be a member a year or more before winding up           438

522........................ Present members to contribute first................................. 438

523........................ Past member of former unlimited company.................... 438

524........................ Past member of former limited company........................ 439

526........................ Liability on certain contracts........................................... 439

527........................ Nature of contributory’s liability..................................... 439

528........................ Death of contributory...................................................... 439

529........................ Bankruptcy of contributory............................................. 440

Division 3—Liquidators                                                                                          441

530........................ Appointment of 2 or more liquidators of a company...... 441

530AA.................. Appointment of 2 or more provisional liquidators of a company             441

530A..................... Officers to help liquidator............................................... 441

530B...................... Liquidator’s rights to company’s books......................... 443

530C...................... Warrant to search for, and seize, company’s property or books               444

531........................ Books to be kept by liquidator........................................ 445

532........................ Disqualification of liquidator.......................................... 445

533........................ Reports by liquidator...................................................... 447

534........................ Prosecution by liquidator of delinquent officers and members 449

535........................ When liquidator has qualified privilege........................... 449

536........................ Supervision of liquidators............................................... 449

537........................ Notice of appointment and address of liquidator............. 450

538........................ Regulations relating to money etc. received by liquidator 451

539........................ Liquidator’s accounts...................................................... 452

540........................ Liquidator to remedy defaults......................................... 453

Division 4—General                                                                                                  455

541........................ Notification that company is in liquidation...................... 455

542........................ Books of company.......................................................... 455

543........................ Investment of surplus funds on general account............. 456

544........................ Unclaimed money to be paid to ASIC............................ 457

545........................ Expenses of winding up where property insufficient...... 458

546........................ Resolutions passed at adjourned meetings of creditors and contributories               458

547........................ Meetings to ascertain wishes of creditors or contributories 458

Division 5—Committees of inspection                                                             460

548........................ Convening of meetings by liquidator for appointment of committee of inspection—company not in pooled group.............................................................................. 460

548A..................... Convening of meeting for appointment of committee of inspection—pooled group                461

549........................ Proceedings of committee of inspection.......................... 462

550........................ Vacancies on committee of inspection............................ 463

551........................ Member of committee not to accept extra benefit............ 464

552........................ Powers of Court where no committee of inspection....... 465

Division 6—Proof and ranking of claims                                                       466

Subdivision A—Admission to proof of debts and claims                             466

553........................ Debts or claims that are provable in winding up............. 466

553A..................... Member cannot prove debt unless contributions paid..... 467

553AA.................. Selling shareholder cannot prove debt unless documents given               467

553AB................... Superannuation contribution debts not admissible to proof 467

553B...................... Insolvent companies—penalties and fines not generally provable            469

553C...................... Insolvent companies—mutual credit and set‑off............. 469

553D..................... Debts or claims may be proved formally or informally... 469

553E...................... Application of Bankruptcy Act to winding up of insolvent company      470

Subdivision B—Computation of debts and claims                                         470

554........................ General rule—compute amount as at relevant date.......... 470

554A..................... Determination of value of debts and claims of uncertain value 470

554B...................... Discounting of debts payable after relevant date............. 472

554C...................... Conversion into Australian currency of foreign currency debts or claims                472

Subdivision C—Special provisions relating to secured creditors of insolvent companies          473

554D..................... Application of Subdivision............................................. 473

554E...................... Proof of debt by secured creditor.................................... 473

554F...................... Redemption of security interest by liquidator.................. 474

554G..................... Amendment of valuation................................................. 475

554H..................... Repayment of excess...................................................... 475

554J....................... Subsequent realisation of security interest...................... 476

Subdivision D—Priorities                                                                                    476

555........................ Debts and claims proved to rank equally except as otherwise provided   476

556........................ Priority payments............................................................ 477

558........................ Debts due to employees.................................................. 484

559........................ Debts of a class to rank equally...................................... 485

560........................ Advances for company to make priority payments in relation to employees            485

561........................ Priority of employees’ claims over circulating security interests              486

562........................ Application of proceeds of contracts of insurance.......... 487

562A..................... Application of proceeds of contracts of reinsurance....... 487

563........................ Provisions relating to injury compensation..................... 489

563AA.................. Seller under a buy‑back agreement................................. 490

563A..................... Postponing subordinate claims....................................... 490

563AAA............... Redemption of debentures.............................................. 491

Subdivision E—Miscellaneous                                                                            491

563B...................... Interest on debts and claims from relevant date to date of payment          491

563C...................... Debt subordination......................................................... 492

564........................ Power of Court to make orders in favour of certain creditors  492

Division 7—Effect on certain transactions                                                   493

565........................ Undue preference............................................................ 493

566........................ Effect of floating charge.................................................. 493

567........................ Liquidator’s right to recover in respect of certain transactions 493

Division 7A—Disclaimer of onerous property                                            497

568........................ Disclaimer by liquidator; application to Court by party to contract           497

568A..................... Liquidator must give notice of disclaimer....................... 499

568B...................... Application to set aside disclaimer before it takes effect. 499

568C...................... When disclaimer takes effect........................................... 500

568D..................... Effect of disclaimer......................................................... 501

568E...................... Application to set aside disclaimer after it has taken effect 501

568F...................... Court may dispose of disclaimed property...................... 502

Division 7B—Effect on enforcement process against company’s property         504

569........................ Executions, attachments etc. before winding up.............. 504

570........................ Duties of sheriff after receiving notice of application...... 505

Division 8—Pooling                                                                                                   509

Subdivision A—Pooling determinations                                                          509

571........................ Pooling determination..................................................... 509

572........................ Variation of pooling determination................................. 512

573........................ Lodgment of copy of pooling determination etc.............. 512

574........................ Eligible unsecured creditors must approve the making or variation of a pooling determination               513

575........................ Members’ voluntary winding up—copy of notice etc. to be given to each member of the company        514

576........................ Conduct of meeting......................................................... 515

577........................ Eligible unsecured creditors may decide to approve the determination or variation  515

578........................ When pooling determination comes into force etc........... 516

579........................ Duties of liquidator......................................................... 517

579A..................... Court may vary or terminate pooling determination........ 517

579B...................... Court may cancel or confirm variation............................ 519

579C...................... When Court may void or validate pooling determination 520

579D..................... Effect of termination or avoidance.................................. 521

Subdivision B—Pooling orders                                                                          521

579E...................... Pooling orders................................................................ 521

579F...................... Variation of pooling orders............................................. 525

579G..................... Court may make ancillary orders etc............................... 525

579H..................... Variation of ancillary orders etc...................................... 527

579J....................... Notice of application for pooling order etc...................... 528

579K...................... Notice of pooling order etc............................................. 529

579L...................... Consolidated meetings of creditors................................. 532

Subdivision C—Other provisions                                                                       533

579M..................... When debts or claims are provable in winding up.......... 533

579N..................... Group of companies....................................................... 533

579P...................... Secured debt may become unsecured.............................. 534

579Q..................... Eligible unsecured creditor.............................................. 534

Division 9—Co‑operation between Australian and foreign courts in external administration matters                                                                                                                    535

580........................ Definitions...................................................................... 535

581........................ Courts to act in aid of each other..................................... 535

Part 5.7—Winding up bodies other than companies                                    537

582........................ Application of Part.......................................................... 537

583........................ Winding up Part 5.7 bodies............................................ 537

585........................ Insolvency of Part 5.7 body............................................ 538

586........................ Contributories in winding up of Part 5.7 body............... 539

587........................ Power of Court to stay or restrain proceedings............... 540

588........................ Outstanding property of defunct registrable body........... 540

Part 5.7B—Recovering property or compensation for the benefit of creditors of insolvent company 542

Division 1—Preliminary                                                                                          542

588C...................... Definitions...................................................................... 542

588D..................... Secured debt may become unsecured.............................. 542

588E...................... Presumptions to be made in recovery proceedings......... 542

588F...................... Certain taxation liabilities taken to be debts..................... 545

Division 2—Voidable transactions                                                                    546

588FA................... Unfair preferences.......................................................... 546

588FB................... Uncommercial transactions............................................. 547

588FC................... Insolvent transactions..................................................... 547

588FD................... Unfair loans to a company.............................................. 548

588FDA................ Unreasonable director‑related transactions...................... 549

588FE.................... Voidable transactions...................................................... 550

588FF.................... Courts may make orders about voidable transactions..... 553

588FG................... Transaction not voidable as against certain persons........ 555

588FGA................ Directors to indemnify Commissioner of Taxation if certain payments set aside     557

588FGB................ Defences in proceedings under section 588FGA............ 558

588FH................... Liquidator may recover from related entity benefit resulting from insolvent transaction          559

588FI..................... Creditor who gives up benefit of unfair preference may prove for preferred debt    560

588FJ.................... Circulating security interest created within 6 months before relation‑back day        561

Division 2A—Vesting of PPSA security interests if not continuously perfected               563

588FK................... Interpretation and application.......................................... 563

588FL.................... Vesting of PPSA security interests if collateral not registered within time               563

588FM.................. Extension of time for registration.................................... 566

588FN................... PPSA security interests unaffected by section 588FL.... 567

588FO................... Certain lessors, bailors and consignors entitled to damages 569

Division 2B—Security interests in favour of company officers etc. 571

588FP.................... Security interests in favour of an officer of a company etc. void              571

Division 3—Director’s duty to prevent insolvent trading                     574

588G..................... Director’s duty to prevent insolvent trading by company 574

588H..................... Defences......................................................................... 576

Division 4—Director liable to compensate company                               578

Subdivision A—Proceedings against director                                                578

588J....................... On application for civil penalty order, Court may order compensation    578

588K...................... Criminal court may order compensation......................... 579

588L...................... Enforcement of order under section 588J or 588K......... 579

588M..................... Recovery of compensation for loss resulting from insolvent trading       579

588N..................... Avoiding double recovery.............................................. 580

588P...................... Effect of sections 588J, 588K and 588M........................ 580

588Q..................... Certificates evidencing contravention.............................. 581

Subdivision B—Proceedings by creditor                                                         581

588R...................... Creditor may sue for compensation with liquidator’s consent  581

588S...................... Creditor may give liquidator notice of intention to sue for compensation 582

588T...................... When creditor may sue for compensation without liquidator’s consent   582

588U..................... Events preventing creditor from suing............................ 583

Division 5—Liability of holding company for insolvent trading by subsidiary 584

588V..................... When holding company liable......................................... 584

588W..................... Recovery of compensation for loss resulting from insolvent trading       584

588X..................... Defences......................................................................... 585

Division 6—Application of compensation under Division 4 or 5       587

588Y..................... Application of amount paid as compensation.................. 587

Division 7—Person managing a corporation while disqualified may become liable for corporation’s debts                                                                                                                    588

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

Part 5.8—Offences                                                                                                            589

589........................ Interpretation and application.......................................... 589

590........................ Offences by officers of certain companies...................... 592

592........................ Incurring of certain debts; fraudulent conduct................. 595

593........................ Powers of Court............................................................. 597

594........................ Certain rights not affected............................................... 598

595........................ Inducement to be appointed liquidator etc. of company.. 599

596........................ Frauds by officers........................................................... 599

Part 5.8A—Employee entitlements                                                                          601

596AA.................. Object and coverage of Part............................................ 601

596AB................... Entering into agreements or transactions to avoid employee entitlements 602

596AC................... Person who contravenes section 596AB liable to compensate for loss    603

596AD.................. Avoiding double recovery.............................................. 604

596AE................... Effect of section 596AC................................................. 604

596AF................... Employee may sue for compensation with liquidator’s consent               604

596AG.................. Employee may give liquidator notice of intention to sue for compensation              604

596AH.................. When employee may sue for compensation without liquidator’s consent                605

596AI.................... Events preventing employee from suing......................... 606

Part 5.9—Miscellaneous                                                                                                 607

Division 1—Examining a person about a corporation                           607

596A..................... Mandatory examination.................................................. 607

596B...................... Discretionary examination.............................................. 607

596C...................... Affidavit in support of application under section 596B.. 608

596D..................... Content of summons....................................................... 608

596E...................... Notice of examination..................................................... 608

596F...................... Court may give directions about examination................. 609

597........................ Conduct of examination.................................................. 609

597A..................... When Court is to require affidavit about corporation’s examinable affairs               612

597B...................... Costs of unnecessary examination or affidavit................ 613

Division 2—Orders against a person in relation to a corporation  615

598........................ Order against person concerned with corporation........... 615

Division 3—Provisions applying to various kinds of external administration   617

600AA.................. Duty of receiver, administrator or liquidator—parental leave pay            617

600A..................... Powers of Court where outcome of voting at creditors’ meeting determined by related entity 617

600B...................... Review by Court of resolution of creditors passed on casting vote of person presiding at meeting         619

600C...................... Court’s powers where proposed resolution of creditors lost as casting vote of person presiding at meeting........................................................................................ 620

600D..................... Interim order on application under section 600A, 600B or 600C             621

600E...................... Order under section 600A or 600B does not affect act already done pursuant to resolution    621

600F...................... Limitation on right of suppliers of essential services to insist on payment as condition of supply           621

600G..................... Electronic methods of giving or sending certain notices etc. 623

600H..................... Rights if claim against the company postponed.............. 624

Chapter 5A—Deregistration, and transfer of registration, of companies              626

Part 5A.1—Deregistration                                                                                            626

601........................ Definitions...................................................................... 626

601AA.................. Deregistration—voluntary.............................................. 626

601AB................... Deregistration—ASIC initiated....................................... 628

601AC................... Deregistration—following amalgamation or winding up 629

601AD.................. Effect of deregistration.................................................... 630

601AE................... What the Commonwealth or ASIC does with the property 631

601AF................... The Commonwealth’s and ASIC’s power to fulfil outstanding obligations of deregistered company     633

601AG.................. Claims against insurers of deregistered company........... 634

601AH.................. Reinstatement.................................................................. 634

Part 5A.2—Transfer of registration                                                                       636

601AI.................... Transferring registration................................................. 636

601AJ.................... Applying to transfer registration..................................... 636

601AK................... ASIC makes transfer of registration declaration............. 637

601AL................... ASIC to deregister company........................................... 637

Chapter 5B—Bodies corporate registered as companies, and registrable bodies           638

Part 5B.1—Registering a body corporate as a company                           638

Division 1—Registration                                                                                         638

601BA................... Bodies corporate may be registered as certain types of companies           638

601BB................... Bodies registered as proprietary companies.................... 639

601BC................... Applying for registration under this Part........................ 639

601BD................... ASIC gives body ACN, registers as company and issues certificate       643

601BE................... Registered office............................................................. 644

601BF................... Name.............................................................................. 644

601BG................... Constitution.................................................................... 644

601BH................... Modifications of constitution.......................................... 644

601BJ.................... ASIC may direct company to apply for Court approval for modifications of constitution       645

601BK................... Establishing registers and minute books......................... 645

601BL................... Registration of registered bodies..................................... 646

Division 2—Operation of this Act                                                                      647

601BM.................. Effect of registration under this Part............................... 647

601BN................... Liability of members on winding up............................... 647

601BP................... Bearer shares.................................................................. 647

601BQ................... References in pre‑registration contracts and other documents to par value in existing contracts and documents........................................................................................ 648

601BR................... First AGM...................................................................... 649

601BS................... Modification by regulations............................................ 649

Part 5B.2—Registrable bodies                                                                                   650

Division 1A—Preliminary                                                                                      650

601C...................... Definitions...................................................................... 650

Division 1—Registrable Australian bodies                                                   651

601CA................... When a registrable Australian body may carry on business in this jurisdiction and outside its place of origin........................................................................................ 651

601CB................... Application for registration............................................. 651

601CC................... Cessation of business etc................................................ 652

Division 2—Foreign companies                                                                           655

601CD................... When a foreign company may carry on business in this jurisdiction        655

601CDA................ Limited disclosure if place of origin is a prescribed country 655

601CE................... Application for registration............................................. 655

601CF................... Appointment of local agent............................................. 656

601CG................... Local agent: how appointed............................................ 657

601CH................... Local agent: how removed.............................................. 658

601CJ.................... Liability of local agent..................................................... 658

601CK................... Balance‑sheets and other documents............................... 658

601CL................... Cessation of business etc................................................ 660

601CM.................. Register of members of foreign company....................... 663

601CN................... Register kept under section 601CM................................ 664

601CP................... Notifying ASIC about register kept under section 601CM 665

601CQ................... Effect of right to acquire shares compulsorily................. 665

601CR................... Index of members and inspection of registers................. 666

601CS................... Certificate as to shareholding.......................................... 666

Division 3—Bodies registered under this Part                                            667

601CTA................ Limited disclosure if place of origin is a prescribed country 667

601CT................... Registered office............................................................. 667

601CU................... Certificate of registration................................................. 668

601CV................... Notice of certain changes................................................ 668

601CW.................. Body’s name etc. must be displayed at office and place of business        669

601CX................... Service of documents on registered body....................... 670

601CY................... Power to hold land.......................................................... 671

Division 4—Register of debenture holders for non‑companies          672

601CZA................ Certain documents are debentures................................... 672

601CZB................. Register of debenture holders to be maintained by non‑companies          672

601CZC................. Location of register......................................................... 672

601CZD................ Application of sections 173 to 177................................. 673

Part 5B.3—Names of registrable Australian bodies and foreign companies         674

601DA.................. Reserving a name............................................................ 674

601DB................... Acceptable abbreviations................................................ 674

601DC................... When a name is available................................................ 675

601DD.................. Registered Australian bodies and registered foreign companies can carry on business with some names only........................................................................................ 676

601DE................... Using a name and ARBN............................................... 677

601DF................... Exception to requirement to have ARBN on receipts...... 678

601DG.................. Regulations may exempt from requirement to set out information on documents    678

601DH.................. Notice of name change must be given to ASIC.............. 678

601DJ.................... ASIC’s power to direct a registered name be changed.... 679

Chapter 2L—Debentures

Part 2L.1—Requirement 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 needs disclosure to investors under Chapter 6D, or does not need disclosure to investors under Chapter 6D because of subsection 708(14) (disclosure document exclusion for debenture 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 an off‑market takeover bid; or

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

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

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

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

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

             (2)  The body may revoke the trust deed after it has repaid all amounts payable under the debentures in accordance with the debentures’ terms and the trust deed.

             (3)  The body must comply with this Chapter.

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

             (4)  The regulations may exempt a specified offer of debentures, or a specified class of offers of debentures, from subsection (1).

283AB  Trust deed

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

                     (a)  the right to enforce the borrower’s duty to repay;

                     (b)  any charge or security for repayment;

                     (c)  the right to enforce any other duties that the borrower and any 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 guarantor body have under this Chapter, see sections 283BB to 283CE.

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

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

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

                    (aa)  a licensed trustee company (within the meaning of Chapter 5D); or

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

                     (c)  a body corporate registered under section 21 of the Life Insurance Act 1995; or

                     (d)  an Australian ADI; or

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

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

                             (ii)  have subscribed for and beneficially hold shares in the trustee and there is an uncalled liability of at least $500,000 in respect of those shares that can only be called up if the trustee becomes an externally‑administered body corporate (see section 254N); or

                      (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 the extent provided for by section 283AD) if the appointment or acting will not result in a conflict of interest or duty. This subsection is not intended to affect any rule of law or equity.

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

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

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

                   An existing trustee continues to act as the trustee until a new trustee is appointed and has taken office as trustee, despite any rule of 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 of the debentures or provisions of the trust deed, the borrower may appoint a body corporate that is related to the existing trustee as trustee 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 or provisions of the trust deed.

Appointment by Court

             (2)  The Court may:

                     (a)  appoint a person who may be a trustee under section 283AC as trustee on the application of the borrower, a debenture holder or ASIC if:

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

                             (ii)  the trustee has ceased to exist; or

                     (b)  terminate the existing trustee’s appointment and appoint a person who may be a trustee under section 283AC as trustee in the existing trustee’s place on the application of the borrower, the existing trustee, a debenture holder or ASIC if:

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

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

Part 2L.2—Duties of borrower

  

283BA  Duties of borrower

                   A borrower that is required to enter into a trust deed under section 283AA has the duties imposed by this Part.

283BB  General duties

                   The borrower must:

                     (a)  carry on and conduct its business in a proper and efficient manner; and

                     (b)  provide a copy of the trust deed to:

                              (i)  a debenture holder; or

                             (ii)  the trustee;

                            if they request a copy; and

                     (c)  make all of its financial and other records available for inspection by:

                              (i)  the trustee; or

                             (ii)  an officer or employee of the trustee authorised by the trustee to carry out the inspection; or

                            (iii)  a registered company auditor appointed by the trustee to carry out the inspection;

                            and give them any information, explanations or other assistance that they require about matters relating to those records.

Note:          The borrower also has a duty to call a meeting of debenture holders in certain circumstances (see section 283EA).

283BC  Duty to notify ASIC of information related to trustee

             (1)  Within 14 days after the trustee is appointed, the borrower must lodge with ASIC a notice containing the following information:

                     (a)  the name of the trustee;

                     (b)  any other information related to the trustee or the debentures that is prescribed by the regulations.

             (2)  If there is any change to the information, the borrower must, within 14 days of the change, lodge with ASIC a notice containing the changed information.

             (3)  A notice under subsection (1) or (2) must be in the prescribed form.

283BCA  Register relating to trustees for debenture holders

The register

             (1)  ASIC must establish and maintain a register relating to trustees for debenture holders.

             (2)  The regulations may prescribe the way in which the register must be established or maintained, including the details that ASIC must enter in the register.

Inspection of register

             (3)  A person may inspect the register, and may make copies of, or take extracts from, the register.

             (4)  The regulations may prescribe the fees that a person must pay ASIC to do the things mentioned in subsection (3).

             (5)  Any disclosure necessary for the purposes of this section is authorised by this section.

283BD  Duty to replace trustee

                   The borrower must take all reasonable steps to replace the trustee under section 283AE as soon as practicable after the borrower becomes aware that the trustee:

                     (a)  has ceased to exist; or

                     (b)  has not been validly appointed; or

                     (c)  cannot be a trustee under section 283AC; or

                     (d)  has failed or refused to act as trustee.

283BE  Duty to inform trustee about security interests

                   If the borrower creates a security interest, it must:

                     (a)  give the trustee written details of the security interest within 21 days after it is created; and

                     (b)  if the total amount to be advanced on the security of the security interest is indeterminate and the advances are not merged in a current account with bankers, trade creditors or anyone else—give the trustee written details of the amount of each advance within 7 days after it is made.

Note:          If the advances are merged in a current account the borrower must give the trustee the details in the quarterly report (see subsection 283BF(4)).

283BF  Duty to give trustee and ASIC quarterly reports

Quarterly reports

             (1)  Within 1 month after the end of each quarter, the borrower must:

                     (a)  give the trustee a quarterly report that sets out the information required by subsections (4), (5) and (6); and

                     (b)  lodge a copy of the report with ASIC (see section 351).

First quarter

             (2)  The first quarter is the period of 3 months ending on a day fixed by the borrower, by written notice to the trustee. The day must be less than 6 months after the first issue of a debenture under the trust deed.

Subsequent quarters

             (3)  Each of the subsequent quarters are periods of 3 months. The trustee may allow a particular quarter to be a period of less than 3 months if the trustee is satisfied that special circumstances justify doing 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 comply with the terms of the debentures or the provisions of the trust deed 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 the debenture or provisions of the trust deed to become immediately enforceable; and

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

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

                             (ii)  any security interest included in or created by the debentures or the trust deed; and

                     (d)  any substantial change in the nature of the business of the borrower, any of its subsidiaries, or any of the guarantors that has 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 the payment of the whole or part of the money for which it was liable under the guarantee;

                            (iii)  a change of name of a guarantor (if this happens, the report must also disclose the guarantor’s new name); and

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

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

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

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

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

             (5)  If the borrower has deposited money with, or lent money to, a related body corporate during the quarter, the report must also include details of:

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

                     (b)  the total amount of money owing to the borrower at the end of the quarter in respect of the deposits or loans to the related body corporate.

Disregard any amount that the borrower deposits with an ADI in the normal course of the borrower’s business.

             (6)  If the borrower has assumed a liability of a related body corporate during the quarter, the report must also include details of the extent of the liability assumed during the quarter and the extent of the liability 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 of liability that are secured and those that are unsecured; and

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

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

                             (ii)  secured the guarantee by a security interest over all of its property 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.

283BG  Exceptions to borrower’s duty to report to trustee and ASIC

                   Section 283BF does not apply in respect of:

                     (a)  a borrower, while:

                              (i)  it is under external administration; or

                             (ii)  a receiver, or a receiver and manager, of property of the borrower has been appointed and has not ceased to act under that appointment; or

                     (b)  a security interest in PPSA retention of title property.

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 the debentures; 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 recklessly contravenes 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 first mortgage given to the trustee over land vested in the borrower or in any of the guarantors; and

                     (d)  the mortgage has been registered, or is a registrable mortgage that has been lodged for registration, in accordance with the law relating to the registration of mortgages of land in the place where the land is situated; and

                     (e)  the total amount of that money and of all other liabilities (if any) secured by the mortgage of that land ranking equally with the liability to repay that money does not exceed 60% of the value of the borrower’s or guarantor’s interest in that land as shown in the valuation included in the disclosure document 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 a security interest in favour of the trustee over the whole or any part of the tangible property of the borrower or of any of the guarantors; and

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

                              (i)  have been or may be incurred; and

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

283BI  Offences for failure to comply with statutory duties

                   The borrower commits an offence if it intentionally or recklessly contravenes section 283BB, 283BC, 283BD, 283BE, 283BF or 283EA.

Part 2L.3—Duties of guarantor

  

283CA  Duties of guarantor

                   If a borrower is required to enter into a trust deed under section 283AA in relation to debentures, a guarantor in respect of the debentures has the duties imposed by this Part.

283CB  General duties

                   The guarantor must:

                     (a)  carry on and conduct its business in a proper and efficient manner; and

                     (b)  make all of its financial and other records available for inspection by:

                              (i)  the trustee; or

                             (ii)  an officer or employee of the trustee authorised by the trustee to carry out the inspection; or

                            (iii)  a registered company auditor appointed by the trustee to carry out the inspection;

                            and give them any information, explanations or other assistance that they require about matters relating to those records.

283CC  Duty to inform trustee about security interests

                   If the guarantor creates a security interest, it must:

                     (a)  give the trustee written details of the security interest within 21 days after it is created; and

                     (b)  if the total amount to be advanced on the security of the security interest is indeterminate, give the trustee written details of:

                              (i)  the amount of each advance made within 7 days after it is made; or

                             (ii)  where the advances are merged in a current account with bankers, trade creditors or anyone else—the net amount outstanding on the advances at the end of every 3 months.

283CD  Exceptions to guarantor’s duty to inform trustee

                   Section 283CC does not apply in respect of:

                     (a)  the guarantor, while:

                              (i)  it is under external administration; or

                             (ii)  a receiver, or a receiver and manager, of property of the guarantor has been appointed and has not ceased to act under that appointment; or

                     (b)  a security interest in PPSA retention of title property.

283CE  Offences for failure to comply with statutory duties

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

Part 2L.4—Trustee

  

283DA  Trustee’s duties

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

                     (a)  exercise reasonable diligence to ascertain whether the property of the borrower and of each guarantor that is or should be available (whether by way of security or otherwise) will be sufficient to repay the amount deposited or lent 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 a guarantor 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 not materially prejudice the debenture holders’ interests or any security for 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 the trustee discovers that it cannot be a trustee under section 283AC; and

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

                              (i)  the Court calls in relation to a scheme under subsection 411(1) or (1A); or

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

                     (h)  comply with any directions given to it at a debenture holders’ meeting referred to in section 283EA, 283EB or 283EC unless:

                              (i)  the trustee is of the opinion that the direction is inconsistent with the terms of the debentures or the provisions of the trust deed or this Act or is otherwise objectionable; and

                             (ii)  has either obtained, or is in the process of obtaining, an order from the Court under section 283HA setting aside or varying the direction; and

                      (i)  apply to the Court for an order under section 283HB if the borrower requests it to do so.

Note 1:       Paragraph (g)—Section 411 relates to compromises and arrangements.

Note 2:       Section 283DC deals with indemnification in respect of a trustee’s liability to the debenture holders.

283DB  Exemptions and indemnifications of trustee from liability

             (1)  A term of a debenture, provision of a trust deed or a term of a contract with holders of debentures secured by a trust deed, is void in so far as the term or provision would have the effect of:

                     (a)  exempting a trustee from liability for breach of section 283DA for failure to show the degree of care and diligence required of it as trustee; or

                     (b)  indemnifying the trustee against that liability;

unless the term or provision:

                     (c)  releases the trustee from liability for something done or omitted to be done before the release is given; or

                     (d)  enables a meeting of debenture holders to approve the release of the trustee from liability for something done or omitted to be done before the release is given.

             (2)  For the purposes of paragraph (1)(d):

                     (a)  a release is approved if the debenture holders who vote for the resolution hold 75% of the nominal value of the debentures held by all the debenture holders who attend the meeting and vote on the resolution; and

                     (b)  a debenture holder attends the meeting and votes on the resolution if:

                              (i)  they attend the meeting in person and vote on the resolution; or

                             (ii)  if proxies are permitted—they are represented at the meeting by a proxy and the proxy votes on the resolution.

283DC  Indemnity

                   The trustee is not liable for anything done or omitted to be done in accordance with a direction given to it by the debenture holders at any meeting called under section 283EA, 283EB or 283EC.

Part 2L.5—Meetings of debenture holders

  

283EA  Borrower’s duty to call meeting

Duty to call meeting

             (1)  The borrower must call a meeting of debenture holders if:

                     (a)  debenture holders who together hold 10% or more of the nominal value of the issued debentures to which the trust relates direct the borrower to do so; and

                     (b)  the direction is given to the borrower in writing at its registered office; and

                     (c)  the purpose of the meeting is to:

                              (i)  consider the financial statements that were laid before the last AGM of the borrower; or

                             (ii)  give the trustee directions in relation to the exercise of any of its powers.

Note:          The trustee usually must comply with any directions given to it by the debenture holders at the meeting (see paragraph 283DA(h)).

Duty to give notification of meeting

             (2)  If the borrower is required to call a meeting, it must give notice of the time and place of the meeting to:

                     (a)  the trustee; and

                     (b)  the borrower’s auditor; and

                     (c)  each of the debenture holders whose names are entered on the register of debenture holders.

Notice to joint holders of a debenture must be given to the joint holder named first in the register of debenture holders.

             (3)  The borrower may give the notice to a debenture holder:

                     (a)  personally; or

                     (b)  by sending it by post to the address for the debenture holder in the register of debenture holders; or

                     (c)  by sending it to the fax number or electronic address (if any) nominated by the debenture holder; or

                     (d)  by any other means that the trust deed or the terms of the debentures permit.

Note:          A defect in the notice may not invalidate a meeting (see section 1322).

When notice by post or fax is given

             (4)  A notice of meeting sent to a debenture holder is taken to be given:

                     (a)  3 days after it is posted, if it is posted; or

                     (b)  on the business day after it is sent, if it is sent by fax or other electronic means;

unless the trust deed or the terms of the debentures provide otherwise.

283EB  Trustee’s power to call meeting

Trustee may call meeting in event of breach

             (1)  If the borrower or a guarantor fails to remedy any breach of the terms of the debentures or provisions of the trust deed or this Chapter when required by the trustee, the trustee may:

                     (a)  call a meeting of debenture holders; and

                     (b)  inform the debenture holders of the failure at the meeting; and

                     (c)  submit proposals for protection of the debenture holders’ interests to the meeting; and

                     (d)  ask for directions from the debenture holders in relation to the matter.

Trustee may appoint person to chair meeting

             (2)  The trustee may appoint a person to chair a meeting of debenture holders called under subsection (1). If the trustee does not exercise this power, the debenture holders present at the meeting may appoint a person to chair the meeting.

283EC  Court may order meeting

             (1)  Without limiting section 283HA or 283HB, the Court may make an order under either of those sections for a meeting of all or any of the debenture holders to be held to give directions to the trustee. The order may direct the trustee to:

                     (a)  place before the debenture holders any information concerning their interests; and

                     (b)  place before the debenture holders any proposals to protect their interests that the Court directs or the trustee considers appropriate; and

                     (c)  obtain the debenture holders’ directions concerning the protection of their interests.

             (2)  The meeting is to be held and conducted in the manner the Court directs. The trustee may appoint a person to chair the meeting. If the trustee does not exercise this power, the debenture holders present at the meeting may appoint a person to chair the meeting.

Part 2L.6—Civil liability

  

283F  Civil liability for contravening this Chapter

             (1)  A person who suffers loss or damage because a person contravenes a provision of this Chapter may recover the amount of the loss or damage from:

                     (a)  the person who contravened the provision; or

                     (b)  a person involved in the contravention.

This is so even if the person did not commit, and was not involved in, the contravention.

             (2)  An action under subsection (1) may begin at any time within 6 years after the day on which the cause of action arose.

             (3)  This Part does not affect any liability that a person has under any other law.

Part 2L.7—ASIC powers

  

283GA  ASIC’s power to exempt and modify

             (1)  ASIC may:

                     (a)  exempt a person from a provision of this Chapter; or

                     (b)  declare that this Chapter applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration.

             (2)  The exemption or declaration may do all or any of the following:

                     (a)  apply to all or specified provisions of this Chapter;

                     (b)  apply to all persons, specified persons, or a specified class of persons;

                     (c)  relate to all debentures, specified debentures or a specified class of debentures;

                     (d)  relate to any other matter generally or as specified.

             (3)  An exemption may apply unconditionally or subject to specified conditions. A person to whom a condition specified in an exemption applies must comply with the condition. The Court may order the person to comply with the condition in a specified way. Only ASIC may apply to the Court for the order.

             (4)  The exemption or declaration must be in writing and ASIC must publish notice of it in the Gazette.

             (5)  For the purposes of this section, the provisions of this Chapter include:

                     (a)  regulations made for the purposes of this Chapter; and

                     (b)  definitions in this Act or the regulations as they apply to references in:

                              (i)  this Chapter; or

                             (ii)  regulations made for the purposes of this Chapter; and

                     (c)  the old Division 12 of Part 11.2 transitionals.

283GB  ASIC may approve body corporate to be trustee

             (1)  ASIC may approve a body corporate in writing to be a trustee for the purposes of paragraph 283AC(1)(f). The approval may allow the body corporate to act as trustee:

                     (a)  in any circumstances; or

                     (b)  in relation to a particular borrower or particular class of borrower; or

                     (c)  in relation to a particular trust deed;

and may be given subject to conditions.

             (2)  ASIC must publish notice of the approval in the Gazette.

Part 2L.8—Court

  

283HA  General Court power to give directions and determine questions

                   If the trustee applies to the Court for any direction in relation to the performance of the trustee’s functions or to determine any question in relation to the interests of the debenture holders, the Court may give any direction and make any declaration or determination in relation to the matter that the Court considers appropriate. The Court may also make ancillary or consequential orders.

Note:          Under this section, the Court may order a meeting of debenture holders to be held, see section 283EC.

283HB  Specific Court powers

             (1)  If the trustee or ASIC applies to the Court, the Court may make any or all of the following orders:

                     (a)  an order staying an action or other civil proceedings before a court by or against the borrower or a guarantor body;

                     (b)  an order restraining the borrower from paying any money to the debenture holders or any holders of any other class of debentures;

                     (c)  an order that any security for the debentures be enforceable immediately or at the time the Court directs (even if the debentures are irredeemable or redeemable only on the happening of a contingency);

                     (d)  an order appointing a receiver of any property constituting security for the debentures;

                     (e)  an order restricting advertising by the borrower for deposits or loans;

                      (f)  an order restricting borrowing by the borrower;

                     (g)  any other order that the Court considers appropriate to protect the interests of existing or prospective debenture holders.

             (2)  In deciding whether to make an order under subsection (1), the Court must have regard to:

                     (a)  the ability of the borrower and each guarantor to repay the amount deposited or lent as and when it becomes due; and

                     (b)  any contravention of section 283GA by the borrower; and

                     (c)  the interests of the borrower’s members and creditors; and

                     (d)  the interests of the members of each of the guarantors.

Note:          The Court may order a meeting of debenture holders to be held (see section 283EC).

Part 2L.9—Location of other debenture provisions

  

283I  Signpost to other debenture provisions

                   There are other rules relating to debentures in paragraph 124(1)(b) and section 563AAA.

Chapter 2M—Financial reports and audit

Part 2M.1—Overview

  

285  Overview of obligations under this Chapter

Obligations under this Chapter

             (1)  Under this Chapter, all companies, registered schemes and disclosing entities must keep financial records (see sections
286‑291)—and some must prepare financial reports (see sections 292‑323D). All those that have to prepare financial reports have to prepare them annually; disclosing entities have to prepare half‑year financial reports as well. The following table sets out what is involved in annual financial reporting:

 

Annual financial reporting
	steps	sections	comments
1	prepare financial report	s. 295	The financial report includes: • financial statements • disclosures and notes • directors’ declaration.
2	prepare directors’ report	s. 298	Unless the report relates to a company limited by guarantee, it has a general component (sections 299 and 299A), a specific component (section 300) and a special component for listed companies (section 300A). See section 285A for an overview of the obligations of companies limited by guarantee.
3	have the financial report audited and obtain auditor’s report	s. 301, 307, 308	A small proprietary company preparing a financial report in response to a shareholder direction under s. 293 only has to have an audit if the direction asks for it. There are similar rules for companies limited by guarantee (see section 285A for an overview). Under s. 312, officers must assist the auditor in the conduct of the audit. ASIC may use its exemption powers under s. 340 and 341 to relieve large proprietary companies from the audit requirements in appropriate cases (s. 342(2) and (3)).
4	provide the financial report, directors’ report and auditor’s report to members	s. 314	Unless the report relates to a company limited by guarantee, a concise financial report may be provided to members instead of the full financial statements (subsections 314(1) and (2)). For deadline, see subsections 315(1) to (4). See section 285A for an overview of the obligations of companies limited by guarantee.
5	lodge the financial report, directors’ report and auditor’s report with ASIC	s. 319	For deadline see s. 319(3). Companies that have the benefit of the grandfathering in the relevant Part 10.1 transitionals do not have to lodge.
6	[public companies only] lay financial report, directors’ report and auditor’s report before AGM	s. 317	For the AGM deadline see s. 250N.

Application to disclosing entities

             (2)  This Chapter covers all disclosing entities:

                     (a)  incorporated or formed in Australia; and

                     (b)  whether or not they are companies or registered schemes.

Application to registered schemes

             (3)  For the purposes of applying this Chapter to a registered scheme:

                     (a)  the scheme’s responsible entity is responsible for the performance of obligations in respect of the scheme; and

                     (b)  the directors and officers of the responsible entity are taken to be the directors and officers of the scheme; and

                     (c)  the debts incurred in operating the scheme are taken to be the debts of the scheme.

285A  Overview of obligations of companies limited by guarantee

                   The following table sets out what is involved in annual financial reporting for companies limited by guarantee:

 

Annual financial reporting for companies limited by guarantee
Item	Nature of company	Obligations	Sections
1	Small company limited by guarantee.	No obligation to do any of the following unless required to do so under a member direction or ASIC direction: • prepare a financial report; • prepare a directors’ report; • have financial report audited; • notify members of reports.	Sections 292, 301 and 316A
2	Company limited by guarantee with annual revenue or, if part of a consolidated entity, annual consolidated revenue of less than $1 million.	Must prepare a financial report. Must prepare a directors’ report, although less detailed than that required of other companies. Need not have financial report audited unless a Commonwealth company, or a subsidiary of a Commonwealth company or Commonwealth authority. If the company does not have financial report audited, it must have financial report reviewed. Must give reports to any member who elects to receive them.	Sections 292, 298, 300B, 301, 316A
3	Company limited by guarantee with annual revenue or, if part of a consolidated entity, annual consolidated revenue of $1 million or more.	Must prepare a financial report. Must prepare a directors’ report, although less detailed than that required of other companies. Must have financial report audited. Must give reports to any member who elects to receive them.	Sections 292, 298, 300B, 301, 316A

Part 2M.2—Financial records

  

286  Obligation to keep financial records

             (1)  A company, registered scheme or disclosing entity must keep written financial records that:

                     (a)  correctly record and explain its transactions and financial position and performance; and

                     (b)  would enable true and fair financial statements to be prepared and audited.

The obligation to keep financial records of transactions extends to transactions undertaken as trustee.

Note:          Section 9 defines financial records.

Period for which records must be retained

             (2)  The financial records must be retained for 7 years after the transactions covered by the records are completed.

Strict liability offences

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

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

287  Language requirements

             (1)  The financial records may be kept in any language.

             (2)  An English translation of financial records not kept in English must be made available within a reasonable time to a person who:

                     (a)  is entitled to inspect the records; and

                     (b)  asks for the English translation.

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

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

288  Physical format

             (1)  If financial records are kept in electronic form, they must be convertible into hard copy. Hard copy must be made available within a reasonable time to a person who is entitled to inspect the records.

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

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

289  Place where records are kept

             (1)  A company, registered scheme or disclosing entity may decide where to keep the financial records.

Records kept outside this jurisdiction

             (2)  If financial records about particular matters are kept outside this jurisdiction, sufficient written information about those matters must be kept in this jurisdiction to enable true and fair financial statements to be prepared. The company, registered scheme or disclosing entity must give ASIC written notice in the prescribed form of the place where the information is kept.

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

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

             (3)  ASIC may direct a company, registered scheme or disclosing entity to produce specified financial records that are kept outside this jurisdiction.

             (4)  The direction must:

                     (a)  be in writing; and

                     (b)  specify a place in this jurisdiction where the records are to be produced (the place must be reasonable in the circumstances); and

                     (c)  specify a day (at least 14 days after the direction is given) by which the records are to be produced.

290  Director access

Personal access

             (1)  A director of a company, registered scheme or disclosing entity has a right of access to the financial records at all reasonable times.

Court order for inspection on director’s behalf

             (2)  On application by a director, the Court may authorise a person to inspect the financial records on the director’s behalf.

             (3)  A person authorised to inspect records may make copies of the records unless the Court orders otherwise.

             (4)  The Court may make any other orders it consider appropriate, including either or both of the following:

                     (a)  an order limiting the use that a person who inspects the records may make of information obtained during the inspection;

                     (b)  an order limiting the right of a person who inspects the records to make copies in accordance with subsection (3).

291  Signposts to other relevant provisions

                   The following table sets out other provisions that are relevant to access to financial records.

 

Other provisions relevant to access to financial records
1	section 247A	members A member may apply to the Court for an order to inspect the records.
2	section 310	auditor The auditor has a right of access to the records.
3	section 431	controllers A controller of a corporation’s property (for example, a receiver or receiver and manager) has a right of access to the records.
4	sections 28 to 39 of the ASIC Act	ASIC ASIC has power to inspect the records. It also has power under subsection 289(3) of this Act to call for the production of financial records kept outside this jurisdiction.

Part 2M.3—Financial reporting

Division 1—Annual financial reports and directors’ reports

292  Who has to prepare annual financial reports and directors’ reports

             (1)  A financial report and a directors’ report must be prepared for each financial year by:

                     (a)  all disclosing entities; and

                     (b)  all public companies; and

                     (c)  all large proprietary companies; and

                     (d)  all registered schemes.

Note:          This Chapter only applies to disclosing entities incorporated or formed in Australia (see subsection 285(2)).

Small proprietary companies

             (2)  A small proprietary company has to prepare the financial report and directors’ report only if:

                     (a)  it is directed to do so under section 293 or 294; or

                     (b)  it was controlled by a foreign company for all or part of the year and it is not consolidated for that period in financial statements for that year lodged with ASIC by:

                              (i)  a registered foreign company; or

                             (ii)  a company, registered scheme or disclosing entity.

The rest of this Part does not apply to any other small proprietary company.

Small companies limited by guarantee

             (3)  Despite subsection (1), a small company limited by guarantee has to prepare the financial report and directors’ report only if it is directed to do so under section 294A or 294B. The rest of this Part does not apply to any other small company limited by guarantee.

293  Small proprietary company—shareholder direction

             (1)  Shareholders with at least 5% of the votes in a small proprietary company may give the company a direction to:

                     (a)  prepare a financial report and directors’ report for a financial year; and

                     (b)  send them to all shareholders.

             (2)  The direction must be:

                     (a)  signed by the shareholders giving the direction; and

                     (b)  made no later than 12 months after the end of the financial year concerned.

             (3)  The direction may specify all or any of the following:

                     (a)  that the financial report does not have to comply with some or all of the accounting standards;

                     (b)  that a directors’ report or a part of that report need not be prepared;

                     (c)  that the financial report is to be audited.

294  Small proprietary company—ASIC direction

             (1)  ASIC may give a small proprietary company a direction to comply with requirements of this Division and Divisions 3, 4, 5 and 6 for a financial year.

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

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

             (2)  The direction may be general or may specify the particular requirements that the company is to comply with.

             (3)  The direction must specify the date by which the documents have to be prepared, sent or lodged. The date must be a reasonable one in view of the nature of the direction.

             (4)  The direction must:

                     (a)  be made in writing; and

                     (b)  specify the financial year concerned; and

                     (c)  be made no later than 6 years after the end of that financial year.

294A  Small company limited by guarantee—member direction

             (1)  Members with at least 5% of the votes in a small company limited by guarantee may give the company a direction to:

                     (a)  prepare a financial report and directors’ report for a financial year; and

                     (b)  send them to members who have elected to receive them under section 316A.

             (2)  The direction must be:

                     (a)  signed by the members giving the direction; and

                     (b)  made no later than 12 months after the end of the financial year concerned.

             (3)  The direction may specify all or any of the following:

                     (a)  that the financial report does not have to comply with some or all of the accounting standards;

                     (b)  that a directors’ report or a part of that report need not be prepared;

                     (c)  that the financial report is to be audited or reviewed.

294B  Small company limited by guarantee—ASIC direction

             (1)  ASIC may give a small company limited by guarantee a direction to comply with the requirements of this Division and Divisions 3, 4, 5 and 6 for a financial year.

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

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

             (3)  The direction may be general or may specify the particular requirements that the company is to comply with.

             (4)  The direction must specify the date by which the documents have to be prepared, sent or lodged. The date must be a reasonable one in view of the nature of the direction.

             (5)  The direction must:

                     (a)  be made in writing; and

                     (b)  specify the financial year concerned; and

                     (c)  be made no later than 6 years after the end of that financial year.

             (6)  A direction given under subsection (1) is not a legislative instrument.

295  Contents of annual financial report

Basic contents

             (1)  The financial report for a financial year consists of:

                     (a)  the financial statements for the year; and

                     (b)  the notes to the financial statements; and

                     (c)  the directors’ declaration about the statements and notes.

Financial statements

             (2)  The financial statements for the year are:

                     (a)  unless paragraph (b) applies—the financial statements in relation to the company, registered scheme or disclosing entity required by the accounting standards; or

                     (b)  if the accounting standards require the company, registered scheme or disclosing entity to prepare financial statements in relation to a consolidated entity—the financial statements in relation to the consolidated entity required by the accounting standards.

Notes to financial statements

             (3)  The notes to the financial statements are:

                     (a)  disclosures required by the regulations; and

                     (b)  notes required by the accounting standards; and

                     (c)  any other information necessary to give a true and fair view (see section 297).

Directors’ declaration

             (4)  The directors’ declaration is a declaration by the directors:

                     (c)  whether, in the directors’ opinion, there are reasonable grounds to believe that the company, registered scheme or disclosing entity will be able to pay its debts as and when they become due and payable; and

                    (ca)  if the company, registered scheme or disclosing entity has included in the notes to the financial statements, in compliance with the accounting standards, an explicit and unreserved statement of compliance with international financial reporting standards—that this statement has been included in the notes to the financial statements; and

                     (d)  whether, in the directors’ opinion, the financial statement and notes are in accordance with this Act, including:

                              (i)  section 296 (compliance with accounting standards); and

                             (ii)  section 297 (true and fair view); and

                     (e)  if the company, disclosing entity or registered scheme is listed—that the directors have been given the declarations required by section 295A.

Note:          See paragraph 285(3)(c) for the reference to the debts of a registered scheme.

             (5)  The declaration must:

                     (a)  be made in accordance with a resolution of the directors; and

                     (b)  specify the date on which the declaration is made; and

                     (c)  be signed by a director.

295A  Declaration in relation to listed entity’s financial statements by chief executive officer and chief financial officer

             (1)  If the company, disclosing entity or registered scheme is listed, the directors’ declaration under subsection 295(4) must be made only after each person who performs:

                     (a)  a chief executive function; or

                     (b)  a chief financial officer function;

in relation to the company, disclosing entity or registered scheme has given the directors a declaration under subsection (2) of this section.

             (2)  The declaration is a declaration whether, in the person’s opinion:

                     (a)  the financial records of the company, disclosing entity or registered scheme for the financial year have been properly maintained in accordance with section 286; and

                     (b)  the financial statements, and the notes referred to in paragraph 295(3)(b), for the financial year comply with the accounting standards; and

                     (c)  the financial statements and notes for the financial year give a true and fair view (see section 297); and

                     (d)  any other matters that are prescribed by the regulations for the purposes of this paragraph in relation to the financial statements and the notes for the financial year are satisfied.

             (3)  The declaration must:

                     (a)  be made in writing; and

                     (b)  specify the date on which the declaration is made; and

                     (c)  specify the capacity in which the person is making the declaration; and

                     (d)  be signed by the person making the declaration.

A person who performs both a chief executive function and a chief financial officer function may make a single declaration in both capacities.

             (4)  A person performs a chief executive function in relation to the company, disclosing entity or registered scheme if the person is the person who is primarily and directly responsible to the directors for the general and overall management of the company, disclosing entity or registered scheme.

             (5)  If there is no one person who performs a chief executive function in relation to the company, disclosing entity or registered scheme under subsection (4), a person performs a chief executive function in relation to the company, disclosing entity or registered scheme if the person is one of a number of people who together are primarily and directly responsible to the directors for the general and overall management of the company, disclosing entity or registered scheme.

             (6)  A person performs a chief financial officer function in relation to the company, disclosing entity or registered scheme if that person is the person who is:

                     (a)  primarily responsible for financial matters in relation to the company, disclosing entity or registered scheme; and

                     (b)  directly responsible for those matters to either:

                              (i)  the directors; or

                             (ii)  the person or persons who perform the chief executive function in relation to the company.

             (7)  If there is no one person who performs a chief financial officer function in relation to the company, disclosing entity or registered scheme under subsection (6), a person performs a chief financial officer function in relation to the company, disclosing entity or registered scheme if the person is one of a number of people who together are:

                     (a)  primarily responsible for financial matters in relation to the company, disclosing entity or registered scheme; and

                     (b)  directly responsible for those matters to either:

                              (i)  the directors; or

                             (ii)  the person or persons who perform the chief executive function in relation to the company.

             (8)  Nothing in this section derogates from the responsibility that a director has for ensuring that financial statements comply with this Act.

296  Compliance with accounting standards and regulations

             (1)  The financial report for a financial year must comply with the accounting standards.

Small proprietary companies

          (1A)  Despite subsection (1), the financial report of a small proprietary company does not have to comply with particular accounting standards if:

                     (a)  the report is prepared in response to a shareholder direction under section 293; and

                     (b)  the direction specifies that the report does not have to comply with those standards.

Small companies limited by guarantee

          (1B)  Despite subsection (1), the financial report of a small company limited by guarantee does not have to comply with particular accounting standards if:

                     (a)  the report is prepared in response to a member direction under section 294A; and

                     (b)  the direction specifies that the report does not have to comply with those standards.

Further requirements

             (2)  The financial report must comply with any further requirements in the regulations.

297  True and fair view

                   The financial statements and notes for a financial year must give a true and fair view of:

                     (a)  the financial position and performance of the company, registered scheme or disclosing entity; and

                     (b)  if consolidated financial statements are required—the financial position and performance of the consolidated entity.

This section does not affect the obligation under section 296 for a financial report to comply with accounting standards.

Note:          If the financial statements and notes prepared in compliance with the accounting standards would not give a true and fair view, additional information must be included in the notes to the financial statements under paragraph 295(3)(c).

298  Annual directors’ report

             (1)  The company, registered scheme or disclosing entity must prepare a directors’ report for each financial year.

       (1AA)  Except in the case of a company limited by guarantee, the report must include:

                     (a)  the general information required by sections 299 (all entities) and 299A (additional requirements for listed entities); and

                     (b)  the specific information required by sections 300 and 300A; and

                     (c)  a copy of the auditor’s declaration under section 307C in relation to the audit for the financial year.

       (1AB)  In the case of a company limited by guarantee, the report must include:

                     (a)  the general information required by section 300B; and

                     (b)  a copy of the auditor’s declaration under section 307C in relation to the audit or review for the financial year.

          (1A)  If the financial report for a financial year includes additional information under paragraph 295(3)(c) (information included to give true and fair view of financial position and performance), the directors’ report for the financial year must also:

                     (a)  set out the directors’ reasons for forming the opinion that the inclusion of that additional information was necessary to give the true and fair view required by section 297; and

                     (b)  specify where that additional information can be found in the financial report.

             (2)  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; and

                     (c)  be signed by a director.

Small proprietary companies

             (3)  A small proprietary company does not have to comply with subsection (1) for a financial year if:

                     (a)  it is preparing financial statements for that year in response to a shareholder direction under section 293; and

                     (b)  the direction specified that a directors’ report need not be prepared.

Small companies limited by guarantee

             (4)  A small company limited by guarantee does not have to comply with subsection (1) for a financial year if:

                     (a)  it is preparing the financial statements for that year in response to a member direction under section 294A; and

                     (b)  the direction specified that a directors’ report need not be prepared.

299  Annual directors’ report—general information

General information about operations and activities

             (1)  The directors’ report for a financial year must:

                     (a)  contain a review of operations during the year of the entity reported on and the results of those operations; and

                     (b)  give details of any significant changes in the entity’s state of affairs during the year; and

                     (c)  state the entity’s principal activities during the year and any significant changes in the nature of those activities during the year; and

                     (d)  give details of any matter or circumstance that has arisen since the end of the year that has significantly affected, or may significantly affect:

                              (i)  the entity’s operations in future financial years; or

                             (ii)  the results of those operations in future financial years; or

                            (iii)  the entity’s state of affairs in future financial years; and

                     (e)  refer to likely developments in the entity’s operations in future financial years and the expected results of those operations; and

                      (f)  if the entity’s operations are subject to any particular and significant environmental regulation under a law of the Commonwealth or of a State or Territory—give details of the entity’s performance in relation to environmental regulation.

             (2)  The entity reported on is:

                     (a)  the company, registered scheme or disclosing entity (if consolidated financial statements are not required); or

                     (b)  the consolidated entity (if consolidated financial statements are required).

Prejudicial information need not be disclosed

             (3)  The report may omit material that would otherwise be included under paragraph (1)(e) if it is likely to result in unreasonable prejudice to:

                     (a)  the company, registered scheme or disclosing entity; or

                     (b)  if consolidated financial statements are required—the consolidated entity or any entity (including the company, registered scheme or disclosing entity) that is part of the consolidated entity.

If material is omitted, the report must say so.

299A  Annual directors’ report—additional general requirements for listed entities

             (1)  The directors’ report for a financial year for a company, registered scheme or disclosing entity that is listed must also contain information that members of the listed entity would reasonably require to make an informed assessment of:

                     (a)  the operations of the entity reported on; and

                     (b)  the financial position of the entity reported on; and

                     (c)  the business strategies, and prospects for future financial years, of the entity reported on.

             (2)  The entity reported on is:

                     (a)  the company, registered scheme or disclosing entity that is listed (if consolidated financial statements are not required); or

                     (b)  the consolidated entity (if consolidated financial statements are required).

             (3)  The report may omit material that would otherwise be included under paragraph (1)(c) if it is likely to result in unreasonable prejudice to:

                     (a)  the company, registered scheme or disclosing entity; or

                     (b)  if consolidated financial statements are required—the consolidated entity or any entity (including the company, registered scheme or disclosing entity) that is part of the consolidated entity.

If material is omitted, the report must say so.

300  Annual directors’ report—specific information

             (1)  The directors’ report for a financial year must include details of:

                     (a)  dividends or distributions paid to members during the year; and

                     (b)  dividends or distributions recommended or declared for payment to members, but not paid, during the year; and

                     (c)  the name of each person who has been a director of the company, registered scheme or disclosing entity at any time during or since the end of the year and the period for which they were a director; and

                    (ca)  the name of each person who:

                              (i)  is an officer of the company, registered scheme or disclosing entity at any time during the year; and

                             (ii)  was a partner in an audit firm, or a director of an audit company, that is an auditor of the company, disclosing entity or registered scheme for the year; and

                            (iii)  was such a partner or director at a time when the audit firm or the audit company undertook an audit of the company, disclosing entity or registered scheme; and

                     (d)  options that are:

                              (i)  granted over unissued shares or unissued interests during or since the end of the year; and

                             (ii)  granted to any of the directors or any of the 5 most highly remunerated officers of the company (other than the directors); and

                            (iii)  granted to them as part of their remuneration;

                            (see subsections (3), (4) and (5)); and

                     (e)  unissued shares or interests under option as at the day the report is made (see subsections (3) and (6)); and

                      (f)  shares or interests issued during or since the end of the year as a result of the exercise of an option over unissued shares or interests (see subsections (3) and (7)); and

                     (g)  indemnities given and insurance premiums paid during or since the end of the year for a person who is or has been an officer or auditor (see subsections (8) and (9)).

Public companies, listed companies and registered schemes must include additional information under subsections (10), (11), (11AA), (11A), (11B), (12) and (13) of this section and section 300A.

             (2)  Details do not have to be included in the directors’ report under this section if they are included in the company’s financial report for the financial year.

          (2A)  If subsection (2) is relied on to not include in the directors’ report for a financial year details that would otherwise be required to be included in that report under paragraph (11B)(a) or (11C)(b), that report must specify, in the section headed “Non‑audit services”, where those details may be found in the company’s financial report for that financial year.

             (3)  Paragraphs (1)(d), (e) and (f) cover:

                     (a)  options over unissued shares and interests of the company, registered scheme or disclosing entity; and

                     (b)  if consolidated financial statements are required—options over unissued shares and interests of any controlled entity that is a company, registered scheme or disclosing entity.

Options details

             (5)  The details of an option granted are:

                     (a)  the company, registered scheme or disclosing entity granting the option; and

                     (b)  the name of the person to whom the option is granted; and

                     (c)  the number and class of shares or interests over which the option is granted.

             (6)  The details of unissued shares or interests under option are:

                     (a)  the company, registered scheme or disclosing entity that will issue shares or interests when the options are exercised; and

                     (b)  the number and classes of those shares or interests; and

                     (c)  the issue price, or the method of determining the issue price, of those shares or interests; and

                     (d)  the expiry date of the options; and

                     (e)  any rights that option holders have under the options to participate in any share issue or interest issue of the company, registered scheme or disclosing entity or of any other body corporate or registered scheme.

Shares or interests issued as a result of exercise of option

             (7)  The details of shares or interests issued as a result of the exercise of an option are:

                     (a)  the company, registered scheme or disclosing entity issuing the shares or interests; and

                     (b)  the number of shares or interests issued; and

                     (c)  if the company, registered scheme or disclosing entity has different classes of shares or interests—the class to which each of those shares or interests belongs; and

                     (d)  the amount unpaid on each of those shares or interests; and

                     (e)  the amount paid, or agreed to be considered as paid, on each of those shares or interests.

Indemnities and insurance premiums for officers or auditors

             (8)  The report for a company must include details of:

                     (a)  any indemnity that is given to a current or former officer or auditor against a liability and that is covered by subsection 199A(2) or (3), or any relevant agreement under which an officer or auditor may be given an indemnity of that kind; and

                     (b)  any premium that is paid, or agreed to be paid, for insurance against a current or former officer’s or auditor’s liability for legal costs.

Note:          Sections 199A and 199B contain general prohibitions against giving certain indemnities and paying certain insurance premiums. This subsection requires transactions that are exceptions to these prohibitions to be reported.

             (9)  The details required under subsection (8) are:

                     (a)  for an officer—their name or the class of officer to which they belong or belonged; and

                     (b)  for an auditor—their name; and

                     (c)  the nature of the liability; and

                     (d)  for an indemnity given—the amount the company paid and any other action the company took to indemnify the officer or auditor; and

                     (e)  for an agreement to indemnify—the amount that the relevant agreement requires the company to pay and any other action the relevant agreement requires the company to take to indemnify the officer or auditor; and

                      (f)  for an insurance premium—the amount of the premium.

The report need not give details of the nature of the liability covered by, or the amount of the premium payable under, a contract of insurance to the extent that disclosure of those details is prohibited by the insurance contract.

Special rules for public companies

           (10)  The report for a public company that is not a wholly‑owned subsidiary of another company must also include details of:

                     (a)  each director’s qualifications, experience and special responsibilities; and

                     (b)  the number of meetings of the board of directors held during the year and each director’s attendance at those meetings; and

                     (c)  the number of meetings of each board committee held during the year and each director’s attendance at those meetings; and

                     (d)  the qualifications and experience of each person who is a company secretary of the company as at the end of the year.

Special rules for listed companies and schemes

           (11)  The report for a listed company must also include the following details for each director:

                     (a)  their relevant interests in shares of the company or a related body corporate;

                     (b)  their relevant interests in debentures of, or interests in a registered scheme made available by, the company or a related body corporate;

                     (c)  their rights or options over shares in, debentures of or interests in a registered scheme made available by, the company or a related body corporate;

                     (d)  contracts:

                              (i)  to which the director is a party or under which the director is entitled to a benefit; and

                             (ii)  that confer a right to call for or deliver shares in, or debentures of or interests in a registered scheme made available by the company or a related body corporate;

                     (e)  all directorships of other listed companies held by the director at any time in the 3 years immediately before the end of the financial year and the period for which each directorship has been held.

Note:          Directors must also disclose interests of these kinds to a relevant market operator under section 205G as they are acquired.

     (11AA)  If an individual plays a significant role in the audit of a listed company or listed registered scheme for the financial year in reliance on an approval granted under section 324DAA, the report for the company or scheme must also include details of, and reasons for, the approval.

        (11A)  If a registered company auditor plays a significant role in the audit of a listed company for the financial year in reliance on a declaration made under section 342A, the report for the company must also include details of the declaration.

Listed companies—non‑audit services and auditor independence

        (11B)  The report for a listed company must also include the following in relation to each auditor:

                     (a)  details of the amounts paid or payable to the auditor for non‑audit services provided, during the year, by the auditor (or by another person or firm on the auditor’s behalf);

                     (b)  a statement whether the directors are satisfied that the provision of non‑audit services, during the year, by the auditor (or by another person or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by this Act;

                     (c)  a statement of the directors’ reasons for being satisfied that the provision of those non‑audit services, during the year, by the auditor (or by another person or firm on the auditor’s behalf) did not compromise the auditor independence requirements of this Act.

These details and statements must be included in the directors’ report under the heading “Non‑audit services”. If consolidated financial statements are required, the details and statements must relate to amounts paid or payable to the auditor by, and non‑audit services provided to, any entity (including the company, registered scheme or disclosing entity) that is part of the consolidated entity.

        (11C)  For the purposes of paragraph (11B)(a), the details of amounts paid or payable to an auditor for non‑audit services provided, during the year, by the auditor (or by another person or firm on the auditor’s behalf) are:

                     (a)  the name of the auditor; and

                     (b)  the dollar amount that:

                              (i)  the listed company; or

                             (ii)  if consolidated financial statements are required—any entity that is part of the consolidated entity;

                            paid, or is liable to pay, for each of those non‑audit services.

        (11D)  The statements under paragraphs (11B)(b) and (c) must be made in accordance with:

                     (a)  advice provided by the listed company’s audit committee if the company has an audit committee; or

                     (b)  a resolution of the directors of the listed company if paragraph (a) does not apply.

        (11E)  For the purposes of subsection (11D), a statement is taken to be made in accordance with advice provided by the company’s audit committee only if:

                     (a)  the statement is consistent with that advice and does not contain any material omission of material included in that advice; and

                     (b)  the advice is endorsed by a resolution passed by the members of the audit committee; and

                     (c)  the advice is written advice signed by a member of the audit committee on behalf of the audit committee and given to the directors.

Special rules for listed registered schemes

           (12)  The report for a registered scheme whose interests are quoted on a prescribed financial market must also include the following details for each director of the company that is the responsible entity for the scheme:

                     (a)  their relevant interests in interests in the scheme;

                     (b)  their rights or options over interests in the scheme;

                     (c)  contracts to which the director is a party or under which the director is entitled to a benefit and that confer a right to call for or deliver interests in the scheme.

Special rules for registered schemes

           (13)  The report for a registered scheme must also include details of:

                     (a)  the fees paid to the responsible entity and its associates out of scheme property during the financial year; and

                     (b)  the number of interests in the scheme held by the responsible entity or its associates as at the end of the financial year; and

                     (c)  interests in the scheme issued during the financial year; and

                     (d)  withdrawals from the scheme during the financial year; and

                     (e)  the value of the scheme’s assets as at the end of the financial year, and the basis for the valuation; and

                      (f)  the number of interests in the scheme as at the end of the financial year.

Proceedings on behalf of a company

           (14)  The report for a company must also include the following details of any application for leave under section 237 made in respect of the company:

                     (a)  the applicant’s name; and

                     (b)  a statement whether leave was granted.

           (15)  The report for a company must also include the following details of any proceedings that a person has brought or intervened in on behalf of the company with leave under section 237:

                     (a)  the person’s name;

                     (b)  the names of the parties to the proceedings;

                     (c)  sufficient information to enable members to understand the nature and status of the proceedings (including the cause of action and any orders made by the court).

300A  Annual directors’ report—specific information to be provided by listed companies

             (1)  The directors’ report for a financial year for a company must also include (in a separate and clearly identified section of the report):

                     (a)  discussion of board policy for determining, or in relation to, the nature and amount (or value, as appropriate) of remuneration of the key management personnel for:

                              (i)  the company, if consolidated financial statements are not required; or

                             (ii)  the consolidated entity, if consolidated financial statements are required; and

                     (b)  discussion of the relationship between such policy and the company’s performance; and

                   (ba)  if an element of the remuneration of a member of the key management personnel for the company, or if consolidated financial statements are required, for the consolidated entity is dependent on the satisfaction of a performance condition:

                              (i)  a detailed summary of the performance condition; and

                             (ii)  an explanation of why the performance condition was chosen; and

                            (iii)  a summary of the methods used in assessing whether the performance condition is satisfied and an explanation of why those methods were chosen; and

                            (iv)  if the performance condition involves a comparison with factors external to the company:

                                        (A)  a summary of the factors to be used in making the comparison; and

                                        (B)  if any of the factors relates to the performance of another company, of 2 or more other companies or of an index in which the securities of a company or companies are included—the identity of that company, of each of those companies or of the index; and

                     (c)  the prescribed details in relation to the remuneration of:

                              (i)  if consolidated financial statements are required—each member of the key management personnel for the consolidated entity; or

                             (ii)  if consolidated financial statements are not required—each member of the key management personnel for the company; and

                     (d)  if an element of the remuneration of a person referred to in paragraph (c) consists of securities of a body and that element is not dependent on the satisfaction of a performance condition—an explanation of why that element of the remuneration is not dependent on the satisfaction of a performance condition; and

                     (e)  for each person referred to in paragraph (c):

                              (i)  an explanation of the relative proportions of those elements of the person’s remuneration that are related to performance and those elements of the person’s remuneration that are not; and

                             (ii)  the value (worked out as at the time they are granted and in accordance with any applicable accounting standards) of options that are granted to the person during the year as part of their remuneration; and

                            (iii)  the value (worked out as at the time they are exercised) of options that were granted to the person as part of their remuneration and that are exercised by the person during the year; and

                            (iv)  if options granted to the person as part of their remuneration lapse during the financial year—the number of those options, and the financial year in which those options were granted; and

                           (vii)  if the person is employed by the company under a contract—the duration of the contract, the periods of notice required to terminate the contract and the termination payments provided for under the contract; and

                      (f)  such other matters related to the policy or policies referred to in paragraph (a) as are prescribed by the regulations; and

                     (g)  if:

                              (i)  at the company’s most recent AGM, comments were made on the remuneration report that was considered at that AGM; and

                             (ii)  when a resolution that the remuneration report for the last financial year be adopted was put to the vote at the company’s most recent AGM, at least 25% of the votes cast were against adoption of that report;

                            an explanation of the board’s proposed action in response or, if the board does not propose any action, the board’s reasons for inaction; and

                     (h)  if a remuneration consultant made a remuneration recommendation in relation to any of the key management personnel for the company or, if consolidated financial statements are required, for the consolidated entity, for the financial year:

                              (i)  the name of the consultant; and

                             (ii)  a statement that the consultant made such a recommendation; and

                            (iii)  if the consultant provided any other kind of advice to the company or entity for the financial year—a statement that the consultant provided that other kind or those other kinds of advice; and

                            (iv)  the amount and nature of the consideration payable for the remuneration recommendation; and

                             (v)  the amount and nature of the consideration payable for any other kind of advice referred to in subparagraph (iii); and

                            (vi)  information about the arrangements the company made to ensure that the making of the remuneration recommendation would be free from undue influence by the member or members of the key management personnel to whom the recommendation relates; and

                           (vii)  a statement about whether the board is satisfied that the remuneration recommendation was made free from undue influence by the member or members of the key management personnel to whom the recommendation relates; and

                          (viii)  if the board is satisfied that the remuneration recommendation was made free from undue influence by the member or members of the key management personnel to whom the recommendation relates—the board’s reasons for being satisfied of this.

       (1AA)  Without limiting paragraph (1)(b), the discussion under that paragraph of the company’s performance must specifically deal with:

                     (a)  the company’s earnings; and

                     (b)  the consequences of the company’s performance on shareholder wealth;

in the financial year to which the report relates and in the previous 4 financial years.

       (1AB)  In determining, for the purposes of subsection (1AA), the consequences of the company’s performance on shareholder wealth in a financial year, have regard to:

                     (a)  dividends paid by the company to its shareholders during that year; and

                     (b)  changes in the price at which shares in the company are traded between the beginning and the end of that year; and

                     (c)  any return of capital by the company to its shareholders during that year that involves:

                              (i)  the cancellation of shares in the company; and

                             (ii)  a payment to the holders of those shares that exceeds the price at which shares in that class are being traded at the time when the shares are cancelled; and

                     (d)  any other relevant matter.

          (1A)  The material referred to in subsection (1) must be included in the directors’ report under the heading “Remuneration report”.

          (1C)  Without limiting paragraph (1)(c), the regulations may:

                     (a)  provide that the value of an element of remuneration is to be determined, for the purposes of this section, in a particular way or by reference to a particular standard; and

                     (b)  provide that details to be given of an element of remuneration must relate to the remuneration provided in:

                              (i)  the financial year to which the directors’ report relates; and

                             (ii)  the earlier financial years specified in the regulations.

             (2)  This section applies to any listed disclosing entity that is a company.

             (3)  This section applies despite anything in the company’s constitution.

             (4)  For the purposes of this section, if:

                     (a)  consolidated financial statements are required; and

                     (b)  a person is a group executive who is a group executive of 2 or more entities within the consolidated entity;

the person’s remuneration is taken to include all of the person’s remuneration from those entities (regardless of the capacity in which the person received the remuneration).

300B  Annual directors’ report—companies limited by guarantee

             (1)  The directors’ report for a financial year for a company limited by guarantee must:

                     (a)  contain a description of the short and long term objectives of the entity reported on; and

                     (b)  set out the entity’s strategy for achieving those objectives; and

                     (c)  state the entity’s principal activities during the year; and

                     (d)  state how those activities assisted in achieving the entity’s objectives; and

                     (e)  state how the entity measures its performance, including any key performance indicators used by the entity.

             (2)  The entity reported on is:

                     (a)  the company (if consolidated financial statements are not required); or

                     (b)  the consolidated entity (if consolidated financial statements are required).

             (3)  The directors’ report for a financial year for a company limited by guarantee must also include details of:

                     (a)  the name of each person who has been a director of the company at any time during or since the end of the year and the period for which the person was a director; and

                     (b)  each director’s qualifications, experience and special responsibilities; and

                     (c)  the number of meetings of the board of directors held during the year and each director’s attendance at those meetings; and

                     (d)  for each class of membership in the company—the amount which a member of that class is liable to contribute if the company is wound up; and

                     (e)  the total amount that members of the company are liable to contribute if the company is wound up.

301  Audit of annual financial report

             (1)  A company, registered scheme or disclosing entity must have the financial report for a financial year audited in accordance with Division 3 and obtain an auditor’s report.

Small proprietary companies

             (2)  A small proprietary company’s financial report for a financial year does not have to be audited if:

                     (a)  the report is prepared in response to a direction under section 293; and

                     (b)  the direction did not ask for the financial report to be audited.

Companies limited by guarantee

             (3)  A company limited by guarantee may have its financial report for a financial year reviewed, rather than audited, if:

                     (a)  the company is not one of the following:

                              (i)  a Commonwealth company for the purposes of the Public Governance, Performance and Accountability Act 2013;

                             (ii)  a subsidiary of a Commonwealth company for the purposes of that Act;

                            (iii)  a subsidiary of a corporate Commonwealth entity for the purposes of that Act; and

                     (b)  one of the following is true:

                              (i)  the company is not required by the accounting standards to be included in consolidated financial statements and the revenue of the company for the financial year is less than $1 million;

                             (ii)  the company is required by the accounting standards to be included in consolidated financial statements and the consolidated revenue of the consolidated entity for the financial year is less than $1 million.

             (4)  A small company limited by guarantee’s financial report for a financial year does not have to be audited or reviewed if:

                     (a)  the report is prepared in response to a member direction under section 294A; and

                     (b)  the direction does not ask for the audit or review.

Division 2—Half‑year financial report and directors’ report

302  Disclosing entity must prepare half‑year financial report and directors’ report

                   A disclosing entity must:

                     (a)  prepare a financial report and directors’ report for each half‑year; and

                     (b)  have the financial report audited or reviewed in accordance with Division 3 and obtain an auditor’s report; and

                     (c)  lodge the financial report, the directors’ report and the auditor’s report on the financial report with ASIC;

unless the entity is not a disclosing entity when lodgment is due.

Note 1:       This Chapter only applies to disclosing entities incorporated or formed in Australia (see subsection 285(2)).

Note 2:       See section 320 for the time for lodgment with ASIC.

Note 3:       Subsection 318(4) requires disclosing entities that are borrowers in relation to debentures to also report to the trustee for debenture holders.

303  Contents of half‑year financial report

Basic contents

             (1)  The financial report for a half‑year consists of:

                     (a)  the financial statements for the half‑year; and

                     (b)  the notes to the financial statements; and

                     (c)  the directors’ declaration about the statements and notes.

Financial statements

             (2)  The financial statements for the half‑year are:

                     (a)  unless paragraph (b) applies—the financial statements in relation to the disclosing entity required by the accounting standards; or

                     (b)  if the accounting standards require the disclosing entity to prepare financial statements in relation to a consolidated entity—the financial statements in relation to the consolidated entity required by the accounting standards.

Notes to financial statements

             (3)  The notes to the financial statements are:

                     (a)  disclosures required by the regulations; and

                     (b)  notes required by the accounting standards; and

                     (c)  any other information necessary to give a true and fair view (see section 305).

Directors’ declaration

             (4)  The directors’ declaration is a declaration by the directors:

                     (c)  whether, in the directors’ opinion, there are reasonable grounds to believe that the disclosing entity will be able to pay its debts as and when they become due and payable; and

                     (d)  whether, in the directors’ opinion, the financial statement and notes are in accordance with this Act, including:

                              (i)  section 304 (compliance with accounting standards); and

                             (ii)  section 305 (true and fair view).

Note:          See paragraph 285(3)(c) for the reference to the debts of a disclosing entity that is a registered scheme.

             (5)  The declaration must:

                     (a)  be made in accordance with a resolution of the directors; and

                     (b)  specify the day on which the declaration is made; and

                     (c)  be signed by a director.

304  Compliance with accounting standards and regulations

                   The financial report for a half‑year must comply with the accounting standards and any further requirements in the regulations.

305  True and fair view

                   The financial statements and notes for a half‑year must give a true and fair view of:

                     (a)  the financial position and performance of the disclosing entity; or

                     (b)  if consolidated financial statements are required—the financial position and performance of the consolidated entity.

This section does not affect the obligation under section 304 for financial reports to comply with accounting standards.

Note:          If the financial statements prepared in compliance with the accounting standards would not give a true and fair view, additional information must be included in the notes to the financial statements under paragraph 303(3)(c).

306  Half‑year directors’ report

             (1)  The directors of the disclosing entity must prepare a directors’ report for each half‑year that consists of:

                     (a)  a review of the entity’s operations during the half‑year and the results of those operations; and

                     (b)  the name of each person who has been a director of the disclosing entity at any time during or since the end of the half‑year and the period for which they were a director.

If consolidated financial statements are required, the review under paragraph (a) must cover the consolidated entity.

          (1A)  The directors’ report must include a copy of the auditor’s declaration under section 307C in relation to the audit or review for the half‑year.

             (2)  If the financial report for a half‑year includes additional information under paragraph 303(3)(c) (information included to give true and fair view of financial position and performance), the directors’ report for the half‑year must also:

                     (a)  set out the directors’ reasons for forming the opinion that the inclusion of that additional information was necessary to give the true and fair view required by section 305; and

                     (b)  specify where that information can be found in the financial report.

             (3)  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; and

                     (c)  be signed by a director.

Division 3—Audit and auditor’s report

307  Audit

                   An auditor who conducts an audit of the financial report for a financial year or half‑year must form an opinion about:

                     (a)  whether the financial report is in accordance with this Act, including:

                              (i)  section 296 or 304 (compliance with accounting standards); and

                             (ii)  section 297 or 305 (true and fair view); and

                    (aa)  if the financial report includes additional information under paragraph 295(3)(c) or 303(3)(c) (information included to give true and fair view of financial position and performance)—whether the inclusion of that additional information was necessary to give the true and fair view required by section 297 or 305; and

                     (b)  whether the auditor has been given all information, explanation and assistance necessary for the conduct of the audit; and

                     (c)  whether the company, registered scheme or disclosing entity has kept financial records sufficient to enable a financial report to be prepared and audited; and

                     (d)  whether the company, registered scheme or disclosing entity has kept other records and registers as required by this Act.

307A  Audit to be conducted in accordance with auditing standards

             (1)  If an individual auditor, or an audit company, conducts:

                     (a)  an audit or review of the financial report for a financial year; or

                     (b)  an audit or review of the financial report for a half‑year;

the individual auditor or audit company must conduct the audit or review in accordance with the auditing standards.

             (2)  If an audit firm, or an audit company, conducts:

                     (a)  an audit or review of the financial report for a financial year; or

                     (b)  an audit or review of the financial report for a half‑year;

the lead auditor for the audit or review must ensure that the audit or review is conducted in accordance with the auditing standards.

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

Note:          For strict liability see section 6.1 of the Criminal Code.

307B  Audit working papers to be retained for 7 years

Contravention by individual auditor or audit company

             (1)  An auditor contravenes this subsection if:

                     (a)  the auditor is an individual auditor or an audit company; and

                     (b)  the auditor conducts:

                              (i)  an audit or review of the financial report for a financial year; or

                             (ii)  an audit or review of the financial report for a half‑year; and

                     (c)  the auditor does not retain all audit working papers prepared by or for, or considered or used by, the auditor in accordance with the requirements of the auditing standards until:

                              (i)  the end of 7 years after the date of the audit report prepared in relation to the audit or review to which the audit working papers relate; or

                             (ii)  an earlier date determined for the audit working papers by ASIC under subsection (6).

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

Note:          For strict liability see section 6.1 of the Criminal Code.

Contravention by member of audit firm

             (3)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit firm conducts:

                              (i)  an audit or review of the financial report for a financial year; or

                             (ii)  an audit or review of the financial report for a half‑year; and

                     (b)  the audit firm fails, at a particular time, to retain all audit working papers prepared by or for, or considered or used by, the audit firm in accordance with the requirements of the auditing standards until:

                              (i)  the end of 7 years after the date of the audit report prepared in relation to the audit or review to which the documents relate; or

                             (ii)  the earlier date determined by ASIC for the audit working papers under subsection (6); and

                     (c)  the defendant is a member of the firm at that time.

             (4)  An offence based on subsection (3) is an offence of strict liability.

Note 1:       For strict liability see section 6.1 of the Criminal Code.

Note 2:       Subsection (5) provides a defence.

             (5)  A member of an audit firm does not commit an offence at a particular time because of a contravention of subsection (3) if the member either:

                     (a)  does not know at that time of the circumstances that constitute the contravention of subsection (3); or

                     (b)  knows of those circumstances at that time but takes all reasonable steps to correct the contravention as soon as possible after the member becomes aware of those circumstances.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

Earlier retention date for audit working papers

             (6)  ASIC may, on application by a person, determine, in writing, an earlier date for the audit working papers for the purposes of paragraphs (1)(c) and (3)(b) if:

                     (a)  the auditor is an individual auditor and the auditor:

                              (i)  dies; or

                             (ii)  ceases to be a registered company auditor; or

                     (b)  the auditor is an audit firm and the firm is dissolved (otherwise than simply as part of a reconstitution of the firm because of the death, retirement or withdrawal of a member or members or because of the admission of a new member or members); or

                     (c)  the auditor is an audit company and the company:

                              (i)  is wound up; or

                             (ii)  ceases to be an authorised audit company.

             (7)  In deciding whether to make a determination under subsection (6), ASIC must have regard to:

                     (a)  whether ASIC is inquiring into or investigating any matters in respect of:

                              (i)  the auditor; or

                             (ii)  the audited body for the audit to which the documents relate; and

                     (b)  whether the professional accounting bodies have any investigations or disciplinary action pending in relation to the auditor; and

                     (c)  whether civil or criminal proceedings in relation to:

                              (i)  the conduct of the audit; or

                             (ii)  the contents of the financial report to which the audit working papers relate;

                            have been, or are about to be, commenced; and

                     (d)  any other relevant matter.

Audit working papers kept in electronic form

             (8)  For the purposes of this section, if audit working papers are in electronic form they are taken to be retained only if they are convertible into hard copy.

307C  Auditor’s independence declaration

Contravention by individual auditor

             (1)  If an individual auditor conducts:

                     (a)  an audit or review of the financial report for a financial year; or

                     (b)  an audit or review of the financial report for a half‑year;

the individual auditor must give the directors of the company, registered scheme or disclosing entity:

                     (c)  a written declaration that, to the best of the individual auditor’s knowledge and belief, there have been:

                              (i)  no contraventions of the auditor independence requirements of this Act in relation to the audit or review; and

                             (ii)  no contraventions of any applicable code of professional conduct in relation to the audit or review; or

                     (d)  a written declaration that, to the best of the individual auditor’s knowledge and belief, the only contraventions of:

                              (i)  the auditor independence requirements of this Act in relation to the audit or review; or

                             (ii)  any applicable code of professional conduct in relation to the audit or review;

                            are those contraventions details of which are set out in the declaration.

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

Note:          For strict liability see section 6.1 of the Criminal Code.

Contravention by lead auditor

             (3)  If an audit firm or audit company conducts:

                     (a)  an audit or review of the financial report for a financial year; or

                     (b)  an audit or review of the financial report for a half‑year;

the lead auditor for the audit must give the directors of the company, registered scheme or disclosing entity:

                     (c)  a written declaration that, to the best of the lead auditor’s knowledge and belief, there have been:

                              (i)  no contraventions of the auditor independence requirements of this Act in relation to the audit or review; and

                             (ii)  no contraventions of any applicable code of professional conduct in relation to the audit or review; or

                     (d)  a written declaration that, to the best of the lead auditor’s knowledge and belief, the only contraventions of:

                              (i)  the auditor independence requirements of this Act in relation to the audit or review; or

                             (ii)  any applicable code of professional conduct in relation to the audit or review;

                            are those contraventions details of which are set out in the declaration.

             (4)  An offence based on subsection (3) is an offence of strict liability.

Note:          For strict liability see section 6.1 of the Criminal Code.

             (5)  The declaration under subsection (1) or (3):

                     (a)  either:

                              (i)  must be given when the audit report is given to the directors of the company, registered scheme or disclosing entity; or

                             (ii)  must satisfy the conditions in subsection (5A); and

                     (b)  must be signed by the person making the declaration.

          (5A)  A declaration under subsection (1) or (3) in relation to a financial report for a financial year or half‑year satisfies the conditions in this subsection if:

                     (a)  the declaration is given to the directors of the company, registered scheme or disclosing entity before the directors pass a resolution under subsection 298(2) or 306(3) (as the case requires) in relation to the directors’ report for the financial year or half‑year; and

                     (b)  a director signs the directors’ report within 7 days after the declaration is given to the directors; and

                     (c)  the auditor’s report on the financial report is made within 7 days after the directors’ report is signed; and

                     (d)  the auditor’s report includes either of the following statements:

                              (i)  a statement to the effect that the declaration would be in the same terms if it had been given to the directors at the time the auditor’s report was made;

                             (ii)  a statement to the effect that circumstances have changed since the declaration was given to the directors, and setting out how the declaration would differ if it had been given to the directors at the time the auditor’s report was made.

          (5B)  An individual auditor or a lead auditor is not required to give a declaration under subsection (1) or (3) in respect of a contravention if:

                     (a)  the contravention was a contravention by a person of subsection 324CE(2), 324CF(2) or 324CG(2); and

                     (b)  the person does not commit an offence because of subsection 324CE(4), 324CF(4) or 324CG(4).

Self‑incrimination

             (6)  An individual is not excused from giving a declaration under subsection (1) or (3) on the ground that giving the declaration might tend to incriminate the individual or expose the individual to a penalty.

Use/derivative use indemnity

             (7)  However, neither:

                     (a)  the information included in the declaration; nor

                     (b)  any information, document or thing obtained as a direct or indirect consequence of including the information in the declaration;

is admissible in evidence against the individual in any criminal proceedings, or in any proceedings that would expose the person to a penalty, other than:

                     (c)  proceedings for an offence against section 1308 or 1309 in relation to the declaration; or

                     (d)  proceedings for an offence against section 137.1 or 137.2 of the Criminal Code (false or misleading information or documents) in relation to the declaration.

308  Auditor’s report on annual financial report

             (1)  An auditor who audits the financial report for a financial year must report to members on whether the auditor is of the opinion that the financial report is in accordance with this Act, including:

                     (a)  section 296 (compliance with accounting standards); and

                     (b)  section 297 (true and fair view).

If not of that opinion, the auditor’s report must say why.

             (2)  If the auditor is of the opinion that the financial report does not comply with an accounting standard, the auditor’s report must, to the extent it is practicable to do so, quantify the effect that non‑compliance has on the financial report. If it is not practicable to quantify the effect fully, the report must say why.

             (3)  The auditor’s report must describe:

                     (a)  any defect or irregularity in the financial report; and

                     (b)  any deficiency, failure or shortcoming in respect of the matters referred to in paragraph 307(b), (c) or (d).

       (3AA)  An auditor who reviews the financial report for a company limited by guarantee must report to members on whether the auditor became aware of any matter in the course of the review that makes the auditor believe that the financial report does not comply with Division 1.

       (3AB)  A report under subsection (3AA) must:

                     (a)  describe any matter referred to in subsection (3AA); and

                     (b)  say why that matter makes the auditor believe that the financial report does not comply with Division 1.

          (3A)  The auditor’s report must include any statements or disclosures required by the auditing standards.

          (3B)  If the financial report includes additional information under paragraph 295(3)(c) (information included to give true and fair view of financial position and performance), the auditor’s report must also include a statement of the auditor’s opinion on whether the inclusion of that additional information was necessary to give the true and fair view required by section 297.

          (3C)  If the directors’ report for the financial year includes a remuneration report, the auditor must also report to members on whether the auditor is of the opinion that the remuneration report complies with section 300A. If not of that opinion, the auditor’s report must say why.

             (4)  A report under subsection (1) or (3AA) must specify the date on which it is made.

             (5)  An offence based on subsection (1), (3), (3AA), (3AB), (3A), (3C) or (4) is an offence of strict liability.

Note:          For strict liability see section 6.1 of the Criminal Code.

309  Auditor’s report on half‑year financial report

Audit of financial report

             (1)  An auditor who audits the financial report for a half‑year must report to members on whether the auditor is of the opinion that the financial report is in accordance with this Act, including:

                     (a)  section 304 (compliance with accounting standards); and

                     (b)  section 305 (true and fair view).

If not of that opinion, the auditor’s report must say why.

             (2)  If the auditor is of the opinion that the financial report does not comply with an accounting standard, the auditor’s report must, to the extent that it is practicable to do so, quantify the effect that non‑compliance has on the financial report. If it is not practicable to quantify the effect fully, the report must say why.

             (3)  The auditor’s report must describe:

                     (a)  any defect or irregularity in the financial report; and

                     (b)  any deficiency, failure or shortcoming in respect of the matters referred to in paragraph 307(b), (c) or (d).

Review of financial report

             (4)  An auditor who reviews the financial report for a half‑year must report to members on whether the auditor became aware of any matter in the course of the review that makes the auditor believe that the financial report does not comply with Division 2.

             (5)  A report under subsection (4) must:

                     (a)  describe any matter referred to in subsection (4); and

                     (b)  say why that matter makes the auditor believe that the financial report does not comply with Division 2.

          (5A)  The auditor’s report must include any statements or disclosures required by the auditing standards.

          (5B)  If the financial report includes additional information under paragraph 303(3)(c) (information included to give true and fair view of financial position and performance), the auditor’s report must also include a statement of the auditor’s opinion on whether the inclusion of that additional information was necessary to give the true and fair view required by section 305.

Report to specify day made

             (6)  A report under subsection (1) or (4) must specify the date on which it is made.

             (7)  An offence based on subsection (1), (3), (4), (5), (5A) or (6) is an offence of strict liability.

Note:          For strict liability see section 6.1 of the Criminal Code.

310  Auditor’s power to obtain information

                   The auditor:

                     (a)  has a right of access at all reasonable times to the books of the company, registered scheme or disclosing entity; and

                     (b)  may require any officer to give the auditor information, explanations or other assistance for the purposes of the audit or review.

A request under paragraph (b) must be a reasonable one.

311  Reporting to ASIC

Contravention by individual auditor

             (1)  An individual auditor conducting an audit contravenes this subsection if:

                     (a)  the auditor is aware of circumstances that:

                              (i)  the auditor has reasonable grounds to suspect amount to a contravention of this Act; or

                             (ii)  amount to an attempt, in relation to the audit, by any person to unduly influence, coerce, manipulate or mislead a person involved in the conduct of the audit (see subsection (6)); or

                            (iii)  amount to an attempt, by any person, to otherwise interfere with the proper conduct of the audit; and

                     (b)  if subparagraph (a)(i) applies:

                              (i)  the contravention is a significant one; or

                             (ii)  the contravention is not a significant one and the auditor believes that the contravention has not been or will not be adequately dealt with by commenting on it in the auditor’s report or bringing it to the attention of the directors; and

                     (c)  the auditor does not notify ASIC in writing of those circumstances as soon as practicable, and in any case within 28 days, after the auditor becomes aware of those circumstances.

Contravention by audit company

             (2)  An audit company conducting an audit contravenes this subsection if:

                     (a)  the lead auditor for the audit is aware of circumstances that:

                              (i)  the lead auditor has reasonable grounds to suspect amount to a contravention of this Act; or

                             (ii)  amount to an attempt, in relation to the audit, by any person to unduly influence, coerce, manipulate or mislead a person involved in the conduct of the audit (see subsection (6)); or

                            (iii)  amount to an attempt, by any person, to otherwise interfere with the proper conduct of the audit; and

                     (b)  if subparagraph (a)(i) applies:

                              (i)  the contravention is a significant one; or

                             (ii)  the contravention is not a significant one and the lead auditor believes that the contravention has not been or will not be adequately dealt with by commenting on it in the auditor’s report or bringing it to the attention of the directors; and

                     (c)  the lead auditor does not notify ASIC in writing of those circumstances as soon as practicable, and in any case within 28 days, after the lead auditor becomes aware of those circumstances.

Contravention by lead auditor

             (3)  A person contravenes this subsection if:

                     (a)  the person is the lead auditor for an audit; and

                     (b)  the person is aware of circumstances that:

                              (i)  the person has reasonable grounds to suspect amount to a contravention of this Act; or

                             (ii)  amount to an attempt, in relation to the audit, by any person to unduly influence, coerce, manipulate or mislead a person involved in the conduct of the audit (see subsection (6)); or

                            (iii)  amount to an attempt, by any person, to otherwise interfere with the proper conduct of the audit; and

                     (c)  if subparagraph (b)(i) applies:

                              (i)  the contravention is a significant one; or

                             (ii)  the contravention is not a significant one and the person believes that the contravention has not been or will not be adequately dealt with by commenting on it in the auditor’s report or bringing it to the attention of the directors; and

                     (d)  the person does not notify ASIC in writing of those circumstances as soon as practicable, and in any case within 28 days, after the person becomes aware of those circumstances.

Significant contraventions

             (4)  In determining for the purposes of this section whether a contravention of this Act is a significant one, have regard to:

                     (a)  the level of penalty provided for in relation to the contravention; and

                     (b)  the effect that the contravention has, or may have, on:

                              (i)  the overall financial position of the company, registered scheme or disclosing entity; or

                             (ii)  the adequacy of the information available about the overall financial position of the company, registered scheme or disclosing entity; and

                     (c)  any other relevant matter.

             (5)  Without limiting paragraph (4)(a), a penalty provided for in relation to a contravention of a provision of Part 2M.2 or 2M.3, or section 324DAA, 324DAB or 324DAC, includes a penalty imposed on a director, because of the operation of section 344, for failing to take reasonable steps to comply with, or to secure compliance with, that provision.

Person involved in an audit

             (6)  In this section:

person involved in the conduct of an audit means:

                     (a)  the auditor; or

                     (b)  the lead auditor for the audit; or

                     (c)  the review auditor for the audit; or

                     (d)  a professional member of the audit team for the audit; or

                     (e)  any other person involved in the conduct of the audit.

312  Assisting auditor

             (1)  An officer of a company, registered scheme or disclosing entity must:

                     (a)  allow the auditor access to the books of the company, scheme or entity; and

                     (b)  give the auditor any information, explanation or assistance required under section 310.

Note:          Books include registers and documents generally (not only the accounting “books”): see the definition of books in section 9.

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

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

313  Special provisions on audit of debenture issuers and guarantors

Auditor to give trustee for debenture holders copies of reports, certificates etc.

             (1)  The auditor of a borrower in relation to debentures must give the trustee for debenture holders:

                     (a)  a copy of any report, certificate or other document that the auditor must give the borrower or its members under this Act, the debentures or the trust deed; and

                     (b)  a copy of any document that accompanies it.

The copies must be given within 7 days after the auditor gives the originals to the borrower or its members.

Auditor to report on matters prejudicial to debenture holders’ interests

             (2)  The auditor of a borrower, or guarantor, in relation to debentures must give the borrower or guarantor a written report about any matter that:

                     (a)  the auditor became aware of in conducting the audit or review; and

                     (b)  in the auditor’s opinion, is or is likely to be prejudicial to the interests of debenture holders; and

                     (c)  in the auditor’s opinion, is relevant to the exercise of the powers of the trustee for debenture holders, or the performance of the trustee’s duties, under this Act or the trust deed.

The auditor must give a copy of the report to the trustee for debenture holders. The report and the copy must be given within 7 days after the auditor becomes aware of the matter.

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

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

Division 4—Annual financial reporting to members

314  Annual financial reporting to members

             (1)  A company, registered scheme or disclosing entity must report to members for a financial year by providing either of the following in accordance with subsection (1AA) or (1AE):

                     (a)  all of the following reports:

                              (i)  the financial report for the year;

                             (ii)  the directors’ report for the year (see sections 298 to 300A);

                            (iii)  the auditor’s report on the financial report;

                     (b)  a concise report for the year that complies with subsection (2).

    (1AAA)  This section does not apply to a company limited by guarantee.

Note:          The requirement for annual financial reporting to members for those companies is in section 316A.

       (1AA)  A company, registered scheme or disclosing entity may provide the reports, or the concise report, for a financial year by doing all of the following:

                     (a)  sending, to each member who has made the election referred to in paragraph (1AB)(a):

                              (i)  a hard copy of the reports, or the concise report; or

                             (ii)  if the member has elected to receive the reports, or the concise report, as an electronic copy in accordance paragraph (1AB)(c)—an electronic copy of the reports, or the concise reports;

                     (b)  making a copy of the reports, or the concise report, readily accessible on a website;

                     (c)  directly notifying, in writing, all members who did not make the election referred to in paragraph (1AB)(a) that the copy is accessible on the website, and specifying the direct address on the website where the reports, or the concise report, may be accessed.

Note:          A direct address may be specified, for example, by specifying the URL of the reports or the concise report.

       (1AB)  For the purposes of paragraph (1AA)(a), a company, registered scheme or disclosing entity must, on at least one occasion, directly notify in writing each member that:

                     (a)  the member may elect to receive, free of charge, a copy of the reports for each financial year, or a copy of the concise report for each financial year; and

                     (b)  if the member does not so elect—the member may access the reports, or the concise report, on a specified website; and

                     (c)  if the member does so elect and the company, scheme or entity offers to send the report either as a hard copy or an electronic copy—the member may elect to receive the copy as either a hard copy or an electronic copy.

       (1AC)  An election made under subsection (1AB) is a standing election for each later financial year until the member changes his, her or its election.

Note:          The member may request, under section 316, the company, registered scheme or disclosing entity not to send them material under this section.

       (1AD)  A member may, for the purposes of paragraph (1AA)(c) or subsection (1AB), be notified by electronic means only if the member has previously nominated that means as one by which the member may be notified.

        (1AE)  A company, registered scheme or disclosing entity may provide the reports, or the concise report, by sending each member:

                     (a)  a hard copy of the reports, or the concise report; or

                     (b)  an electronic copy of the reports, or the concise report, if the member has nominated that means as one by which the member may be sent the reports or the concise report.

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

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

Concise report

             (2)  A concise report for a financial year consists of:

                     (a)  a concise financial report for the year drawn up in accordance with accounting standards made for the purposes of this paragraph; and

                     (b)  the directors’ report for the year (see sections 298‑300A); and

                     (c)  a statement by the auditor:

                              (i)  that the financial report has been audited; and

                             (ii)  whether, in the auditor’s opinion, the concise financial report complies with the accounting standards made for the purposes of paragraph (a); and

                     (d)  a copy of any qualification in, and of any statements included in the emphasis of matter section of, the auditor’s report on the financial report; and

                     (e)  a statement that the report is a concise report and that the full financial report and auditor’s report will be sent to the member free of charge if the member asks for them.

             (3)  If the accounting standards made for the purposes of paragraph (2)(a) require a discussion and analysis to be included in a concise financial report:

                     (a)  the auditor must report on whether the discussion and analysis complies with the requirements that the accounting standards lay down for the discussion and analysis; and

                     (b)  the auditor does not otherwise need to audit the statements made in the discussion and analysis.

315  Deadline for reporting to members

Public companies and disclosing entities that are not registered schemes

             (1)  A public company, or a disclosing entity that is not a registered scheme, must report to members under section 314 by the earlier of:

                     (a)  21 days before the next AGM after the end of the financial year; or

                     (b)  4 months after the end of the financial year.

Note:          For the deadline for holding an AGM, see section 250N.

Small proprietary companies (shareholder direction under section 293)

             (2)  If a shareholder direction is given to a small proprietary company under section 293 after the end of the financial year, the company must report to members under section 314 by the later of:

                     (a)  2 months after the date on which the direction is given; and

                     (b)  4 months after the end of the financial year.

Registered schemes

             (3)  A registered scheme must report to members under section 314 within 3 months after the end of the financial year.

Other proprietary companies

             (4)  A proprietary company that is not covered by subsection (1) or (2) must report to members under section 314 within 4 months after the end of the financial year.

             (5)  For the purposes of this section, a company, registered scheme or disclosing entity that reports in accordance with subsection 314(1AA) is taken to report at the time that the company, scheme or entity has fully complied with the requirements of that subsection.

316  Member’s choices for annual financial information

             (1)  A member may request the company, registered scheme or disclosing entity:

                     (a)  not to send them the material required by section 314; or

                     (b)  to send them a full financial report and the directors’ report and auditor’s report.

A request may be a standing request or for a particular financial year. The member is not entitled to a report for a financial year earlier than the one before the financial year in which the request is made.

             (2)  The time for complying with a request under paragraph (1)(b) is:

                     (a)  7 days after the request is received; or

                     (b)  the deadline for reporting under section 315;

whichever is later.

             (3)  A full financial report, directors’ report and auditor’s report are to be sent free of charge unless the member has already received a copy of them free of charge.

             (4)  An offence based on subsection (2) or (3) is an offence of strict liability.

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

             (5)  This section does not apply in relation to a company limited by guarantee.

316A  Annual financial reporting to members of companies limited by guarantee

             (1)  A member of a company limited by guarantee may, by notice in writing to the company, elect to receive a hard copy or an electronic copy of the following reports:

                     (a)  the financial reports;

                     (b)  the directors’ reports;

                     (c)  the auditor’s reports.

             (2)  If a member makes an election in a financial year, the election:

                     (a)  is made by the member for that financial year; and

                     (b)  is a standing election made by the member for each later financial year until the member changes the election.

             (3)  If the company prepares a financial report or a directors’ report for a financial year, or obtains an auditor’s report on the financial report, the company must send a copy of the report, free of charge, to each member who has made an election for that financial year, in accordance with the election, by the earlier of:

                     (a)  21 days before the next AGM after the end of the financial year; and

                     (b)  4 months after the end of the financial year.

Note:          For the deadline for holding an AGM, see section 250N.

             (4)  If a member direction is given to a small company limited by guarantee under section 294A after the end of a financial year, subsection (3) does not apply and the company must send a copy of the reports that the company prepares or obtains as a result of the direction to each member who has made an election for that financial year, in accordance with the election, by the later of:

                     (a)  2 months after the date on which the direction was given; and

                     (b)  4 months after the end of the financial year.

             (5)  An offence based on subsection (3) or (4) is an offence of strict liability.

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

317  Consideration of reports at AGM

             (1)  The directors of a public company that is required to hold an AGM must lay before the AGM:

                     (a)  the financial report; and

                     (b)  the directors’ report; and

                     (c)  the auditor’s report;

for the last financial year that ended before the AGM.

Note 1:       If the company’s first AGM is held before the end of its first financial year, there will be no reports to lay before the meeting.

Note 2:       A public company that has only 1 member is not required to hold an AGM (see section 250N).

Note 3:       Section 250RA imposes on the auditor of a listed public company an obligation to attend or be represented at the AGM.

          (1A)  Subsection (1) does not apply to a small company limited by guarantee in relation to a report if the company is not required under a member direction made under section 294A or an ASIC direction made under section 294B to prepare or obtain the report.

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

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

318  Additional reporting by debenture issuers

             (1)  A company or disclosing entity that was a borrower in relation to debentures at the end of a financial year must give a copy of the annual financial report, directors’ report and auditor’s report to the trustee for debenture holders by the deadline for the financial year set by section 315.

             (2)  A debenture holder may ask the company or disclosing entity that issued the debenture for copies of:

                     (a)  the last reports provided to members under section 314; or

                     (b)  the full financial report and the directors’ report and auditor’s report for the last financial year.

             (3)  The company or entity must give the debenture holder the copies as soon as practicable after the request and free of charge.

             (4)  A disclosing entity that was a borrower in relation to debentures at the end of a half‑year must give a copy of the half‑year financial report, directors’ report and auditor’s report to the trustee for debenture holders within 75 days after the end of the half‑year.

             (5)  An offence based on subsection (1), (3) or (4) is an offence of strict liability.

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

Division 5—Lodging reports with ASIC

319  Lodgment of annual reports with ASIC

             (1)  A company, registered scheme or disclosing entity that has to prepare or obtain a report for a financial year under Division 1 must lodge the report with ASIC. This obligation extends to a concise report provided to members under section 314.

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

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

             (2)  Subsection (1) does not apply to:

                     (a)  a small proprietary company that prepares a report in response to a shareholder direction under section 293 or an ASIC direction under section 294; and

                     (b)  a small company limited by guarantee that prepares a report in response to a member direction under section 294A or an ASIC direction under section 294B.

             (3)  The time for lodgment is:

                     (a)  within 3 months after the end of the financial year for a disclosing entity or registered scheme; and

                     (b)  within 4 months after the end of the financial year for anyone else.

320  Lodgment of half‑year reports with ASIC

             (1)  A disclosing entity that has to prepare or obtain a report for a half‑year under Division 2 must lodge the report with ASIC within 75 days after the end of the half‑year.

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

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

321  ASIC power to require lodgment

             (1)  ASIC may give a company, registered scheme or disclosing entity a direction to lodge with ASIC a copy of reports prepared or obtained by it under Division 1 or 2.

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

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

             (2)  The direction must:

                     (a)  be made in writing; and

                     (b)  specify the period or periods concerned; and

                     (c)  be made no later than 6 years after the end of the period or periods; and

                     (d)  specify the date by which the documents have to be lodged.

The date specified under paragraph (d) must be at least 14 days after the date on which the direction is given.

322  Relodgment if financial statements or directors’ reports amended after lodgment

             (1)  If a financial report or directors’ report is amended after it is lodged with ASIC, the company, registered scheme or disclosing entity must:

                     (a)  lodge the amended report with ASIC within 14 days after the amendment; and

                     (b)  give a copy of the amended report free of charge to any member who asks for it.

             (2)  If the amendment is a material one, the company, registered scheme or disclosing entity must also notify members as soon as practicable of:

                     (a)  the nature of the amendment; and

                     (b)  their right to obtain a copy of the amended report under subsection (1).

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

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

Division 6—Special provisions about consolidated financial statements

323  Directors and officers of controlled entity to give information

             (1)  If a company, registered scheme or disclosing entity has to prepare consolidated financial statements, a director or officer of a controlled entity must give the company, registered scheme or disclosing entity all information requested that is necessary to prepare the consolidated financial statements and the notes to those statements.

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

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

323A  Auditor’s power to obtain information from controlled entity

             (1)  An auditor who audits or reviews a financial report that includes consolidated financial statements:

                     (a)  has a right of access at all reasonable times to the books of any controlled entity; and

                     (b)  may require any officer of the entity to give the auditor information, explanations or other assistance for the purposes of the audit or review.

A request under paragraph (b) must be a reasonable one.

             (2)  The information, explanations or other assistance required under paragraph (1)(b) is to be given at the expense of the company, registered scheme or disclosing entity whose financial report is being audited or reviewed.

323B  Controlled entity to assist auditor

             (1)  If a company, registered scheme or disclosing entity has to prepare a financial report that includes consolidated financial statements, an officer or auditor of a controlled entity must:

                     (a)  allow the auditor for the company, scheme or entity access to the controlled entity’s books; and

                     (b)  give the auditor any information, explanation or assistance required under section 323A.

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

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

323C  Application of Division to entity that has ceased to be controlled

                   Sections 323, 323A and 323B apply to the preparation or audit of a financial report that covers a controlled entity even if the entity is no longer controlled by the company, registered scheme or disclosing entity whose financial report is being prepared or audited.

Division 7—Financial years and half‑years

323D  Financial years and half‑years

First financial year

             (1)  The first financial year for a company, registered scheme or disclosing entity starts on the day on which it is registered or incorporated. It lasts for 12 months or the period (not longer than 18 months) determined by the directors.

Financial years after first year

             (2)  Subject to subsections (2A) and (4), subsequent financial years must:

                     (a)  start at the end of the previous financial year; and

                     (b)  be 12 months long.

The directors may determine that the financial year is to be shorter or longer (but not by more than 7 days).

          (2A)  A subsequent financial year may last for a period of less than 12 months determined by the directors if:

                     (a)  the subsequent financial year starts at the end of the previous financial year; and

                     (b)  there has not been a period during the previous 5 financial years in which there was a financial year of less than 12 months in reliance on this subsection; and

                     (c)  the change to the subsequent financial year is made in good faith in the best interests of the company, registered scheme or disclosing entity.

Note:          For the purposes of paragraph (b), financial years that, in reliance on subsection (2) or (4), were less than 12 months are disregarded.

Synchronisation of financial years where consolidated financial statements are required

             (3)  A company, registered scheme or disclosing entity that has to prepare consolidated financial statements must do whatever is necessary to ensure that the financial years of the consolidated entities are synchronised with its own financial years. It must achieve this synchronisation by the end of 12 months after the situation that calls for consolidation arises.

          (3A)  An offence based on subsection (3) is an offence of strict liability.

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

             (4)  To facilitate this synchronisation, the financial year for a controlled entity may be extended or shortened. The extended financial year cannot be longer than 18 months.

Half‑years

             (5)  A half‑year for a company, registered scheme or disclosing entity is the first 6 months of a financial year. The directors may determine that the half‑year is to be shorter or longer (but not by more than 7 days).

Division 8—Disclosure by listed companies of information filed overseas

323DA  Listed companies to disclose information filed overseas

             (1)  A company that discloses information to, or as required by:

                     (a)  the Securities and Exchange Commission of the United States of America; or

                     (b)  the New York Stock Exchange; or

                     (c)  a financial market in a foreign country if that financial market is prescribed by regulations made for the purposes of this paragraph;

must disclose that information in English to each relevant market operator, if the company is listed on the next business day after doing so.

             (3)  This section applies despite anything in the company’s constitution.

Part 2M.4—Appointment and removal of auditors

Division 1—Entities that may be appointed as an auditor for a company or registered scheme

324AA  Individual auditors, audit firms and authorised audit companies

                   Subject to this Part, the following may be appointed as auditor for a company or a registered scheme for the purposes of this Act:

                     (a)  an individual;

                     (b)  a firm;

                     (c)  a company.

The company or registered scheme may have more than one auditor.

324AB  Effect of appointing firm as auditor—general

             (1)  The appointment of a firm as auditor of a company or registered scheme is taken to be an appointment of all persons who, at the date of the appointment, are:

                     (a)  members of the firm; and

                     (b)  registered company auditors.

This is so whether or not those persons are resident in Australia.

             (2)  The appointment of the members of a firm as auditors of a company or registered scheme that is taken by subsection (1) to have been made because of the appointment of the firm as auditor of the company or scheme is not affected by the dissolution of the firm. This subsection has effect subject to section 324AC.

             (3)  A report or notice that purports to be made or given by a firm appointed as auditor of a company or registered scheme is not taken to be duly made or given unless it is signed by a member of the firm who is a registered company auditor both:

                     (a)  in the firm name; and

                     (b)  in his or her own name.

             (4)  A notice required or permitted to be given to an audit firm under the Corporations legislation may be given to the firm by giving the notice to a member of the firm.

             (5)  For the purposes of criminal proceedings under this Act against a member of an audit firm, an act or omission by:

                     (a)  a member of the firm; or

                     (b)  an employee or agent of the audit firm;

acting within the actual or apparent scope of his or her employment, or within his or her actual or apparent authority, is also to be attributed to the audit firm.

324AC  Effect of appointing firm as auditor—reconstitution of firm

Reconstitution of firm

             (1)  This section deals with the situation in which:

                     (a)  a firm is appointed as auditor of a company or registered scheme; and

                     (b)  the firm is reconstituted because of either or both of the following:

                              (i)  the death, retirement or withdrawal of a member or members; or

                             (ii)  the admission of a new member or new members.

Retiring or withdrawing member

             (2)  A person who:

                     (a)  is taken under subsection 324AB(1) to be an auditor of the company; and

                     (b)  retires or withdraws from the firm as previously constituted as mentioned in subparagraph (1)(b)(i) of this section;

is taken to resign as auditor of the company as from the day of his or her retirement or withdrawal.

             (3)  Section 329 does not apply to the resignation that is taken to occur under subsection (2) unless:

                     (a)  the person who is taken to have resigned was the only member of the firm who was a registered company auditor; and

                     (b)  there is no member of the firm who is a registered company auditor after that person retires or withdraws from the firm.

New member

             (4)  A person who:

                     (a)  is a registered company auditor; and

                     (b)  is admitted to the firm as mentioned in subparagraph (1)(b)(ii);

is taken to have been appointed as an auditor of the company or registered scheme as from the day of his or her admission to the firm.

Appointments of continuing members not affected

             (5)  The reconstitution of the firm does not affect the appointment of the continuing members of the firm who are registered company auditors as auditors of the company or registered scheme.

             (6)  Nothing in this section affects the operation of section 324BB.

324AD  Effect of appointing company as auditor

             (1)  A report or notice that purports to be made or given by an audit company appointed as auditor of a company or registered scheme is not taken to be duly made or given unless it is signed by a director of the audit company (or the lead auditor or review auditor for the audit) both:

                     (a)  in the audit company’s name; and

                     (b)  in his or her own name.

             (2)  For the purposes of criminal proceedings under this Act against a director of an audit company, an act or omission by:

                     (a)  an officer of the audit company; or

                     (b)  an employee or agent of the audit company;

acting within the actual or apparent scope of his or her employment, or within his or her actual or apparent authority, is also to be attributed to the audit company.

324AE  Professional members of the audit team

                   If an individual auditor, audit firm or audit company conducts an audit of a company or registered scheme, the professional members of the audit team are:

                     (a)  any registered company auditor who participates in the conduct of the audit; and

                     (b)  any other person who participates in the conduct of the audit and, in the course of doing so, exercises professional judgment in relation to the application of or compliance with:

                              (i)  accounting standards; or

                             (ii)  auditing standards; or

                            (iii)  the provisions of this Act dealing with financial reporting and the conduct of audits; and

                     (c)  any other person who is in a position to directly influence the outcome of the audit because of the role they play in the design, planning, management, supervision or oversight of the audit; and

                     (d)  any person who recommends or decides what the lead auditor is to be paid in connection with the performance of the audit; and

                     (e)  any person who provides, or takes part in providing, quality control for the audit.

324AF  Lead and review auditors

Lead auditor

             (1)  If an audit firm or audit company conducts an audit of a company or registered scheme, the lead auditor for the audit is the registered company auditor who is primarily responsible to the audit firm or the audit company for the conduct of the audit.

Review auditor

             (2)  If an individual auditor, audit firm or audit company conducts an audit of a company or registered scheme, the review auditor for the audit is the registered company auditor (if any) who is primarily responsible to the individual auditor, the audit firm or the audit company for reviewing the conduct of the audit.

Division 2—Registration requirements

324BA  Registration requirements for appointment of individual as auditor

                   Subject to section 324BD, an individual contravenes this section if:

                     (a)  the individual:

                              (i)  consents to be appointed as auditor of a company or registered scheme; or

                             (ii)  acts as auditor of a company or registered scheme; or

                            (iii)  prepares a report required by this Act to be prepared by a registered company auditor or by an auditor of a company or registered scheme; and

                     (b)  the person is not a registered company auditor.

324BB  Registration requirements for appointment of firm as auditor

Contraventions by members of firm

             (1)  A person (the defendant) contravenes this subsection if:

                     (a)  at a particular time, a firm:

                              (i)  consents to be appointed as auditor of a company or registered scheme; or

                             (ii)  acts as auditor of a company or registered scheme; or

                            (iii)  prepares a report required by this Act to be prepared by a registered company auditor or by an auditor of a company or registered scheme; and

                     (b)  at that time, the firm:

                              (i)  does not satisfy subsection (5); or

                             (ii)  does not satisfy subsection (6); and

                     (c)  the defendant is a member of the firm at that time; and

                     (d)  the defendant is aware of the circumstances referred to in paragraphs (a) and (b) at that time.

             (2)  A person (the defendant) contravenes this subsection if:

                     (a)  at a particular time, a firm:

                              (i)  consents to be appointed as auditor of a company or registered scheme; or

                             (ii)  acts as auditor of a company or registered scheme; or

                            (iii)  prepares a report required by this Act to be prepared by a registered company auditor or by an auditor of a company or registered scheme; and

                     (b)  at that time, the firm:

                              (i)  does not satisfy subsection (5); or

                             (ii)  does not satisfy subsection (6); and

                     (c)  the defendant is a member of the firm at that time.

             (3)  For the purposes of an offence based on subsection (2), strict liability applies to the physical elements of the offence specified in paragraphs (2)(a) and (b).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (4) provides a defence.

             (4)  A member of an audit firm does not commit an offence at a particular time because of a contravention of subsection (2) if the member either:

                     (a)  does not know at that time of the circumstances that constitute the contravention of subsection (2); or

                     (b)  does know of those circumstances at that time but takes all reasonable steps to correct the contravention as soon as possible after the member becomes aware of those circumstances.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

Registered company auditor requirement

             (5)  The firm satisfies this subsection if at least 1 member of the firm is a registered company auditor who is ordinarily resident in Australia.

Business name or members names requirement

             (6)  The firm satisfies this subsection if:

                     (a)  the business name under which the firm is carrying on business is registered on the Business Names Register; or

                     (b)  a return in the prescribed form has been lodged showing, in relation to each member of the firm, the member’s full name and address as at the time when the firm so consents, acts or prepares a report.

324BC  Registration requirements for appointment of company as auditor

Contravention by company

             (1)  A company contravenes this subsection if:

                     (a)  the company:

                              (i)  consents to be appointed as auditor of a company or registered scheme; or

                             (ii)  acts as auditor of a company or registered scheme; or

                            (iii)  prepares a report required by this Act to be prepared by a registered company auditor or by an auditor of a company or registered scheme; and

                     (b)  the company is not an authorised audit company.

Contraventions by directors of company

             (2)  A person (the defendant) contravenes this subsection if:

                     (a)  at a particular time, a company:

                              (i)  consents to be appointed as auditor of a company or registered scheme; or

                             (ii)  acts as auditor of a company or registered scheme; or

                            (iii)  prepares a report required by this Act to be prepared by a registered company auditor or by an auditor of a company or registered scheme; and

                     (b)  at that time, the company is not an authorised audit company; and

                     (c)  the defendant is a director of the company at that time; and

                     (d)  the defendant is aware of the circumstances referred to in paragraphs (a) and (b) at that time.

             (3)  A person (the defendant) contravenes this subsection if:

                     (a)  at a particular time, a company:

                              (i)  consents to be appointed as auditor of a company or registered scheme; or

                             (ii)  acts as auditor of a company or registered scheme; or

                            (iii)  prepares a report required by this Act to be prepared by a registered company auditor or by an auditor of a company or registered scheme; and

                     (b)  at that time, the company is not an authorised audit company; and

                     (c)  the defendant is a director of the company at that time.

             (4)  For the purposes of an offence based on subsection (3), strict liability applies to the physical elements of the offence specified in paragraphs (3)(a) and (b).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (5) provides a defence.

             (5)  A director of a company does not commit an offence at a particular time because of a contravention of subsection (3) if the director either:

                     (a)  does not know at that time of the circumstances that constitute the contravention of subsection (3); or

                     (b)  knows of those circumstances at that time but takes all reasonable steps to correct the contravention of subsection (3) as soon as possible after the director becomes aware of those circumstances.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

324BD  Exception from registration requirement for proprietary company

             (1)  An individual who is not a registered company auditor may be appointed as auditor of a proprietary company if:

                     (a)  ASIC is satisfied that it is impracticable for a proprietary company to obtain the services of:

                              (i)  an individual who could be appointed as auditor consistently with section 324BA; or

                             (ii)  a firm that could be appointed as auditor consistently with section 324BB; or

                            (iii)  a company that could be appointed consistently with section 324BC;

                            because of the place where the company carries on business; and

                     (b)  ASIC is satisfied that the individual is suitably qualified or experienced; and

                     (c)  ASIC approves the individual for the purposes of this Act in relation to the audit of the company’s financial reports.

The appointment is subject to such terms and conditions as are specified in the approval under paragraph (c).

             (2)  If an individual is appointed in accordance with subsection (1):

                     (a)  the individual is taken to be a registered company auditor in relation to the auditing of any of the company’s financial reports; and

                     (b)  the provisions of this Act apply, with the necessary modifications, in relation to the individual accordingly.

Paragraph (a) has effect subject to the terms and conditions of the approval under subsection (1).

             (3)  If an individual approved by ASIC under subsection (1) is acting as auditor of a company, ASIC may at any time, by notice in writing given to the company:

                     (a)  amend, revoke or vary the terms and conditions of its approval; or

                     (b)  terminate the appointment of that individual as auditor of the company.

             (4)  A notice under subsection (3) terminating the appointment of an individual as auditor of a company takes effect as if, on the date on which the notice is received by the company, the company had received from the individual notice of the individual’s resignation as auditor taking effect from that date.

324BE  Exception from registration requirement—reviewing financial reports of companies limited by guarantee

             (1)  An individual is taken to be a registered company auditor for the purposes of a review of a financial report of a company limited by guarantee if the individual:

                     (a)  is a member of a professional accounting body; and

                     (b)  has a designation, in respect of that membership, prescribed by the regulations for the purposes of this paragraph.

             (2)  The provisions of this Act apply, with the necessary modifications, in relation to the individual accordingly.

Division 3—Auditor independence

Subdivision A—General requirement

324CA  General requirement for auditor independence—auditors

Contravention by individual auditor or audit company

             (1)  An individual auditor or audit company contravenes this subsection if:

                     (a)  the individual auditor or audit company engages in audit activity in relation to an audited body at a particular time; and

                     (b)  a conflict of interest situation exists in relation to the audited body at that time; and

                     (c)  at that time:

                              (i)  in the case of an individual auditor—the individual auditor is aware that the conflict of interest situation exists; or

                             (ii)  in the case of an audit company—the audit company is aware that the conflict of interest situation exists; and

                     (d)  the individual auditor or audit company does not, as soon as possible after the individual auditor or the audit company becomes aware that the conflict of interest situation exists, take all reasonable steps to ensure that the conflict of interest situation ceases to exist.

Note:          For conflict of interest situation, see section 324CD.

Individual auditor or audit company to notify ASIC

          (1A)  An individual auditor or audit company contravenes this subsection if:

                     (a)  the individual auditor or audit company is the auditor of an audited body; and

                     (b)  a conflict of interest situation exists in relation to the audited body while the individual auditor or audit company is the auditor of the audited body; and

                     (c)  on a particular day (the start day):

                              (i)  in the case of an individual auditor—the individual auditor becomes aware that the conflict of interest situation exists; or

                             (ii)  in the case of an audit company—the audit company becomes aware that the conflict of interest situation exists; and

                     (d)  at the end of the period of 7 days from the start day:

                              (i)  the conflict of interest situation remains in existence; and

                             (ii)  the individual auditor or audit company has not informed ASIC in writing that the conflict of interest situation exists.

Note 1:       For conflict of interest situation, see section 324CD.

Note 2:       If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2A) or (2C) (public company) or 331AAA(2A) or (2C) (registered scheme) within the period of 21 days (or a longer period that has been approved by ASIC) from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

          (1B)  A person is not excused from informing ASIC under subsection (1A) that a conflict of interest situation exists on the ground that the information might tend to incriminate the person or expose the person to a penalty.

          (1C)  However, if the person is a natural person:

                     (a)  the information; and

                     (b)  the giving of the information;

are not admissible in evidence against the person in a criminal proceeding, or any other proceeding for the recovery of a penalty, other than proceedings for an offence based on the information given being false or misleading.

          (1D)  If the individual auditor or audit company gives ASIC a notice under paragraph (1A)(d), ASIC must, as soon as practicable after the notice has been received, give a copy of the notice to the audited body.

Conflict of interest situation of which individual auditor or audit company is not aware

             (2)  An individual auditor or audit company contravenes this subsection if:

                     (a)  the individual auditor or audit company engages in audit activity in relation to an audited body at a particular time; and

                     (b)  a conflict of interest situation exists in relation to the audited body at the time; and

                     (c)  at that time:

                              (i)  in the case of an individual auditor—the individual auditor is not aware that the conflict of interest situation exists; or

                             (ii)  in the case of an audit company—the audit company is not aware that the conflict of interest situation exists; and

                     (d)  the individual auditor or the audit company would have been aware of the existence of the conflict of interest situation at that time if the individual auditor or audit company had had in place a quality control system reasonably capable of making the individual auditor or audit company aware of the existence of such a conflict of interest situation.

Note:          For conflict of interest situation, see section 324CD.

             (3)  For the purposes of an offence based on subsection (2), strict liability applies to the physical element of the offence specified in paragraph (2)(b).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsections (4) and (5) provide defences.

             (4)  An individual auditor does not commit an offence because of a contravention of subsection (2) in relation to audit activity engaged in by the auditor at a particular time if the individual auditor has reasonable grounds to believe that the individual auditor had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the individual auditor) that the individual auditor and the individual auditor’s employees complied with the requirements of this Subdivision.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

             (5)  An audit company does not commit an offence because of a contravention of subsection (2) in relation to audit activity engaged in by the audit company at a particular time if the audit company has reasonable grounds to believe that the audit company had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the audit company) that the audit company and the audit company’s employees complied with the requirements of this Subdivision.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

Relationship between obligations under this section and other obligations

             (6)  The obligations imposed by this section are in addition to, and do not derogate from, any obligation imposed by:

                     (a)  another provision of this Act; or

                     (b)  a code of professional conduct.

Note:          Paragraph (a)—see, for example, the specific obligations imposed by Subdivision B.

324CB  General requirement for auditor independence—member of audit firm

Contravention by member of audit firm

             (1)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit firm engages in audit activity in relation to an audited body at a particular time; and

                     (b)  a conflict of interest situation exists in relation to the audited body at that time; and

                     (c)  the defendant is a member of the audit firm at that time; and

                     (d)  the defendant is or becomes aware of the circumstances referred to in paragraphs (a) and (b); and

                     (e)  the defendant does not, as soon as possible after the defendant becomes aware of those circumstances, take reasonable steps to ensure that the conflict of interest situation ceases to exist.

Note:          For conflict of interest situation, see section 324CD.

Member of audit firm to notify ASIC

          (1A)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit firm is the auditor of an audited body; and

                     (b)  a conflict of interest situation exists in relation to the audited body while the audit firm is the auditor of the audited body; and

                     (c)  the defendant is a member of the audit firm at a time when the conflict of interest situation exists; and

                     (d)  on a particular day (the start day), the defendant becomes aware of the circumstances referred to in paragraphs (a) and (b); and

                     (e)  at the end of the period of 7 days from the start day:

                              (i)  the conflict of interest situation remains in existence; and

                             (ii)  ASIC has not been informed in writing by the defendant, by another member of the audit firm or by someone else on behalf of the audit firm that the conflict of interest situation exists.

Note 1:       For conflict of interest situation, see section 324CD.

Note 2:       If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2B) (public company) or 331AAA(2B) (registered scheme) within the period of 21 days (or a longer period that has been approved by ASIC) from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

          (1B)  A person is not excused from informing ASIC under subsection (1A) that a conflict of interest situation exists on the ground that the information might tend to incriminate the person or expose the person to a penalty.

          (1C)  However:

                     (a)  the information; and

                     (b)  the giving of the information;

are not admissible in evidence against the person in a criminal proceeding, or any other proceeding for the recovery of a penalty, other than proceedings for an offence based on the information given being false or misleading.

          (1D)  If ASIC is given a notice under paragraph (1A)(e), ASIC must, as soon as practicable after the notice is received, give a copy of the notice to the audited body.

Conflict of interest situation of which another member of audit firm is aware

             (2)  A person contravenes this subsection if:

                     (a)  an audit firm engages in audit activity in relation to an audited body at a particular time; and

                     (b)  a conflict of interest situation exists in relation to the audited body at the time; and

                     (c)  the person is a member of the audit firm at that time; and

                     (d)  at that time, another member of the audit firm is aware that the conflict of interest situation exists; and

                     (e)  the audit firm does not, as soon as possible after the member referred to in paragraph (d) becomes aware that the conflict of interest situation exists, take all reasonable steps to ensure that the conflict of interest situation ceases to exist.

Note:          For conflict of interest situation, see section 324CD.

             (3)  For the purposes of an offence based on subsection (2), strict liability applies to the physical elements of the offence specified in paragraphs (2)(a), (b), (d) and (e).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (6) provides a defence.

Conflict of interest situation of which members are not aware

             (4)  A person contravenes this subsection if:

                     (a)  an audit firm engages in audit activity in relation to an audited body at a particular time; and

                     (b)  a conflict of interest situation exists in relation to the audited body at the time; and

                     (c)  the person is a member of the audit firm at that time; and

                     (d)  at that time none of the members of the audit firm is aware that the conflict of interest situation exists; and

                     (e)  a member of the audit firm would have been aware of the existence of the conflict of interest situation if the audit firm had in place a quality control system reasonably capable of making the audit firm aware of the existence of such a conflict of interest situation.

Note:          For conflict of interest situation, see section 324CD.

             (5)  For the purposes of an offence based on subsection (4), strict liability applies to the physical elements of the offence specified in paragraphs (4)(a), (b), (d) and (e).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (6) provides a defence.

Defence

             (6)  A person does not commit an offence because of a contravention of subsection (2) or (4) in relation to audit activity engaged in by an audit firm at a particular time if the person has reasonable grounds to believe that the audit firm had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the audit firm) that the audit firm and its employees complied with the requirements of this Subdivision.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

Relationship between obligations under this section and other obligations

             (7)  The obligations imposed by this section are in addition to, and do not derogate from, any obligation imposed by:

                     (a)  another provision of this Act; or

                     (b)  a code of professional conduct.

Note:          Paragraph (a)—see, for example, the specific obligations imposed by Subdivision B.

324CC  General requirement for auditor independence—director of audit company

Contravention by director of audit company

             (1)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit company engages in audit activity in relation to an audited body at a particular time; and

                     (b)  a conflict of interest situation exists in relation to the audited body at that time; and

                     (c)  the defendant is a director of the audit company at that time; and

                     (d)  the defendant is or becomes aware of the circumstances referred to in paragraphs (a) and (b); and

                     (e)  the defendant does not, as soon as possible after the defendant becomes aware of those circumstances, take reasonable steps to ensure that the conflict of interest situation ceases to exist.

Note 1:       For conflict of interest situation, see section 324CD.

Note 2:       The audit company itself will commit an offence based on the contravention of subsection 324AA(1).

Director of audit company to notify ASIC

          (1A)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit company is the auditor of an audited body; and

                     (b)  a conflict of interest situation exists in relation to the audited body while the audit company is the auditor of the audited body; and

                     (c)  the defendant is a director of the audit company at a time when the conflict of interest situation exists; and

                     (d)  on a particular day (the start day), the defendant becomes aware of the circumstances referred to in paragraphs (a) and (b); and

                     (e)  at the end of the period of 7 days from the start day:

                              (i)  the conflict of interest situation remains in existence; and

                             (ii)  ASIC has not been informed in writing by the defendant, by another director of the audit company or by the audit company that the conflict of interest situation exists.

Note 1:       For conflict of interest situation, see section 324CD.

Note 2:       If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2C) (public company) or 331AAA(2C) (registered scheme) within the period of 21 days (or a longer period that has been approved by ASIC) from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

          (1B)  A person is not excused from informing ASIC under subsection (1A) that a conflict of interest situation exists on the ground that the information might tend to incriminate the person or expose the person to a penalty.

          (1C)  However, if the person is a natural person:

                     (a)  the information; and

                     (b)  the giving of the information;

are not admissible in evidence against the person in a criminal proceeding, or any other proceeding for the recovery of a penalty, other than proceedings for an offence based on the information given being false or misleading.

          (1D)  If ASIC is given a notice under paragraph (1A)(e), ASIC must, as soon as practicable after the notice is received, give a copy of the notice to the audited body.

Conflict of interest situation of which another director of audit company aware

             (2)  A person contravenes this subsection if:

                     (a)  an audit company engages in audit activity in relation to an audited body at a particular time; and

                     (b)  a conflict of interest situation exists in relation to the audited body at the time; and

                     (c)  the person is a director of the audit company at that time; and

                     (d)  at that time, another director of the audit company is aware that the conflict of interest situation exists; and

                     (e)  the audit company does not, as soon as possible after the director referred to in paragraph (d) becomes aware that the conflict of interest situation exists, take all reasonable steps to ensure that the conflict of interest situation ceases to exist.

Note 1:       For conflict of interest situation, see section 324CD.

Note 2:       The company itself will commit an offence based on the contravention of subsection 324AA(1).

             (3)  For the purposes of an offence based on subsection (2), strict liability applies to the physical elements of the offence specified in paragraphs (2)(a), (b), (d) and (e).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (6) provides a defence.

Conflict of interest situation of which directors of audit company not aware

             (4)  A person contravenes this subsection if:

                     (a)  an audit company engages in audit activity in relation to an audited body at a particular time; and

                     (b)  a conflict of interest situation exists in relation to the audited body at the time; and

                     (c)  the person is a director of the audit company at that time; and

                     (d)  at that time none of the directors of the audit company is aware that the conflict of interest situation exists; and

                     (e)  a director of the audit company would have been aware of the existence of the conflict of interest situation if the audit company had in place a quality control system reasonably capable of making the audit company aware of the existence of such a conflict of interest situation.

Note 1:       For conflict of interest situation, see section 324CD.

Note 2:       The company itself will commit an offence based on the contravention of subsection 324AA(2).

             (5)  For the purposes of an offence based on subsection (4), strict liability applies to the physical elements of the offence specified in paragraphs (4)(a), (b), (d) and (e).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (6) provides a defence.

Defence

             (6)  A person does not commit an offence because of a contravention of subsection (2) or (4) in relation to audit activity engaged in by an audit company at a particular time if the person has reasonable grounds to believe that the audit company had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the audit company) that the audit company and its employees complied with the requirements of this Subdivision.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

Relationship between obligations under this section and other obligations

             (7)  The obligations imposed by this section are in addition to, and do not derogate from, any obligation imposed by:

                     (a)  another provision of this Act; or

                     (b)  a code of professional conduct.

Note:          Paragraph (a)—see, for example, the specific obligations imposed by Subdivision B.

324CD  Conflict of interest situation

             (1)  For the purposes of sections 324CA, 324CB and 324CC, a conflict of interest situation exists in relation to an audited body at a particular time if, because of circumstances that exist at that time:

                     (a)  the auditor, or a professional member of the audit team, is not capable of exercising objective and impartial judgment in relation to the conduct of the audit of the audited body; or

                     (b)  a reasonable person, with full knowledge of all relevant facts and circumstances, would conclude that the auditor, or a professional member of the audit team, is not capable of exercising objective and impartial judgment in relation to the conduct of the audit of the audited body.

             (2)  Without limiting subsection (1), have regard to circumstances arising from any relationship that exists, has existed, or is likely to exist, between:

                     (a)  the individual auditor; or

                     (b)  the audit firm or any current or former member of the firm; or

                     (c)  the audit company, any current or former director of the audit company or any person currently or formerly involved in the management of the audit company;

and any of the persons and bodies set out in the following table:

 

Relevant relationships
Item	If the audited body is…	have regard to any relationship with…
1	a company	the company; or a current or former director of the company; or a person currently or formerly involved in the management of the company.
2	a disclosing entity	the entity; or a current or former director of the entity; or a person currently or formerly involved in the management of the entity.
3	a registered scheme	the responsible entity for the registered scheme; or a current or former director of the responsible entity; or a person currently or formerly involved in the management of the scheme; or a person currently or formerly involved in the management of the responsible entity.

Subdivision B—Specific requirements

324CE  Auditor independence—specific requirements for individual auditor

Specific independence requirements for individual auditor

             (1)  An individual auditor contravenes this subsection if:

                     (a)  the individual auditor engages in audit activity at a particular time; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies at that time to a person or entity covered by subsection (5) of this section; and

                     (c)  the individual auditor is or becomes aware of the circumstances referred to in paragraph (b); and

                     (d)  the individual auditor does not, as soon as possible after the individual auditor becomes aware of those circumstances, take all reasonable steps to ensure that the individual auditor does not continue to engage in audit activity in those circumstances.

Individual auditor to notify ASIC

          (1A)  An individual auditor contravenes this subsection if:

                     (a)  the individual auditor is the auditor of an audited body; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies to a person or entity covered by subsection (5) of this section while the individual auditor is the auditor of the audited body; and

                     (c)  on a particular day (the start day), the individual auditor becomes aware of the circumstances referred to in paragraph (b); and

                     (d)  at the end of the period of 7 days from the start day:

                              (i)  those circumstances remain in existence; and

                             (ii)  the individual auditor has not informed ASIC in writing of those circumstances.

Note:          If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2A) (public company) or 331AAA(2A) (registered scheme) within the period of 21 days (or a longer period that has been approved by ASIC) from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

          (1B)  A person is not excused from informing ASIC under subsection (1A) that the circumstances referred to in paragraph (1A)(b) exist on the ground that the information might tend to incriminate the person or expose the person to a penalty.

          (1C)  However:

                     (a)  the information; and

                     (b)  the giving of the information;

are not admissible in evidence against the person in a criminal proceeding, or any other proceeding for the recovery of a penalty, other than proceedings for an offence based on the information given being false or misleading.

          (1D)  If the individual auditor gives ASIC a notice under paragraph (1A)(d), ASIC must, as soon as practicable after the notice has been received, give a copy of the notice to the audited body.

Strict liability contravention of specific independence requirements by individual auditor

             (2)  An individual auditor contravenes this subsection if:

                     (a)  the individual auditor engages in audit activity at a particular time; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies at that time to a person or entity covered by subsection (5) of this section.

             (3)  For the purposes of an offence based on subsection (2), strict liability applies to the physical elements of the offence specified in paragraph (2)(b).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (4) provides a defence.

             (4)  An individual auditor does not commit an offence because of a contravention of subsection (2) in relation to audit activity engaged in by the individual auditor at a particular time if the individual auditor has reasonable grounds to believe that the individual auditor had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the individual auditor) that the individual auditor and the individual auditor’s employees complied with the requirements of this Subdivision.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

People and entities covered

             (5)  The following table sets out:

                     (a)  the persons and entities covered by this subsection in relation to audit activity engaged in by an individual auditor; and

                     (b)  the items of the table in subsection 324CH(1) that are the relevant items for each of those persons and entities:

 

Maximum hours test

             (6)  A non‑audit services provider satisfies the maximum hours test in this subsection if:

                     (a)  the number of hours for which the person provides services (other than services related to the conduct of an audit) to the audited body on behalf of the auditor during the period to which the audit relates does not exceed 10 hours; and

                     (b)  the number of hours for which the person provides services (other than services related to the conduct of an audit) to the audited body on behalf of the auditor during the 12 months immediately before the beginning of the period to which the audit relates does not exceed 10 hours.

In a prosecution for an offence based on subsection (1) or (2), the prosecution must prove that the non‑audit services provider did not satisfy the maximum hours test in this subsection.

Independence test

             (7)  A person satisfies the independence test in this subsection in relation to an individual auditor if the person:

                     (a)  does not influence the operations or financial policies of the accounting and audit practice conducted by the auditor; and

                     (b)  does not participate, or appear to participate, in the business or professional activities of the accounting and audit practice conducted by the auditor; and

                     (c)  does not have any rights against the auditor in relation to the accounting and audit practice conducted by the auditor in relation to the termination of the person’s former employment by the auditor; and

                     (d)  has no financial arrangements with the auditor in relation to the accounting and audit practice conducted by the auditor, other than:

                              (i)  an arrangement providing for regular payments of a fixed pre‑determined dollar amount which is not dependent, directly or indirectly, on the revenues, profits or earnings of the auditor; or

                             (ii)  an arrangement providing for regular payments of a dollar amount where the method of calculating the dollar amount is fixed and is not dependent, directly or indirectly, on the revenues, profits or earnings of the auditor; and

                     (e)  without limiting paragraph (d), has no financial arrangement with the auditor to receive a commission or similar payment in relation to business generated by the person for the accounting and audit practice conducted by the auditor.

In a prosecution for an offence based on subsection (1) or (2), the prosecution must prove that the person did not satisfy the independence test in this subsection in relation to the individual auditor.

             (8)  In applying subsection (7), disregard any rights that the person has against the auditor by way of an indemnity for, or contribution in relation to, liabilities incurred by the person when the person was an employee of the auditor or the owner of the auditor’s business.

324CF  Auditor independence—specific requirements for audit firm

Contraventions by members of audit firm

             (1)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit firm engages in audit activity at a particular time; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies at that time to a person or entity covered by subsection (5) of this section; and

                     (c)  the defendant is a member of the audit firm at that time; and

                     (d)  the defendant is or becomes aware of the circumstances referred to in paragraphs (a) and (b); and

                     (e)  the defendant does not, as soon as possible after the defendant becomes aware of those circumstances, take all reasonable steps to ensure that the audit firm does not continue to engage in audit activity in those circumstances.

Member of audit firm to notify ASIC

          (1A)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit firm is the auditor of an audited body; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies to a person or entity covered by subsection (5) of this section while the audit firm is the auditor of the audited body; and

                     (c)  the defendant is a member of the audit firm at a time when the circumstances referred to in paragraph (b) exist; and

                     (d)  on a particular day (the start day), the defendant becomes aware of the circumstances referred to in paragraphs (a) and (b); and

                     (e)  at the end of the period of 7 days from the start day:

                              (i)  the circumstances referred to in paragraph (b) remain in existence; and

                             (ii)  ASIC has not been informed in writing of those circumstances by the defendant, by another member of the audit firm or by someone else on behalf of the audit firm.

Note:          If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2B) (public company) or 331AAA(2B) (registered scheme) within the period of 21 days (or a longer period that has been approved by ASIC) from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

          (1B)  A person is not excused from informing ASIC under subsection (1A) that the circumstances referred to in paragraph (1A)(b) exist on the ground that the information might tend to incriminate the person or expose the person to a penalty.

          (1C)  However:

                     (a)  the information; and

                     (b)  the giving of the information;

are not admissible in evidence against the person in a criminal proceeding, or any other proceeding for the recovery of a penalty, other than proceedings for an offence based on the information given being false or misleading.

          (1D)  If ASIC is given a notice under paragraph (1A)(e), ASIC must, as soon as practicable after the notice is received, give a copy of the notice to the audited body.

Contravention of independence requirements by members of audit firm

             (2)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit firm engages in audit activity at a particular time; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies at that time to a person or entity covered by subsection (5) of this section; and

                     (c)  the defendant is a member of the audit firm at that time.

             (3)  For the purposes of an offence based on subsection (2), strict liability applies to the physical elements of the offence specified in paragraphs (2)(a) and (b).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (4) provides a defence.

             (4)  A person does not commit an offence because of a contravention of subsection (2) in relation to audit activity engaged in by an audit firm at a particular time if the person has reasonable grounds to believe that the audit firm had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the audit firm) that the audit firm and its employees complied with the requirements of this Subdivision.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

People and entities covered

             (5)  The following table sets out:

                     (a)  the persons and entities covered by this subsection in relation to audit activity engaged in by an audit firm; and

                     (b)  the items of the table in subsection 324CH(1) that are the relevant items for each of those persons and entities:

 

Audit firm
Item	For this person or entity...	the relevant items of the table in subsection 324CH(1) are...
1	the firm	4 7 10 to 19
2	a service company or trust acting for, or on behalf of, the firm, or another entity performing a similar function	4 7 10 to 19
3	a member of the firm	1 to 7 9 15
4	a professional member of the audit team conducting the audit of the audited body	1 to 6 8 to 19
5	an immediate family member of a professional member of the audit team conducting the audit of the audited body	1 and 2 10 to 19
6	a person who: (a) is a non‑audit services provider; and (b) does not satisfy the maximum hours test in subsection (6)	10 to 12
7	an immediate family member of a person who: (a) is a non‑audit services provider; and (b) does not satisfy the maximum hours test in subsection (6)	10 to 12
8	an entity that the firm (or a service company or trust acting for, or on behalf of, the firm, or another entity performing a similar function) controls	15
9	a body corporate in which the firm (or a service company or trust acting for, or on behalf of, the firm, or another entity performing a similar function) has a substantial holding	15
10	an entity that a member of the firm controls or a body corporate in which a member of the firm has a substantial holding	15
11	a person who: (a) is a former member of the firm; and (b) does not satisfy the independence test in subsection (7)	1 and 2
12	a person who: (a) is a former professional employee of the firm; and (b) does not satisfy the independence test in subsection (7)	1 and 2

Maximum hours test

             (6)  A non‑audit services provider satisfies the maximum hours test in this subsection if:

                     (a)  the number of hours for which the person provides services (other than services related to the conduct of an audit) to the audited body on behalf of the auditor during the period to which the audit relates does not exceed 10 hours; and

                     (b)  the number of hours for which the person provided services (other than services related to the conduct of an audit) to the audited body on behalf of the auditor during the 12 months immediately before the beginning of the period to which the audit relates does not exceed 10 hours.

In a prosecution for an offence based on subsection (1) or (2), the prosecution must prove that the non‑audit services provider did not satisfy the maximum hours test in this subsection.

Independence test

             (7)  A person satisfies the independence test in this subsection in relation to a firm if the person:

                     (a)  does not influence the operations or financial policies of the accounting and audit practice conducted by the firm; and

                     (b)  does not participate, or appear to participate, in the business or professional activities of the accounting and audit practice conducted by the firm; and

                     (c)  does not have any rights against the firm, or the members of the firm, in relation to the accounting and audit practice conducted by the firm in relation to the termination of, or the value of, the person’s former partnership interest in the firm; and

                     (d)  has no financial arrangements with the firm in relation to the accounting and audit practice conducted by the firm, other than:

                              (i)  an arrangement providing for regular payments of a fixed pre‑determined dollar amount which is not dependent, directly or indirectly, on the revenues, profits or earnings of the firm; or

                             (ii)  an arrangement providing for regular payments of a dollar amount where the method of calculating the dollar amount is fixed and is not dependent, directly or indirectly, on the revenues, profits or earnings of the firm; and

                     (e)  without limiting paragraph (d), has no financial arrangement with the firm to receive a commission or similar payment in relation to business generated by the person for the accounting and audit practice conducted by the firm.

In a prosecution for an offence based on subsection (1) or (2), the prosecution must prove that the person did not satisfy the independence test in this subsection in relation to the firm.

             (8)  In applying subsection (7), disregard any rights that the person has against the firm, or the members of the firm, by way of an indemnity for, or contribution in relation to, liabilities incurred by the person when the person was a member or employee of the firm.

Meaning of holding by firm in body corporate

             (9)  For the purposes of item 9 in the table in subsection (5), a firm is taken to have a holding in a body corporate if the holding is one of the firm’s partnership assets.

324CG  Auditor independence—specific requirements for audit company

Specific independence requirements for audit company

             (1)  An audit company contravenes this subsection if:

                     (a)  the audit company engages in audit activity at a particular time; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies at that time to a person or entity covered by subsection (9) of this section; and

                     (c)  the audit company is or becomes aware of the circumstances referred to in paragraph (b); and

                     (d)  the audit company does not, as soon as possible after the audit company becomes aware of those circumstances, take all reasonable steps to ensure that the audit company does not continue to engage in audit activity in those circumstances.

Audit company to notify ASIC

          (1A)  An audit company contravenes this subsection if:

                     (a)  the audit company is the auditor of an audited body; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies to a person or entity covered by subsection (9) of this section while the audit company is the auditor of the audited body; and

                     (c)  on a particular day (the start day), the audit company becomes aware of the circumstances referred to in paragraph (b); and

                     (d)  at the end of the period of 7 days from the start day:

                              (i)  those circumstances remain in existence; and

                             (ii)  the audit company has not informed ASIC in writing of those circumstances.

Note:          If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2C) (public company) or 331AAA(2C) (registered scheme) within the period of 21 days (or a longer period that has been approved by ASIC) from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

          (1B)  If the audit company gives ASIC a notice under paragraph (1A)(d), ASIC must, as soon as practicable after the notice has been received, give a copy of the notice to the audited body.

Strict liability contravention of specific independence requirements by audit company

             (2)  An audit company contravenes this subsection if:

                     (a)  the audit company engages in audit activity at a particular time; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies at that time to a person or entity covered by subsection (9) of this section.

             (3)  For the purposes of an offence based on subsection (2), strict liability applies to the physical elements of the offence specified in paragraph (2)(b).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (4) provides a defence.

             (4)  An audit company does not commit an offence because of a contravention of subsection (2) in relation to audit activity engaged in by the audit company at a particular time if the audit company has reasonable grounds to believe that the audit company had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the audit company) that the audit company and the audit company’s employees complied with the requirements of this Subdivision.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

Contraventions by directors of audit company

             (5)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit company engages in audit activity at a particular time; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies at that time to a person or entity covered by subsection (9) of this section; and

                     (c)  the defendant is a director of the audit company at that time; and

                     (d)  the defendant is or becomes aware of the circumstances referred to in paragraphs (a) and (b); and

                     (e)  the defendant does not, as soon as possible after the defendant becomes aware of those circumstances, take all reasonable steps to ensure that the audit company does not continue to engage in audit activity in those circumstances.

Director of audit company to notify ASIC

          (5A)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit company is the auditor of an audited body; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies to a person or entity covered by subsection (9) of this section while the audit company is the auditor of the audited body; and

                     (c)  the defendant is a director of the audit company at a time when the circumstances referred to in paragraph (b) exist; and

                     (d)  on a particular day (the start day), the defendant becomes aware of the circumstances referred to in paragraphs (a) and (b); and

                     (e)  at the end of the period of 7 days from the start day:

                              (i)  the circumstances referred to in paragraph (b) remain in existence; and

                             (ii)  ASIC has not been informed in writing of those circumstances by the defendant, by another director of the company or by the audit company.

Note:          If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2C) (public company) or 331AAA(2C) (registered scheme) within the period of 21 days (or a longer period that has been approved by ASIC) from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

          (5B)  A person is not excused from informing ASIC under subsection (5A) that the circumstances referred to in paragraph (5A)(b) exist on the ground that the information might tend to incriminate the person or expose the person to a penalty.

          (5C)  However, if the person is a natural person:

                     (a)  the information; and

                     (b)  the giving of the information;

are not admissible in evidence against the person in a criminal proceeding, or any other proceeding for the recovery of a penalty, other than proceedings for an offence based on the information given being false or misleading.

          (5D)  If ASIC is given a notice under paragraph (5A)(e), ASIC must, as soon as practicable after the notice is received, give a copy of the notice to the audited body.

Strict liability contravention of specific independence requirements by director of audit company

             (6)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit company engages in audit activity at a particular time; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies at that time to a person or entity covered by subsection (9) of this section; and

                     (c)  the defendant is a director of the audit company at that time.

             (7)  For the purposes of an offence based on subsection (6), strict liability applies to the physical elements of the offence specified in paragraphs (6)(a) and (b).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (8) provides a defence.

             (8)  A person does not commit an offence because of a contravention of subsection (6) in relation to audit activity engaged in by an audit company at a particular time if the person has reasonable grounds to believe that the audit company had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the audit company) that the audit company and its employees complied with the requirements of this Subdivision.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

People and entities covered

             (9)  The following table sets out:

                     (a)  the persons and entities covered by this subsection in relation to audit activity engaged in by an audit company; and

                     (b)  the items of the table in subsection 324CH(1) that are the relevant items for each of those persons and entities:

 

Audit company
Item	For this person or entity...	the relevant items of the table in subsection 324CH(1) are...
1	the audit company	4 7 10 to 19
2	a service company or trust acting for, or on behalf of, the audit company, or another entity performing a similar function	4 7 10 to 19
3	a director or senior manager of the audit company	1 to 7 9 15
4	a professional member of the audit team conducting the audit of the audited body	1 to 6 8 to 19
5	an immediate family member of a professional member of the audit team conducting the audit of the audited body	1 and 2 10 to 19
6	a person who: (a) is a non‑audit services provider; and (b) does not satisfy the maximum hours test in subsection (10)	10 to 12
7	an immediate family member of a person who: (a) is a non‑audit services provider; and (b) does not satisfy the maximum hours test in subsection (10)	10 to 12
8	an entity that the audit company (or a service company or trust acting for, or on behalf of, the audit company, or another entity performing a similar function) controls	15
9	a body corporate in which the audit company (or a service company or trust acting for, or on behalf of, the audit company, or another entity performing a similar function) has a substantial holding	15
10	an entity that an officer of the audit company controls or a body corporate in which an officer of the audit company has a substantial holding	16
11	a person who: (a) is a former officer of the audit company; and (b) does not satisfy the independence test in subsection (11)	1 and 2
12	a person who: (a) is a former professional employee of the audit company; and (b) does not satisfy the independence test in subsection (11)	1 and 2

Maximum hours test

           (10)  A non‑audit services provider satisfies the maximum hours test in this subsection if:

                     (a)  the number of hours for which the person provides services (other than services related to the conduct of an audit) to the audited body on behalf of the auditor during the period to which the audit relates does not exceed 10 hours; and

                     (b)  the number of hours for which the person provided services (other than services related to the conduct of an audit) to the audited body on behalf of the auditor during the 12 months immediately before the beginning of the period to which the audit relates does not exceed 10 hours.

In a prosecution for an offence based on subsection (1), (2), (5) or (6), the prosecution must prove that the non‑audit services provider did not satisfy the maximum hours test in this subsection.

Independence test

           (11)  A person satisfies the independence test in this subsection in relation to an audit company if the person:

                     (a)  does not influence the operations or financial policies of the accounting and audit practice conducted by the audit company; and

                     (b)  does not participate, or appear to participate, in the business or professional activities of the accounting and audit practice conducted by the audit company; and

                     (c)  does not have any rights against the audit company in relation to the accounting and audit practice conducted by the audit company in relation to the termination of the person’s former position as an officer of the audit company; and

                     (d)  has no financial arrangements with the audit company in relation to the accounting and audit practice conducted by the audit company, other than:

                              (i)  an arrangement providing for regular payments of a fixed pre‑determined dollar amount which is not dependent, directly or indirectly, on the revenues, profits or earnings of the audit company; or

                             (ii)  an arrangement providing for regular payments of a dollar amount where the method of calculating the dollar amount is fixed and is not dependent, directly or indirectly, on the revenues, profits or earnings of the audit company; and

                     (e)  without limiting paragraph (d), has no financial arrangement with the audit company to receive a commission or similar payment in relation to business generated by the person for the accounting and audit practice conducted by the audit company.

In a prosecution for an offence based on subsection (1), (2), (5) or (6), the prosecution must prove that the person did not satisfy the independence test in this subsection in relation to the audit company.

           (12)  In applying subsection (11), disregard any rights that the person has against the audit company by way of an indemnity for, or contribution in relation to, liabilities incurred by the person when the person was an officer or employee of the audit company.

324CH  Relevant relationships

Table of relevant relationships

             (1)  The following table lists the relationships between:

                     (a)  a person or a firm; and

                     (b)  the audited body for an audit;

that are relevant for the purposes of sections 324CE, 324CF and 324CG:

 

Relevant relationships
Item	This item applies to a person (or, if applicable, to a firm) at a particular time if at that time the person (or firm)...
1	is an officer of the audited body This item does not apply if the audited body is a small proprietary company for the relevant financial year.
2	is an audit‑critical employee of the audited body This item does not apply if the audited body is a small proprietary company for the relevant financial year.
3	is a partner of: (a) an officer of the audited body; or (b) an audit‑critical employee of the audited body This item does not apply if the audited body is a small proprietary company for the relevant financial year.
4	is an employer of: (a) an officer of the audited body; or (b) an audit‑critical employee of the audited body This item does not apply if the audited body is a small proprietary company for the relevant financial year.
5	is an employee of: (a) an officer of the audited body; or (b) an audit‑critical employee of the audited body This item does not apply if the audited body is a small proprietary company for the relevant financial year.
6	is a partner or employee of an employee of: (a) an officer of the company; or (b) an audit‑critical employee of the company This item does not apply if the audited body is a small proprietary company for the relevant financial year.
7	provides remuneration to: (a) an officer of the audited body; or (b) an audit‑critical employee of the audited body; for acting as a consultant to the person This item does not apply if the audited body is a small proprietary company for the relevant financial year.
8	was an officer of the audited body at any time during: (a) the period to which the audit relates; or (b) the 12 months immediately preceding the beginning of the period to which the audit relates; or (c) the period during which the audit is being conducted or the audit report is being prepared This item does not apply if the audited body is a small proprietary company for the relevant financial year.
9	was an audit‑critical employee of the audited body at any time during: (a) the period to which the audit relates; or (b) the 12 months immediately preceding the beginning of the period to which the audit relates; or (c) the period during which the audit is being conducted or the audit report is being prepared This item does not apply if the audited body is a small proprietary company for the relevant financial year.
10	has an asset that is an investment in the audited body
11	has an asset that is a beneficial interest in an investment in the audited body and has control over that asset
12	has an asset that is a beneficial interest in an investment in the audited body that is a material interest
13	has an asset that is a material investment in an entity that has a controlling interest in the audited body
14	has an asset that is a material beneficial interest in an investment in an entity that has a controlling interest in the audited body
15	owes an amount to: (a) the audited body; or (b) a related body corporate; or (c) an entity that the audited body controls; unless the debt is disregarded under subsection (5), (5A) or (5B)
16	is owed an amount by: (a) the audited body; or (b) a related body corporate; or (c) an entity that the audited body controls; under a loan that is not disregarded under subsection (6) or (6A)
17	is liable under a guarantee of a loan made to: (a) the audited body; or (b) a related body corporate; or (c) an entity that the audited body controls
19	is entitled to the benefit of a guarantee given by: (a) the audited body; or (b) a related body corporate; or (c) an entity that the audited body controls in relation to a loan unless the guarantee is disregarded under subsection (8)

Applying table if audited body is registered scheme

             (2)  If the audited body is a registered scheme, apply the table in subsection (1) as if:

                     (a)  references to the audited body in items 1 to 9, and items 15 to 19, in the table were references to the responsible entity for the registered scheme; and

                     (b)  references to an interest in the audited body in items 10 to 12 in the table were references to an interest in either:

                              (i)  the registered scheme; or

                             (ii)  the responsible entity for the registered scheme; and

                     (c)  references to an investment in an entity that has a controlling interest in the audited body in items 13 and 14 of the table were references to an investment in an entity that has a controlling interest in the responsible entity for the registered scheme.

Applying table if audited body is listed entity (other than registered scheme)

             (3)  If the audited body is a listed entity (other than a registered scheme), apply the table in subsection (1) as if references in the table to the audited body included references to an associated entity of the audited body.

Note:          See section 50AAA for the definition of associated entity.

Firm assets

             (4)  For the purpose of applying items 10 to 14 in the table in subsection (1) to an audit firm, the firm is taken to have a particular asset if the asset is one of the firm’s partnership assets.

Housing loan exception

             (5)  For the purposes of item 15 of the table in subsection (1), disregard a debt owed by an individual to a body corporate or entity if:

                     (a)  the body corporate or entity is:

                              (i)  an Australian ADI; or

                             (ii)  a body corporate registered under section 21 of the Life Insurance Act 1995; and

                     (b)  the debt arose because of a loan that the body corporate or entity made to the person in the ordinary course of its ordinary business; and

                     (c)  the person used the amount of the loan to pay the whole or part of the purchase price of premises that the person uses as their principal place of residence.

Goods and services exception

          (5A)  For the purposes of item 15 of the table in subsection (1), disregard a debt owed by a person or firm to a body corporate or entity if:

                     (a)  the debt arises from the acquisition of goods or services from:

                              (i)  the audited body; or

                             (ii)  an entity that the audited body controls; or

                            (iii)  a related body corporate; and

                     (b)  the acquisition of goods and services was on the terms and conditions that would normally apply to goods or services acquired from the body, entity or related body corporate; and

                     (c)  the debt is owed on the terms and conditions that would normally apply to a debt owing to the body, entity or related body corporate; and

                     (d)  the goods or services will be used by the person or firm:

                              (i)  for the personal use of the person or firm; or

                             (ii)  in the ordinary course of business of the person or firm.

Ordinary commercial loan exception

          (5B)  For the purposes of item 15 of the table in subsection (1), disregard a debt owed under a loan that:

                     (a)  is made or given in the ordinary course of business of:

                              (i)  the audited body; or

                             (ii)  the related body corporate; or

                            (iii)  the controlled entity; and

                     (b)  is made or given on the terms and conditions that would normally apply to a loan made or given by the audited body, the related body corporate or the controlled entity.

Loans by immediate family members in ordinary business dealing with client

             (6)  For the purposes of item 16 of the table in subsection (1), disregard a debt owed to a person by a body corporate or entity if:

                     (a)  the item applies to the person because the person is an immediate family member of:

                              (i)  a professional member of the audit team conducting the audit of the audited body; or

                             (ii)  a non‑audit services provider; and

                     (b)  the debt is incurred in the ordinary course of business of the body corporate or entity.

          (6A)  For the purposes of item 16 in the table in subsection (1), disregard an amount owed under a loan to a person or firm by the audited body, a related body corporate or an entity that the audited body controls if:

                     (a)  the body, body corporate or entity is an Australian ADI; and

                     (b)  the amount is deposited in a basic deposit product (within the meaning of section 761A) provided by the body, body corporate or entity; and

                     (c)  the amount was deposited, in the ordinary course of business of the audited body, body corporate or entity, on the terms and conditions that would normally apply to a basic deposit product provided by the body, body corporate or entity.

Ordinary commercial guarantee exception

             (8)  For the purposes of item 19 of the table in subsection (1), disregard any guarantee that:

                     (a)  is made or given in the ordinary course of the business of:

                              (i)  the audited body; or

                             (ii)  the related body corporate; or

                            (iii)  the controlled entity; and

                     (b)  is made or given on the terms and conditions that would normally apply to a guarantee made or given by the audited body, the related body corporate or the controlled entity.

Future debts and liabilities

          (8A)  In this section:

                     (a)  a reference to a debt or amount that is owed by one entity to another entity includes a reference to a debt or amount that will (or may) be owed by the first entity to the other entity under an existing agreement between the entities; and

                     (b)  a reference to a liability under a guarantee of a loan includes a reference to a liability that will arise under the guarantee if the loan is not repaid.

Relevant financial year

             (9)  In this section:

relevant financial year, in relation to audit activities undertaken in relation to an audit or review of a financial report for a financial year or an audit or review of a financial report for a half‑year in a financial year, means the financial year immediately before that financial year.

324CI  Special rule for retiring partners of audit firms and retiring directors of authorised audit companies

                   A person contravenes this section if:

                     (a)  the person ceases to be:

                              (i)  a member of an audit firm; or

                             (ii)  a director of an audit company;

                            at a particular time (the departure time); and

                     (b)  at any time before the departure time, the audit firm or audit company has engaged in an audit of an audited body; and

                     (c)  the person was a professional member of the audit team for the audit; and

                     (d)  within the period of 2 years starting on the date the report under section 308 or 309 was made on the latest audit to which paragraphs (b) and (c) apply, the person becomes, or continues to be, an officer of the audited body; and

                     (e)  the audited body is not a small proprietary company for the most recently ended financial year.

If the audited body is a listed entity (other than a registered scheme), apply paragraph (d) as if references in that paragraph to the audited body included references to a related body corporate of the audited body.

324CJ  Special rule for retiring professional member of audit company

                   A person contravenes this section if:

                     (a)  the person who is not a director of an audit company ceases to be a professional employee of the audit company at a particular time (the departure time); and

                     (b)  at any time before the departure time, the audit company has engaged in an audit of an audited body; and

                     (c)  the person was a lead auditor or review auditor for the audit; and

                     (d)  within the period of 2 years starting on the date the report under section 308 or 309 was made on the latest audit to which paragraphs (b) and (c) apply, the person becomes, or continues to be, an officer of the audited body; and

                     (e)  the audited body is not a small proprietary company for the most recently ended financial year.

If the audited body is a listed entity (other than a registered scheme), apply paragraph (d) as if references in that paragraph to the audited body included references to a related body corporate of the audited body.

324CK  Multiple former audit firm partners or audit company directors

                   A person contravenes this section if:

                     (a)  an audit firm, or audit company, is an auditor of an audited body for a financial year; and

                     (b)  the person has at any time been a member of the audit firm or a director of the audit company; and

                     (c)  the person becomes an officer of the audited body within a period of 5 years after the person ceased (or last ceased) to be a member of the audit firm or a director of the audit company (as the case may be); and

                     (d)  at the time when paragraph (c) is satisfied another person who is or who also has at any time been a member of the audit firm, or a director of the audit company, at a time when the audit firm, or audit company, undertook an audit of the audited body is also an officer of the audited body; and

                     (e)  the audited body is not a small proprietary company for the most recently ended financial year.

If the audited body is a listed entity (other than a registered scheme), apply paragraphs (c) and (d) as if references in those paragraphs to the audited body included references to a related body corporate of the audited body.

Subdivision C—Common provisions

324CL  People who are regarded as officers of a company for the purposes of this Division

             (1)  For the purposes of this Division, a person is taken to be an officer of a company if:

                     (a)  the person is an officer of:

                              (i)  a related body corporate; or

                             (ii)  an entity that the company controls; or

                     (b)  the person has, at any time within the immediately preceding period of 12 months, been an officer or promoter of:

                              (i)  the company; or

                             (ii)  a related body corporate; or

                            (iii)  an entity that the company controlled at that time.

             (2)  Paragraph (b) does not apply if ASIC directs that it does not apply in relation to the person in relation to the company. ASIC may give the direction only if ASIC thinks that it is appropriate to do so in the circumstances of the case.

             (3)  For the purposes of this Division, a person is not taken to be an officer of a company by reason only of being, or having been, the liquidator of:

                     (a)  the company; or

                     (b)  a related body corporate; or

                     (c)  an entity that the company controls or has controlled.

             (4)  For the purposes of this Division, a person is not taken to be an officer of a company merely because of one or more of the following:

                     (a)  having been appointed as auditor of:

                              (i)  the company; or

                             (ii)  a related body corporate; or

                            (iii)  an entity that the company controls or has controlled;

                     (b)  having been appointed, for any purpose relating to taxation, as public officer of:

                              (i)  a body corporate; or

                             (ii)  an unincorporated body; or

                            (iii)  a trust estate;

                     (c)  being or having been authorised to accept service of process or notices on behalf of:

                              (i)  the company; or

                             (ii)  a related body corporate; or

                            (iii)  an entity that the company controls or has controlled.

Division 4—Deliberately disqualifying auditor

324CM  Deliberately disqualifying auditor

Individual auditor

             (1)  An individual contravenes this subsection if:

                     (a)  the individual is appointed auditor of a company or registered scheme; and

                     (b)  while the appointment continues, the individual brings about a state of affairs; and

                     (c)  the individual cannot, while that state of affairs continues, act as auditor of the company or scheme without contravening Division 2 or 3.

Audit firm

             (2)  A member of a firm contravenes this subsection if:

                     (a)  the firm is appointed auditor of a company or a registered scheme; and

                     (b)  while the appointment continues, the member brings about a state of affairs; and

                     (c)  the firm cannot, while that state of affairs continues, act as auditor of the company or scheme without a person contravening Division 2 or 3.

Audit company

             (3)  A person who is:

                     (a)  a member of a company; or

                     (b)  a director of a company; or

                     (c)  a lead auditor in relation to an audit conducted by a company;

contravenes this subsection if:

                     (d)  the company is appointed auditor of a company or a registered scheme; and

                     (e)  while the appointment continues, the person brings about a state of affairs; and

                      (f)  the company cannot, while that state of affairs continues, act as auditor of the company or scheme without contravening Division 2 or 3.

Division 5—Auditor rotation for listed companies

324DA  Limited term for eligibility to play significant role in audit of a listed company or listed registered scheme

             (1)  If an individual plays a significant role in the audit of a listed company or listed registered scheme for 5 successive financial years (the extended audit involvement period), the individual is not eligible to play a significant role in the audit of the company or the scheme for a later financial year (the subsequent financial year) unless:

                     (a)  the individual has not played a significant role in the audit of the company or the scheme for at least 2 successive financial years (the intervening financial years); and

                     (b)  the intervening financial years:

                              (i)  commence after the end of the extended audit involvement period; and

                             (ii)  end before the beginning of the subsequent financial year.

Note:          Play a significant role in an audit is defined in section 9.

             (2)  An individual is not eligible to play a significant role in the audit of a listed company or listed registered scheme for a financial year if, were the individual to do so, the individual would play a significant role in the audit of the company or scheme for more than 5 out of 7 successive financial years.

             (3)  For the purposes of subsection (2), disregard an individual’s playing of a significant role in the audit of a company or scheme for a financial year if:

                     (a)  either:

                              (i)  the directors of the company or scheme grant an approval under section 324DAA in relation to the individual; or

                             (ii)  ASIC makes a declaration under paragraph 342A(1)(a) in relation to the individual; and

                     (b)  because of the approval or the declaration, subsection (1) of this section does not operate to make the individual not eligible to play a significant role in the audit of the company or scheme for that financial year.

324DAA  Directors may extend eligibility term

             (1)  Subject to section 324DAB, the directors of a listed company, or of a listed registered scheme, may, by resolution, grant an approval for an individual to play a significant role in the audit of the company or scheme for not more than 2 successive financial years in addition to the 5 successive financial years mentioned in subsection 324DA(1).

             (2)  The approval must be granted before the end of those 5 successive financial years.

             (3)  If the directors grant the approval, subsection 324DA(1) applies to the individual, in relation to the audit of the company or scheme, as if the references in that subsection to 5 successive financial years were references to:

                     (a)  if the approval is for one additional successive financial year—6 successive financial years; or

                     (b)  if the approval is for an additional 2 successive financial years—7 successive financial years.

             (4)  If the directors grant the approval for one successive financial year, the directors may, by resolution before the end of that year, grant an approval for an additional successive year.

             (5)  If the directors grant the approval for the additional successive year, subsection 324DA(1) applies to the individual, in relation to the audit of the company or scheme, as if the references in that subsection to 5 successive financial years were references to 7 successive financial years.

324DAB  Requirements for directors to approve extension of eligibility term

Requirements if company or scheme has audit committee

             (1)  If a listed company, or the responsible entity of a listed registered scheme, has an audit committee:

                     (a)  an approval under section 324DAA must not be granted unless it is in accordance with a recommendation provided by the audit committee; and

                     (b)  the resolution granting the approval must set out the reasons why the audit committee is satisfied as mentioned in paragraph (2)(d) of this section.

Note:          Directors are not required to grant an approval merely because the audit committee has recommended that an approval be granted.

             (2)  An approval is taken to be made in accordance with a recommendation provided by the audit committee only if:

                     (a)  the approval is consistent with the audit committee’s recommendation; and

                     (b)  the recommendation is endorsed by a resolution passed by the members of the audit committee; and

                     (c)  the recommendation is in writing signed by a member of the audit committee on behalf of the audit committee and given to the directors of the company or scheme; and

                     (d)  the recommendation states that the audit committee is satisfied that the approval:

                              (i)  is consistent with maintaining the quality of the audit provided to the company or scheme; and

                             (ii)  would not give rise to a conflict of interest situation (as defined in section 324CD);

                            and sets out the reasons why the committee is so satisfied.

Requirements if company or scheme does not have audit committee

             (3)  If a listed company, or the responsible entity of a listed registered scheme, does not have an audit committee:

                     (a)  an approval under section 324DAA must not be granted unless the directors of the company or scheme are satisfied that the approval:

                              (i)  is consistent with maintaining the quality of the audit provided to the company or scheme; and

                             (ii)  would not give rise to a conflict of interest situation (as defined in section 324CD); and

                     (b)  the resolution granting the approval must set out the reasons why the directors are so satisfied.

Auditor must have agreed to extension

             (4)  The directors of a listed company, or of a listed registered scheme, must not grant an approval under section 324DAA unless:

                     (a)  if the individual to whom the approval relates does not act on behalf of an audit firm or company—the individual agrees, in writing, to the approval being granted; or

                     (b)  if the individual to whom the approval relates acts on behalf of an audit firm or company—the audit firm or company on whose behalf the individual acts agrees, in writing, to the approval being granted.

324DAC  Notifications about approval to extend eligibility term

                   If the directors of a listed company, or of a listed registered scheme, grant an approval under section 324DAA, the directors must, within 14 days of granting the approval:

                     (a)  lodge a copy of the resolution granting the approval with ASIC; and

                     (b)  give a copy of the resolution to:

                              (i)  if the individual to whom the approval relates does not act on behalf of an audit firm or company—the individual; and

                             (ii)  if the individual to whom the approval relates acts on behalf of an audit firm or company—the audit firm or company on whose behalf the individual acts.

Note:          Details of the approval, and the reasons for the approval, must be included in the directors’ report under section 300.

324DAD  Approval ineffective unless it complies with requirements

                   A purported grant of approval under section 324DAA is ineffective unless the requirements of sections 324DAA, 324DAB and 324DAC are complied with in relation to the approval.

324DB  Individual’s rotation obligation

                   An individual contravenes this section if the individual:

                     (a)  plays a significant role in the audit of a listed company or listed registered scheme for a financial year; and

                     (b)  is not eligible to play that role.

324DC  Audit firm’s rotation obligation

Contraventions by members of audit firm

             (1)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit firm consents to act as a listed company’s or listed registered scheme’s auditor for a financial year; and

                     (b)  an individual acts, on behalf of the firm, as a lead or review auditor in relation to the audit of the company’s or scheme’s financial report for that financial year; and

                     (c)  the individual is not eligible to play a significant role in the audit of the company or scheme for that financial year; and

                     (d)  the defendant is a member of the firm; and

                     (e)  the defendant is not the individual and is or becomes aware that the individual is not eligible to play that role; and

                      (f)  the defendant fails to take the necessary steps, as soon as possible after the defendant becomes aware that the individual is not eligible to play that role, either:

                              (i)  to ensure that the audit firm resigns as auditor of the company or scheme; or

                             (ii)  to ensure that the individual ceases to act, on behalf of the audit firm, as a lead or review auditor in relation to the audit of the company or scheme for that financial year.

             (2)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit firm consents to act as a listed company’s or listed registered scheme’s auditor for a financial year; and

                     (b)  an individual acts, on behalf of the firm, as a lead or review auditor in relation to the audit of the company’s or scheme’s financial report for that financial year; and

                     (c)  the individual is not eligible to play a significant role in the audit of the company or scheme for that financial year:

                              (i)  because of section 324DAD; or

                             (ii)  for any other reason; and

                     (d)  the defendant is a member of the firm.

             (3)  For the purposes of an offence based on subsection (2), strict liability applies to the physical elements of the offence specified in paragraphs (2)(a) and (b) and subparagraph (2)(c)(ii).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (4) provides a defence.

             (4)  A person does not commit an offence because of a contravention of subsection (2) in relation to an individual acting as lead or review auditor on behalf of an audit firm at a particular time if the person has reasonable grounds to believe that the audit firm had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the audit firm) that the audit firm and its employees complied with the requirements of this Division.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

324DD  Audit company’s rotation obligation

Contravention by audit company

             (1)  An audit company contravenes this subsection if:

                     (a)  the audit company consents to act as a listed company’s or listed registered scheme’s auditor for a financial year; and

                     (b)  an individual acts, on behalf of the audit company, as a lead or review auditor in relation to the audit of the company’s or scheme’s financial report for that financial year; and

                     (c)  the individual is not eligible to play a significant role in the audit of the company or scheme for that financial year; and

                     (d)  a director of the audit company (other than the individual) is aware that the individual is not eligible to play that role; and

                     (e)  the audit company fails to take the necessary steps, as soon as possible after the director becomes aware that the individual is not eligible to play that role, either:

                              (i)  to resign as auditor of the company or scheme; or

                             (ii)  to ensure that the individual ceases to act, on behalf of the audit company, as a lead or review auditor in relation to the audit of the company or scheme for that financial year.

Contraventions by directors of audit company

             (2)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit company consents to act as a listed company’s or listed registered scheme’s auditor for a financial year; and

                     (b)  an individual acts, on behalf of the audit company, as a lead or review auditor in relation to the audit of the company’s or scheme’s financial report for that financial year; and

                     (c)  the individual is not eligible to play a significant role in the audit of the company or scheme for that financial year; and

                     (d)  the defendant is a director of the audit company; and

                     (e)  the defendant is not the individual and is or becomes aware that the individual is not eligible to play that role; and

                      (f)  the defendant fails to take the necessary steps, as soon as possible after the defendant becomes aware that the individual is not eligible to play that role, either:

                              (i)  to ensure that the audit company resigns as auditor of the company or scheme; or

                             (ii)  to ensure that the individual ceases to act, on behalf of the audit company, as a lead or review auditor in relation to the audit of the company or scheme for that financial year.

             (3)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit company consents to act as a listed company’s or listed registered scheme’s auditor for a financial year; and

                     (b)  an individual acts, on behalf of the audit company, as a lead or review auditor in relation to the audit of the company’s or scheme’s financial report for that financial year; and

                     (c)  the individual is not eligible to play a significant role in the audit of the company or scheme for that financial year:

                              (i)  because of section 324DAD; or

                             (ii)  for any other reason; and

                     (d)  the defendant is a director of the audit company.

             (4)  For the purposes of an offence based on subsection (3), strict liability applies to the physical elements of the offence specified in paragraphs (3)(a) and (b) and subparagraph (3)(c)(ii).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (5) provides a defence.

             (5)  A person does not commit an offence because of a contravention of subsection (3) in relation to an individual acting as lead or review auditor on behalf of an audit company at a particular time if the person has reasonable grounds to believe that the audit company had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the audit company) that the audit company and its employees complied with the requirements of this Division.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

Division 6—Appointment, removal and fees of auditors for companies

Subdivision A—Appointment of company auditors

325  Appointment of auditor by proprietary company

                   The directors of a proprietary company may appoint an auditor for the company if an auditor has not been appointed by the company in general meeting.

327A  Public company auditor (initial appointment of auditor)

             (1)  The directors of a public company must appoint an auditor of the company within 1 month after the day on which a company is registered as a company unless the company at a general meeting has appointed an auditor.

          (1A)  Subsection (1) does not apply in relation to a company if:

                     (a)  the directors reasonably believe that subsection 301(3) will apply to the company’s financial reports; or

                     (b)  the company is a small company limited by guarantee.

             (2)  Subject to this Part, an auditor appointed under subsection (1) holds office until the company’s first AGM.

             (3)  A director of a company must take all reasonable steps to comply with, or to secure compliance with, subsection (1).

327B  Public company auditor (annual appointments at AGMs to fill vacancies)

             (1)  A public company must:

                     (a)  appoint an auditor of the company at its first AGM; and

                     (b)  appoint an auditor of the company to fill any vacancy in the office of auditor at each subsequent AGM.

          (1A)  Subsection (1) does not apply in relation to a company if:

                     (a)  subsection 301(3) applies to the company’s financial reports; or

                     (b)  the company is a small company limited by guarantee.

             (2)  An auditor appointed under subsection (1) holds office until the auditor:

                     (a)  dies; or

                     (b)  is removed, or resigns, from office in accordance with section 329; or

                     (c)  ceases to be capable of acting as auditor because of Division 2 of this Part; or

                     (d)  ceases to be auditor under subsection (2A), (2B) or (2C).

          (2A)  An individual auditor ceases to be auditor of a company under this subsection if:

                     (a)  on a particular day (the start day), the individual auditor:

                              (i)  informs ASIC of a conflict of interest situation in relation to the company under subsection 324CA(1A); or

                             (ii)  informs ASIC of particular circumstances in relation to the company under subsection 324CE(1A); and

                     (b)  the individual auditor does not give ASIC a notice, before the notification day (see subsection (2D)), that that conflict of interest situation has, or those circumstances have, ceased to exist before the end of the period (the remedial period) of 21 days, or such longer period as ASIC approves in writing, from the start day.

          (2B)  An audit firm ceases to be auditor of a company under this subsection if:

                     (a)  on a particular day (the start day), ASIC is:

                              (i)  informed of a conflict of interest situation in relation to the company under subsection 324CB(1A); or

                             (ii)  informed of particular circumstances in relation to the company under subsection 324CF(1A); and

                     (b)  ASIC has not been given a notice on behalf of the audit firm, before the notification day (see subsection (2D)), that that conflict of interest situation has, or those circumstances have, ceased to exist before the end of the period (the remedial period) of 21 days, or such longer period as ASIC approves in writing, from the start day.

          (2C)  An audit company ceases to be auditor of a company under this subsection if:

                     (a)  on a particular day (the start day), ASIC is:

                              (i)  informed of a conflict of interest situation in relation to the company under subsection 324CB(1A) or 324CC(1A); or

                             (ii)  informed of particular circumstances in relation to the company under subsection 324CF(1A) or 324CG(1A) or (5A); and

                     (b)  ASIC has not been given a notice on behalf of the audit company, before the notification day (see subsection (2D)), that that conflict of interest situation has, or those circumstances have, ceased to exist before the end of the period (the remedial period) of 21 days, or such longer period as ASIC approves in writing, from the start day.

          (2D)  The notification day is:

                     (a)  the last day of the remedial period; or

                     (b)  such later day as ASIC approves in writing (whether before or after the remedial period ends).

             (3)  A director of a company must take all reasonable steps to comply with, or to secure compliance with, subsection (1).

             (4)  If an audit firm ceases to be the auditor of a company under subsection (2) at a particular time, each member of the firm who:

                     (a)  is taken to have been appointed as an auditor of the company under subsection 324AB(1) or 324AC(4); and

                     (b)  is an auditor of the company immediately before that time;

ceases to be an auditor of the company at that time.

327C  Public company auditor (appointment to fill casual vacancy)

             (1)  If:

                     (a)  a vacancy occurs in the office of auditor of a public company; and

                     (b)  the vacancy is not caused by the removal of an auditor from office; and

                     (c)  there is no surviving or continuing auditor of the company;

the directors must, within 1 month after the vacancy occurs, appoint an auditor to fill the vacancy unless the company at a general meeting has appointed an auditor to fill the vacancy.

Note:          Certain public companies are not required to appoint an auditor: see subsections 327A(1A) and 327B(1A).

             (2)  An auditor appointed under subsection (1) holds office, subject to this Part, until the company’s next AGM.

             (3)  A director of a public company must take all reasonable steps to comply with, or to secure compliance with, subsection (1).

327D  Appointment to replace auditor removed from office

             (1)  This section deals with the situation in which an auditor of a company is removed from office at a general meeting in accordance with section 329.

             (2)  The company may at that general meeting (without adjournment), by special resolution immediately appoint an individual, firm or company as auditor of the company if a copy of the notice of nomination has been sent to the individual, firm or company under subsection 328B(3).

             (3)  If a special resolution under subsection (2):

                     (a)  is not passed; or

                     (b)  could not be passed merely because a copy of the notice of nomination has not been sent to an individual, firm or company under subsection 328B(3);

the general meeting may be adjourned and the company may, at the adjourned meeting, by ordinary resolution appoint an individual, firm or company as auditor of the company if:

                     (c)  a member of the company gives the company notice of the nomination of the individual, firm or company for appointment as auditor; and

                     (d)  the company receives the notice at least 14 clear days before the day to which the meeting is adjourned.

             (4)  The day to which the meeting is adjourned must be:

                     (a)  not earlier than 20 days after the day of the meeting; and

                     (b)  not later than 30 days after the day of the meeting.

             (5)  Subject to this Part, an auditor appointed under subsection (2) or (3) holds office until the company’s next AGM.

327E  ASIC may appoint public company auditor if auditor removed but not replaced

             (1)  This section deals with the situation in which a public company fails to appoint an auditor under subsection 327D(2) or (3). The failure is referred to as the auditor replacement failure.

             (2)  The company must give ASIC written notice of the auditor replacement failure within the period of 7 days commencing on the day of the auditor replacement failure (the notification period).

             (3)  If the company gives ASIC the notice required by subsection (2), ASIC must appoint an auditor of the company as soon as practicable after receiving the notice. This subsection has effect subject to section 327G.

             (4)  If the company does not give ASIC the notice required by subsection (2), ASIC may appoint an auditor of the company at any time:

                     (a)  after the end of the notification period; and

                     (b)  before ASIC receives notice of the auditor replacement failure from the company.

This subsection has effect subject to section 327G.

             (5)  If the company:

                     (a)  does not give ASIC the notice required by subsection (2); and

                     (b)  gives ASIC notice of the auditor replacement failure after the end of the notification period;

ASIC must appoint an auditor of the company as soon as practicable after receiving the notice. This subsection has effect subject to section 327G.

             (6)  Subject to this Part, an auditor appointed under this section holds office until the company’s next AGM.

327F  ASIC’s general power to appoint public company auditor

             (1)  ASIC may appoint an auditor of a public company if:

                     (a)  the company does not appoint an auditor when required by this Act to do so; and

                     (b)  a member of the company applies to ASIC in writing for the appointment of an auditor under this section.

This subsection has effect subject to section 327G.

             (2)  An individual, firm or company appointed as auditor of a company under subsection (1) holds office, subject to this Part, until the next AGM of the company.

327G  Restrictions on ASIC’s powers to appoint public company auditor

             (1)  ASIC may appoint an individual, firm or company as auditor of a company under section 327E or 327F only if the individual, firm or company consents to being appointed.

             (2)  ASIC must not appoint an auditor of a company under section 327E or 327F if:

                     (a)  there is another auditor of the company (the continuing auditor); and

                     (b)  ASIC is satisfied that the continuing auditor is able to carry out the responsibilities of auditor alone; and

                     (c)  the continuing auditor agrees to continue as auditor.

             (3)  ASIC must not appoint an auditor of a company under section 327E or 327F if:

                     (a)  the company does not give ASIC the notice required by subsection 327E(2) before the end of the notification period; and

                     (b)  ASIC has already appointed an auditor of the company under section 327E after the end of the notification period.

327H  Effect on appointment of public company auditor of company beginning to be controlled by a corporation

                   An auditor of a public company that begins to be controlled by a corporation:

                     (a)  must retire at the AGM of the company next held after the company begins to be controlled by the corporation unless the auditor vacates that office before then; and

                     (b)  is, subject to this Part, eligible for re‑appointment.

This section has effect notwithstanding subsection 327B(2).

327I  Remaining auditors may act during vacancy

                   While a vacancy in the office of auditor of a company continues, the surviving or continuing auditor or auditors (if any) may act as auditors of the company.

328A  Auditor’s consent to appointment

             (1)  A company, the directors of a company or the responsible entity of a registered scheme must not appoint an individual, firm or company as auditor of the company unless that individual, firm or company:

                     (a)  has consented, before the appointment, to act as auditor; and

                     (b)  has not withdrawn that consent before the appointment is made.

For the purposes of this section, a consent, or the withdrawal of a consent, must be given by written notice to the company, the directors or the responsible entity of the scheme.

             (2)  A notice under subsection (1) given by a firm must be signed by a member of the firm who is a registered company auditor both:

                     (a)  in the firm name; and

                     (b)  in his or her own name.

             (3)  A notice under subsection (1) given by a company must be signed by a director or senior manager of the company both:

                     (a)  in the company’s name; and

                     (b)  in his or her own name.

             (4)  If a company, the directors of a company or the responsible entity of a registered scheme appoints an individual, firm or company as auditor of a company in contravention of subsection (1):

                     (a)  the purported appointment does not have any effect; and

                     (b)  the company or responsible entity, and any officer of the company or responsible entity who is in default, are each guilty of an offence.

Note:          An officer of a company, or of a responsible entity, is in default if the officer is involved in the contravention of subsection (1) by the company, the company’s directors or the entity (see section 83). Section 79 defines involved.

328B  Nomination of auditor

             (1)  Subject to this section, a company may appoint an individual, firm or company as auditor of the company at its AGM only if a member of the company gives the company written notice of the nomination of the individual, firm or company for appointment as auditor:

                     (a)  before the meeting was convened; or

                     (b)  not less than 21 days before the meeting.

This subsection does not apply if an auditor is removed from office at the AGM.

             (2)  If a company purports to appoint an individual, firm or company as auditor of the company in contravention of subsection (1):

                     (a)  the purported appointment is of no effect; and

                     (b)  the company and any officer of the company who is in default are each guilty of an offence.

Note:          An officer of a company is in default if the officer is involved in the company’s contravention of subsection (1) (see section 83). Section 79 defines involved.

             (3)  If a member gives a company notice of the nomination of an individual, firm or company for appointment as auditor of the company, the company must send a copy of the notice to:

                     (a)  each individual, firm or company nominated; and

                     (b)  each auditor of the company; and

                     (c)  each person entitled to receive notice of general meetings of the company.

This is so whether the appointment is to be made at a meeting or an adjourned meeting referred to in section 327D or at an AGM.

             (4)  The copy of the notice of nomination must be sent:

                     (a)  not less than 7 days before the meeting; or

                     (b)  at the time notice of the meeting is given.

Subdivision B—Removal and resignation of company auditors

329  Removal and resignation of auditors

             (1)  An auditor of a company may be removed from office by resolution of the company at a general meeting of which notice under subsection (1A) has been given, but not otherwise.

          (1A)  Notice of intention to move the resolution must be given to the company at least 2 months before the meeting is to be held. However, if the company calls a meeting after the notice of intention is given under this subsection, the meeting may pass the resolution even though the meeting is held less than 2 months after the notice of intention is given.

Note:          Short notice of the meeting cannot be given for this resolution (see subsection 249H(4)).

             (2)  Where notice under subsection (1A) of a resolution to remove an auditor is received by a company, it must as soon as possible send a copy of the notice to the auditor and lodge a copy of the notice.

             (3)  Within 7 days after receiving a copy of the notice, the auditor may make representations in writing, not exceeding a reasonable length, to the company and request that, before the meeting at which the resolution is to be considered, a copy of the representations be sent by the company at its expense to every member of the company to whom notice of the meeting is sent.

             (4)  Unless ASIC on the application of the company otherwise orders, the company must send a copy of the representations in accordance with the auditor’s request, and the auditor may, without prejudice to his or her right to be heard orally or, where a firm is the auditor, to have a member of the firm heard orally on its behalf, require that the representations be read out at the meeting.

             (5)  An auditor of a company may, by notice in writing given to the company, resign as auditor of the company if:

                     (a)  the auditor has, by notice in writing given to ASIC, applied for consent to the resignation and stated the reasons for the application and, at or about the same time as the notice was given to ASIC, notified the company in writing of the application to ASIC; and

                     (b)  the consent of ASIC has been given.

             (6)  ASIC must, as soon as practicable after receiving a notice from an auditor under subsection (5), notify the auditor and the company whether it consents to the resignation of the auditor.

             (7)  A statement made by an auditor in an application to ASIC under subsection (5) or in answer to an inquiry by ASIC relating to the reasons for the application:

                     (a)  is not admissible in evidence in any civil or criminal proceedings against the auditor; and

                     (b)  may not be made the ground of a prosecution, action or suit against the auditor;

and a certificate by ASIC that the statement was made in the application or in the answer to the inquiry by ASIC is conclusive evidence that the statement was so made.

             (8)  Subject to subsection (9), the resignation of an auditor takes effect:

                     (a)  on the day (if any) specified for the purpose in the notice of resignation; or

                     (b)  on the day on which ASIC gives its consent to the resignation; or

                     (c)  on the day (if any) fixed by ASIC for the purpose;

whichever last occurs.

             (9)  The resignation of an auditor of a proprietary company or a small company limited by guarantee does not require the consent of ASIC under subsection (5), and takes effect:

                     (a)  on the day (if any) specified for the purpose in the notice of resignation; or

                     (b)  on the day on which the notice is received by the company;

whichever is the later.

           (10)  Where on the retirement or withdrawal from a firm of a member the firm will no longer be capable, by reason of the provisions of subparagraph 324BB(1)(b)(i) or (2)(b)(i) of acting as auditor of a company, the member so retiring or withdrawing is (if not disqualified from acting as auditor of the company) taken to be the auditor of the company until he or she obtains the consent of ASIC to his or her retirement or withdrawal.

           (11)  Within 14 days after:

                     (a)  the removal from office of an auditor of a company; or

                     (b)  the receipt of a notice of resignation from an auditor of a company;

the company must:

                     (c)  lodge with ASIC a notice of the removal or resignation in the prescribed form; and

                     (d)  where there is a trustee for the holders of debentures of the company—give to the trustee a copy of the notice lodged with ASIC.

330  Effect of winding up on office of auditor

                   An auditor of a company ceases to hold office if:

                     (a)  a special resolution is passed for the voluntary winding up of the company; or

                     (b)  in a case to which paragraph (a) does not apply—an order is made by the Court for the winding up of the company.

Subdivision C—Company auditors’ fees and expenses

331  Fees and expenses of auditors

                   The reasonable fees and expenses of an auditor of a company are payable by the company.

Division 7—Appointment, removal and fees of auditors for registered schemes

Subdivision A—Appointment of registered scheme auditors

331AAA  Registered scheme auditor (initial appointment of auditor)

             (1)  The responsible entity of a registered scheme must appoint an auditor of the registered scheme within 1 month after the day on which the scheme is registered.

             (2)  An auditor appointed under subsection (1) holds office until the auditor:

                     (a)  dies; or

                     (b)  is removed, or resigns, from office in accordance with section 331AC; or

                     (c)  ceases to be capable of acting as an auditor because of Division 2 of this Part; or

                     (d)  ceases to be auditor under subsection (2A), (2B) or (2C).

          (2A)  An individual auditor ceases to be auditor of a registered scheme under this subsection if:

                     (a)  on a particular day (the start day), the individual auditor:

                              (i)  informs ASIC of a conflict of interest situation in relation to the scheme under subsection 324CA(1A); or

                             (ii)  informs ASIC of particular circumstances in relation to the scheme under subsection 324CE(1A); and

                     (b)  the individual auditor does not give ASIC a notice, before the notification day (see subsection (2D)), that that conflict of interest situation has, or those circumstances have, ceased to exist before the end of the period (the remedial period) of 21 days, or such longer period as ASIC approves in writing, from the start day.

          (2B)  An audit firm ceases to be auditor of a registered scheme under this subsection if:

                     (a)  on a particular day (the start day), ASIC is:

                              (i)  informed of a conflict of interest situation in relation to the scheme under subsection 324CB(1A); or

                             (ii)  informed of particular circumstances in relation to the scheme under subsection 324CF(1A); and

                     (b)  ASIC has not been given a notice on behalf of the audit firm, before the notification day (see subsection (2D)), that that conflict of interest situation has, or those circumstances have, ceased to exist before the end of the period (the remedial period) of 21 days, or such longer period as ASIC approves in writing, from the start day.

          (2C)  An audit company ceases to be auditor of a registered scheme under this subsection if:

                     (a)  on a particular day (the start day), ASIC is:

                              (i)  informed of a conflict of interest situation in relation to the scheme under subsection 324CB(1A) or 324CC(1A); or

                             (ii)  informed of particular circumstances in relation to the scheme under subsection 324CF(1A) or 324CG(1A) or (5A); and

                     (b)  ASIC has not been given a notice on behalf of the audit company, before the notification day (see subsection (2D)), that that conflict of interest situation has, or those circumstances have, ceased to exist before the end of the period (the remedial period) of 21 days, or such longer period as ASIC approves in writing, from the start day.

          (2D)  The notification day is:

                     (a)  the last day of the remedial period; or

                     (b)  such later day as ASIC approves in writing (whether before or after the remedial period ends).

             (3)  A director of the responsible entity of a registered scheme must take all reasonable steps to secure compliance with subsection (1).

             (4)  If an audit firm ceases to be the auditor of a registered scheme under subsection (2) at a particular time, each member of the firm who:

                     (a)  is taken to have been appointed as an auditor of the scheme under subsection 324AB(1) or 324AC(4); and

                     (b)  is an auditor of the scheme immediately before that time;

ceases to be an auditor of the scheme at that time.

331AAB  Registered scheme auditor (appointment to fill vacancy)

             (1)  If:

                     (a)  a vacancy occurs in the office of auditor of a registered scheme; and

                     (b)  there is no surviving or continuing auditor of the scheme;

the responsible entity must, within 1 month after the vacancy occurs, appoint an auditor to fill the vacancy.

             (2)  A director of the responsible entity of a registered scheme must take all reasonable steps to secure compliance with subsection (1).

331AAC  ASIC’s power to appoint registered scheme auditor

             (1)  ASIC may appoint an auditor of a registered scheme if:

                     (a)  the responsible entity of the scheme does not appoint an auditor when required by this Act to do so; and

                     (b)  a member of the scheme applies to ASIC in writing for the appointment of an auditor under this section.

             (2)  ASIC may only appoint an individual, firm or company as auditor under subsection (1) if the individual, firm or company consents to being appointed.

331AAD  Remaining auditors may act during vacancy

                   While a vacancy in the office of auditor of a registered scheme continues, the surviving or continuing auditor or auditors (if any) may act as auditors of the company.

Subdivision B—Removal and resignation of registered scheme auditors

331AC  Removal and resignation of auditors

             (1)  The responsible entity of a registered scheme may, with ASIC’s consent, remove the auditor of the scheme from office.

             (2)  An auditor of a registered scheme may, by notice in writing given to the responsible entity, resign as auditor of the scheme if:

                     (a)  the auditor:

                              (i)  has, by notice in writing given to ASIC, applied for consent to the resignation and stated the reasons for the application; and

                             (ii)  has, at or about the same time as giving the notice to ASIC, given the responsible entity notice in writing of the application to ASIC; and

                     (b)  ASIC has given its consent.

             (3)  As soon as practicable after ASIC receives a notice from an auditor under subsection (2), ASIC must notify the auditor, and the responsible entity of the registered scheme, whether it consents to the resignation.

             (4)  A statement made by an auditor in an application to ASIC under subsection (2) or in answer to an inquiry by ASIC relating to the reasons for the application:

                     (a)  is not admissible in evidence in any civil or criminal proceedings against the auditor; and

                     (b)  must not be made the ground of a prosecution, action or suit against the auditor.

A certificate by the ASIC that the statement was made in the application or in answer to the inquiry by ASIC is conclusive evidence that the statement was so made.

             (5)  The resignation of an auditor takes effect:

                     (a)  on the day (if any) specified for the purpose in the notice of resignation; or

                     (b)  on the day on which ASIC gives its consent to the resignation; or

                     (c)  on the day (if any) fixed by ASIC for the purpose;

whichever occurs last.

             (6)  If, on the retirement or withdrawal of a member of a firm, the firm will no longer be capable of acting as auditor of a registered scheme because of subparagraph 324BB(1)(b)(i) or (2)(b)(i), the member is (if not disqualified from acting as auditor of the scheme) taken to be the auditor of the scheme until he or she obtains the consent of ASIC to his or her retirement or withdrawal.

             (7)  Within 14 days after:

                     (a)  the removal from office of an auditor of a registered scheme; or

                     (b)  the receipt of a notice of resignation from an auditor of a registered scheme;

the responsible entity must lodge with ASIC a notice of the removal or resignation in the prescribed form.

331AD  Effect of winding up on office of auditor

                   An auditor of a registered scheme ceases to hold office if:

                     (a)  the scheme’s constitution provides that the scheme is to be wound up at a specified time, in specified circumstances or on the happening of a specified event, and that time is reached, those circumstances occur or that event occurs; or

                     (b)  the members pass a resolution directing the responsible entity to wind up the scheme; or

                     (c)  the Court makes an order directing the responsible entity to wind up the scheme; or

                     (d)  the members pass a resolution to remove the responsible entity but do not, at the same meeting, pass a resolution choosing a company to be the new responsible entity that consents to becoming the scheme’s responsible entity.

Subdivision C—Fees and expenses of auditors

331AE  Fees and expenses of auditors

                   The reasonable fees and expenses of an auditor of a registered scheme are payable by the responsible entity.

Part 2M.4A—Annual transparency reports for auditors

  

332  Meaning of transparency reporting auditor and transparency reporting year

             (1)  A transparency reporting auditor is:

                     (a)  an individual auditor; or

                     (b)  an audit firm; or

                     (c)  an authorised audit company.

             (2)  A transparency reporting year is a period of 12 months starting on 1 July.

332A  Transparency reporting auditors must publish annual transparency reports

             (1)  This section applies if, during a transparency reporting year, a transparency reporting auditor conducts audits, under Division 3 of Part 2M.3, of 10 or more bodies of any of the following kinds:

                     (a)  listed companies;

                     (b)  listed registered schemes;

                     (c)  ADIs (authorised deposit‑taking institutions) within the meaning of the Banking Act 1959;

                     (d)  bodies mentioned in paragraph (c) or (e) of the definition of body regulated by APRA in subsection 3(2) of the Australian Prudential Regulation Authority Act 1998;

                     (e)  bodies prescribed by the regulations for the purposes of this paragraph.

Note:          The 10 or more bodies do not all have to be of the same kind. This section applies (for example) if, during the year, the transparency reporting auditor conducts audits of 6 listed companies and 4 listed registered schemes.

             (2)  The auditor must publish an annual transparency report for the transparency reporting year, containing the information required by section 332B, on the auditor’s website within the period of 4 months after the end of the year (or that period as extended under section 332C).

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (3)  The auditor must lodge a copy of the report with ASIC on or before the day it is first published on the auditor’s website.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (4)  An offence based on subsection (2) or (3) is an offence of strict liability.

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

332B  Content of annual transparency report

             (1)  Subject to subsection (2), an annual transparency report must contain the information prescribed by the regulations.

             (2)  The report may omit information that would otherwise be included under subsection (1) if the inclusion of the information is likely to result in unreasonable prejudice to the transparency reporting auditor. If material is omitted, the report must say so.

332C  Extension of period for publication of annual transparency report

             (1)  On an application made by a transparency reporting auditor in accordance with subsection (3), ASIC may make an order extending the period within which the auditor must publish an annual transparency report.

             (2)  The order may be expressed to be subject to conditions.

             (3)  The application must be:

                     (a)  in writing; and

                     (b)  lodged with ASIC before the end of the period within which the auditor would otherwise be required to publish the report; and

                     (c)  if the auditor is an individual auditor—signed by the auditor; and

                     (d)  if the auditor is an audit firm—signed by a member of the firm who is a registered company auditor both:

                              (i)  in the firm name; and

                             (ii)  in the member’s own name; and

                     (e)  if the auditor is an audit company:

                              (i)  authorised by a resolution of the directors; and

                             (ii)  signed by a director.

             (4)  ASIC must give the auditor written notice of the making of the order.

332D  Exemption orders—applications by transparency reporting auditors

             (1)  On an application made by a transparency reporting auditor in accordance with subsection (3), ASIC may make an order in writing relieving the auditor from compliance with all or specified requirements of sections 332A and 332B.

Note:          For the criteria for making orders under this section, see section 332F.

             (2)  The order may:

                     (a)  be expressed to be subject to conditions; and

                     (b)  be indefinite or limited to a specified period.

             (3)  The application must be:

                     (a)  in writing; and

                     (b)  lodged with ASIC; and

                     (c)  if the auditor is an individual auditor—signed by the auditor; and

                     (d)  if the auditor is an audit firm—signed by a member of the firm who is a registered company auditor both:

                              (i)  in the firm name; and

                             (ii)  in the member’s own name; and

                     (e)  if the auditor is an audit company:

                              (i)  authorised by a resolution of the directors; and

                             (ii)  signed by a director.

             (4)  ASIC must give the auditor written notice of the making or revocation of the order.

332E  Exemption orders—class orders for transparency reporting auditors

             (1)  ASIC may, by legislative instrument, make an order in respect of a specified class of transparency reporting auditors relieving the auditors from all or specified requirements of sections 332A and 332B.

Note:          For the criteria for making orders under this section, see section 332F.

             (2)  The order may:

                     (a)  be expressed to be subject to conditions; and

                     (b)  be indefinite or limited to a specified period.

332F  Exemption orders—criteria for orders

             (1)  To make an order under section 332D or 332E exempting a transparency reporting auditor, or class of transparency reporting auditors, from one or more requirements of sections 332A and 332B, ASIC must be satisfied that complying with the requirements would:

                     (a)  be inappropriate in the circumstances; or

                     (b)  impose unreasonable burdens.

             (2)  In deciding for the purposes of subsection (1) whether complying with the requirements would impose an unreasonable burden on the auditor or class of auditors, ASIC is to have regard to:

                     (a)  the expected costs of complying with the requirements; and

                     (b)  the expected benefits of having the auditor or class of auditors comply with the requirements; and

                     (c)  any practical difficulties that the auditor or class of auditors faces in complying effectively with the requirements; and

                     (d)  any unusual aspects of the operations of the auditor or class of auditors; and

                     (e)  any other matters that ASIC considers relevant.

332G  Offences by members of audit firm

             (1)  This Part applies to an audit firm as if it were a person, but with the changes set out in this section.

             (2)  An obligation that would otherwise be imposed on the firm by a provision of this Part is imposed on each member of the firm instead, but may be discharged by any of the members.

             (3)  An offence based on a provision of this Part that would otherwise be committed by the audit firm is taken to have been committed by each member of the firm.

             (4)  A member of the firm does not commit an offence because of subsection (3) if the member:

                     (a)  does not know of the circumstances that constitute the contravention of the provision concerned; or

                     (b)  knows of those circumstances but takes all reasonable steps to correct the contravention as soon as possible after the member becomes aware of those circumstances.

Note:          A defendant bears an evidential burden in relation to the matters in subsection (4)—see subsection 13.3(3) of the Criminal Code.

Part 2M.5—Accounting and auditing standards

  

334  Accounting standards

AASB’s power to make accounting standards

             (1)  The AASB may, by legislative instrument, make accounting standards for the purposes of this Act. The standards must not be inconsistent with this Act or the regulations.

             (4)  An accounting standard applies to:

                     (a)  periods ending after the commencement of the standard; or

                     (b)  periods ending, or starting, on or after a later date specified in the standard.

             (5)  A company, registered scheme or disclosing entity may elect to apply the accounting standard to an earlier period unless the standard says otherwise. The election must be made in writing by the directors.

335  Equity accounting

                   This Chapter (and, in particular, the provisions on consolidation of financial statements) does not prevent accounting standards from incorporating equity accounting principles.

336  Auditing standards

AUASB’s power to make auditing standards

             (1)  The AUASB may, by legislative instrument, make auditing standards for the purposes of this Act. The standards must not be inconsistent with this Act or the regulations.

             (3)  An auditing standard applies to financial reports in relation to:

                     (a)  periods ending after the commencement of the standard; or

                     (b)  periods ending, or starting, on or after a later date specified in the standard.

             (4)  If:

                     (a)  the AUASB makes an auditing standard; and

                     (b)  the standard applies to financial reports in relation to particular periods under subsection (3); and

                     (c)  an auditor is conducting an audit of a financial report in relation to a period that occurs before the start of the earliest of those periods;

the auditor may elect to apply the auditing standard to that audit unless the standard says otherwise. The election must be recorded in the audit report.

337  Interpretation of accounting and auditing standards

                   In interpreting an accounting or auditing standard, unless the contrary intention appears:

                     (a)  expressions used in the standard have the same meanings as they have in this Chapter; and

                     (b)  the provisions of Part 1.2 apply as if the standard’s provisions were provisions of this Chapter.

338  Evidence of text of accounting standard or auditing standard

             (1)  This section applies to a document that purports to be published by, or on behalf of, the AASB or the AUASB and to set out the text of:

                     (a)  a specified standard as in force at a specified time under section 334 or 336; or

                     (b)  a specified provision of a standard of that kind.

It also applies to a copy of a document of that kind.

             (2)  In the absence of evidence to the contrary, a document to which this section applies is proof in proceedings under this Act that:

                     (a)  the specified standard was in force at that time under that section; and

                     (b)  the text set out in the document is the text of the standard referred to in paragraph (1)(a) or the provision referred to in paragraph (1)(b).

Part 2M.6—Exemptions and modifications

  

340  Exemption orders—companies, registered schemes and disclosing entities

             (1)  On an application made in accordance with subsection (3) in relation to a company, registered scheme or disclosing entity, ASIC may make an order in writing relieving any of the following from all or specified requirements of Parts 2M.2, 2M.3 and 2M.4 (other than Division 4):

                     (a)  the directors;

                     (b)  the company, scheme or entity;

                     (c)  the auditor.

Note:          For the criteria for making orders under this section, see section 342.

             (2)  The order may:

                     (a)  be expressed to be subject to conditions; and

                     (b)  be indefinite or limited to a specified period.

             (3)  The application must be:

                     (a)  authorised by a resolution of the directors; and

                     (b)  in writing and signed by a director; and

                     (c)  lodged with ASIC.

             (4)  ASIC must give the applicant written notice of the making, revocation or suspension of the order.

341  Exemption orders—class orders for companies, registered schemes and disclosing entities

             (1)  ASIC may make an order in writing in respect of a specified class of companies, registered schemes or disclosing entities, relieving any of the following from all or specified requirements of Parts 2M.2, 2M.3 and 2M.4 (other than Division 4):

                     (a)  directors;

                     (b)  the companies, registered schemes or disclosing entities themselves;

                     (c)  auditors of the companies, registered schemes or disclosing entities.

Note:          For the criteria for making orders under this section, see section 342.

             (2)  The order may:

                     (a)  be expressed to be subject to conditions; and

                     (b)  be indefinite or limited to a specified period.

             (3)  Notice of the making, revocation or suspension of the order must be published in the Gazette.

342  Exemption orders—criteria for orders for companies, registered schemes and disclosing entities

             (1)  To make an order under section 340 or 341, ASIC must be satisfied that complying with the relevant requirements of Parts 2M.2, 2M.3 and 2M.4 would:

                     (a)  make the financial report or other reports misleading; or

                     (b)  be inappropriate in the circumstances; or

                     (c)  impose unreasonable burdens.

             (2)  In deciding for the purposes of subsection (1) whether the audit requirements for a proprietary company, or a class of proprietary companies, would impose an unreasonable burden on the company or companies, ASIC is to have regard to:

                     (a)  the expected costs of complying with the audit requirements; and

                     (b)  the expected benefits of having the company or companies comply with the audit requirements; and

                     (c)  any practical difficulties that the company or companies face in complying effectively with the audit requirements (in particular, any difficulties that arise because a financial year is the first one for which the audit requirements apply or because the company or companies are likely to move frequently between the small and large proprietary company categories from one financial year to another); and

                     (d)  any unusual aspects of the operation of the company or companies during the financial year concerned; and

                     (e)  any other matters that ASIC considers relevant.

             (3)  In assessing expected benefits under subsection (2), ASIC is to take account of:

                     (a)  the number of creditors and potential creditors; and

                     (b)  the position of creditors and potential creditors (in particular, their ability to independently obtain financial information about the company or companies); and

                     (c)  the nature and extent of the liabilities of the company or companies.

342AA  Exemption orders—non‑auditor members and former members of audit firms; former employees of audit companies

             (1)  On an application made in accordance with subsection (3) by any of the following, ASIC may make an order in writing relieving the applicant from all or specified requirements of Division 3 of Part 2M.4 (auditor independence):

                     (a)  a member of the firm who is not a registered company auditor;

                     (b)  a person who has ceased to be:

                              (i)  a member of an audit firm; or

                             (ii)  a director of an audit company; or

                            (iii)  a professional employee of an audit company.

Note:          For the criteria for making orders under this section, see section 342AC.

             (2)  The order may:

                     (a)  be expressed to be subject to conditions; and

                     (b)  be indefinite or limited to a specified period.

             (3)  The application must be:

                     (a)  in writing and signed by the applicant; and

                     (b)  lodged with ASIC.

             (4)  ASIC must give the applicant written notice of the making, revocation or suspension of the order.

             (5)  An order under subsection (1) is not a legislative instrument.

342AB  Exemption orders—class orders for non‑auditor members etc.

             (1)  ASIC may make an order in writing in respect of a specified class of audit firms or audit companies, relieving any of the following from all or specified requirements of Division 3 of Part 2M.4 (auditor independence):

                     (a)  members of firms who are not registered company auditors;

                     (b)  persons who have ceased to be:

                              (i)  members of audit firms; or

                             (ii)  directors of audit companies; or

                            (iii)  professional employees of audit companies.

Note:          For the criteria for making orders under this section, see section 342AC.

             (2)  The order may:

                     (a)  be expressed to be subject to conditions; and

                     (b)  be indefinite or limited to a specified period.

             (3)  An order under subsection (1) is a legislative instrument.

342AC  Exemption orders—criteria for orders for non‑auditor members etc.

                   To make an order under section 342AA or 342AB, ASIC must be satisfied that complying with the relevant requirements of Division 3 of Part 2M.4 would:

                     (a)  make the financial report or other reports misleading; or

                     (b)  be inappropriate in the circumstances; or

                     (c)  impose unreasonable burdens.

342A  ASIC’s power to modify the operation of section 324DA

             (1)  On an application made in accordance with this section, ASIC may:

                     (a)  declare that subsection 324DA(1) applies to a registered company auditor, in relation to the audit of an audited body or a class of audited bodies, as if the references in that subsection to 5 successive financial years were references to:

                              (i)  6 successive financial years; or

                             (ii)  7 successive financial years; or

                     (b)  declare that subsection 324DA(2) applies to a registered company auditor, in relation to the audit of an audited body or a class of audited bodies during a particular period of 7 successive financial years, as if the reference in that subsection to 5 out of 7 successive financial years were a reference to 6 out of 7 successive financial years.

             (2)  The following persons may apply for the declaration:

                     (a)  the registered company auditor;

                     (b)  a firm or company on whose behalf the registered company auditor acts or would act in relation to the audit or audits.

If the application is made by a firm or company, the declaration has effect only in relation to activities undertaken by the registered company auditor on behalf of that firm or company.

             (3)  The application must be:

                     (a)  in writing; and

                     (b)  signed by the applicant; and

                     (c)  lodged with ASIC.

             (4)  If the application is made by a registered company auditor who engages, or is to engage, in audit activities on behalf of a firm or company, the application must include the firm’s or company’s written consent to the application.

             (5)  If the application is made by a firm or company in relation to a registered company auditor, the application must include the registered company auditor’s written consent to the application.

             (6)  To make a declaration under subsection (1), ASIC must be satisfied that, without the modification, Division 4 of Part 2M.4 would impose an unreasonable burden on:

                     (a)  a registered company auditor; or

                     (b)  a firm or company that is applying for the declaration; or

                     (c)  the audited body or bodies in relation to which the application was made.

             (7)  In deciding for the purposes of subsection (6) whether, without the modification, Division 4 of Part 2M.4 would impose an unreasonable burden on a person referred to in that subsection, ASIC is to have regard to:

                     (a)  the nature of the audited body or bodies, including whether the activity in which the audited body or bodies engage is such that specialist knowledge about that activity is necessary to carry out the audit properly; and

                     (b)  the availability of other registered company auditors capable of providing satisfactory audit services for the audited body or bodies; and

                     (c)  any other matters which ASIC considers relevant.

             (8)  ASIC must give the applicant written notice of the making, revocation or suspension of the declaration.

342B  Auditor to notify company or registered scheme of section 342A declaration

             (1)  If a registered company auditor plays a significant role in the audit of a company or registered scheme in reliance on a declaration by ASIC under section 342A, the auditor must give the company or the responsible entity for the registered scheme written notice of the declaration.

             (2)  The notice must specify:

                     (a)  the name of the registered company auditor; and

                     (b)  the additional financial years for which the registered company auditor is, because of the declaration under section 342A, eligible to play a significant role in the audit of the company or registered scheme.

             (3)  The notice must be given:

                     (a)  as soon as practicable after the declaration is made if the auditor has been appointed before the declaration is made; or

                     (b)  before the auditor is appointed if the declaration is made before the auditor is appointed.

343  Modification by regulations

                   The regulations may modify the operation of this Chapter in relation to:

                     (a)  a specified company, registered scheme or disclosing entity; or

                     (b)  all companies, registered schemes or disclosing entities of a specified kind.

Part 2M.7—Sanctions for contraventions of Chapter

  

344  Contravention of Part 2M.2 or 2M.3, or of certain provisions of Part 2M.4

             (1)  A director of a company, registered scheme or disclosing entity contravenes this section if they fail to take all reasonable steps to comply with, or to secure compliance with, Part 2M.2 or 2M.3, or section 324DAA, 324DAB or 324DAC.

Note:          This section is a civil penalty provision (see section 1317E).

             (2)  A person commits an offence if they contravene subsection (1) and the contravention is dishonest.

             (3)  Subsection (1) does not apply to section 310, 312, 323A or 323B.

             (4)  This section does not affect the application of the provisions of Part 2M.2 or 2M.3 to a director as an officer.

Chapter 2N—Updating ASIC information about companies and registered schemes

Part 2N.1—Review date

  

345A  Review date

             (1)  The review date for a company is:

                     (a)  either:

                              (i)  if the company became registered as a company after the commencement of this Act—the anniversary of the company’s registration as a company under this Act; or

                             (ii)  otherwise—the date of the company’s incorporation or registration as a company, as recorded in a register maintained by ASIC under section 1274; or

                     (b)  if a choice of a different date has effect under section 345C—that different date.

          (1A)  If:

                     (a)  a company was incorporated as a company or became registered as a company before the commencement of this Act; and

                     (b)  there is no date of incorporation of the company as a company or registration of the company as a company recorded in a register maintained by ASIC under section 1274; and

                     (c)  paragraph (1)(b) does not apply to the company;

the review date for the company is the date determined by ASIC and notified to the company.

          (1B)  If, apart from this subsection, the review date for a company would be February 29, the review date for the company is February 28.

             (2)  The review date for a registered scheme is:

                     (a)  the anniversary of the scheme’s registration as a registered scheme; or

                     (b)  if a choice of a different date has effect under section 345C—that different date.

345B  Company or responsible entity may change review date

             (1)  With ASIC’s approval, a company may choose as its review date a date that is different from the anniversary of its registration.

             (2)  With ASIC’s approval, the responsible entity of a registered scheme may choose as the review date for the scheme a date that is different from the anniversary of its registration.

             (3)  If ASIC approves the choice, ASIC must notify the company or responsible entity in writing.

345C  When choice has effect

                   If ASIC notifies the company or responsible entity of its approval under section 345B, the choice has effect:

                     (a)  if the different date occurs before the next review date for the company or scheme—at the time that ASIC notifies its approval; or

                     (b)  otherwise—immediately after the next review date for the company or scheme.

Part 2N.2—Extract of particulars

  

346A  ASIC must give an extract of particulars each year

             (1)  ASIC must, within 2 weeks after each review date for a company or a registered scheme, give to the company or responsible entity of the scheme an extract of particulars for the company or scheme.

             (2)  If an agreement or approval under subsection 352(1) covers the lodgment of a response to an extract of particulars for a company, ASIC may satisfy subsection (1) by making the extract available to the company or its agent by electronic means.

             (3)  An extract of particulars must specify the date of issue.

346B  ASIC may ask questions

                   ASIC may include, in an extract of particulars for a company or a registered scheme, a requirement that the company or responsible entity of the scheme provide a particular prescribed by the regulations for the purposes of this section.

346C  Requirements in relation to an extract of particulars

Respond if a particular is incorrect

             (1)  A company, or responsible entity of a registered scheme, must respond to an extract of particulars that it receives if any particular set out in the extract is not correct as at the date of receipt. The response must comply with subsection (3).

Respond if required to provide a particular

             (2)  A company, or responsible entity of a registered scheme, must respond to an extract of particulars that it receives if the extract includes a requirement to provide a particular under section 346B. The response must comply with subsection (3).

Contents of response

             (3)  The response to an extract of particulars by a company, or by the responsible entity of a registered scheme:

                     (a)  must be lodged within 28 days after the date of issue of the extract; and

                     (b)  must be in the prescribed form; and

                     (c)  must be signed or authenticated; and

                     (d)  if subsection (1) applies—must be such that the particulars set out in the extract, taken together with the response, are correct as at the date the response is signed or authenticated; and

                     (e)  if subsection (2) applies—must provide the required particular, correct as at the date the response is signed or authenticated.

Response satisfies other requirements to notify

             (4)  If a company responds to an extract of particulars:

                     (a)  correcting a particular; or

                     (b)  providing a particular;

in accordance with subsection (3), any requirement elsewhere in this Act to lodge a prescribed form in relation to the particular is satisfied by the response.

             (5)  Subsection (4) does not affect the company’s liability for late lodgment fees incurred before the response to the extract of particulars is lodged or continuing offences committed before that time.

Strict liability offences

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

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

Part 2N.3—Solvency resolution

  

347A  Directors must pass a solvency resolution after each review date

             (1)  The directors of a company must pass a solvency resolution within 2 months after each review date for the company.

             (2)  Subsection (1) does not apply to the directors of a company that has lodged a financial report with ASIC under Chapter 2M within the period of 12 months before the review date.

Note:          The defendant bears an evidential burden in relation to the matter in subsection (2). See subsection 13.3(3) of the Criminal Code.

             (3)  An offence based on this section is an offence of strict liability.

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

347B  Notice to ASIC

             (1)  If the directors of a company pass a negative solvency resolution under section 347A, the company must notify ASIC of that fact, in the prescribed form, within 7 days after the resolution is passed.

             (2)  If:

                     (a)  subsection 347A(1) applies to the directors of a company; and

                     (b)  the directors have not passed a solvency resolution under section 347A within 2 months after a review date;

the company must notify ASIC of that fact, in the prescribed form, within 7 days after the end of the 2 month period following the review date.

             (3)  An offence based on this section is an offence of strict liability.

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

347C  Payment of review fee is taken to be a representation by the directors that the company is solvent

             (1)  If:

                     (a)  a company has paid its review fee in respect of a review date; and

                     (b)  the company has not lodged a notice under section 347B within 7 days after the end of the 2 month period following the review date; and

                     (c)  the company has not lodged a financial report with ASIC under Chapter 2M within the period of 12 months before the review date;

the directors of the company are taken to have represented to ASIC, as at the end of the 2 month period following the company’s review date, that, in their opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

Note:          Directors are not taken to have passed a solvency resolution for the purposes of section 347A merely because they are taken, under this subsection, to have made a representation to ASIC.

             (2)  Subsection (1) does not apply if the directors prove that they made a positive solvency resolution under section 347A within 2 months after the end of the review date.

Part 2N.4—Return of particulars

  

348A  ASIC may give a return of particulars

             (1)  ASIC may give to a company or responsible entity of a registered scheme a return of particulars for the company or scheme if ASIC suspects or believes that particulars recorded in relation to the company or scheme in a register maintained by ASIC under subsection 1274(1) are not correct.

             (2)  If an agreement or approval under subsection 352(1) covers the lodgment of a response to a return of particulars for a company, ASIC may satisfy subsection (1) by making the return available to the company or its agent by electronic means.

             (3)  A return of particulars must specify the date of issue.

348B  ASIC may ask questions

                   ASIC may include, in a return of particulars for a company or a registered scheme, a requirement that the company or responsible entity of the scheme provide a particular prescribed by the regulations for the purposes of this section.

348C  ASIC may require a solvency resolution and statement

             (1)  ASIC may include, in a return of particulars for a company, a requirement that the company comply with subsection (2) or subsection (3). The company may choose which subsection to comply with.

             (2)  The company complies with this subsection if:

                     (a)  before the company lodges a response to the return of particulars, the directors of the company pass a solvency resolution; and

                     (b)  the response to the return of particulars states whether the resolution passed was a positive solvency resolution or a negative solvency resolution.

             (3)  The company complies with this subsection if the response to the return of particulars states the date on which the directors passed a positive solvency resolution under section 347A in respect of the company’s most recent review date.

348D  General requirements in relation to a return of particulars

Response is required

             (1)  A company, or responsible entity of a registered scheme, must respond to a return of particulars that it receives. The response must comply with subsection (2).

Contents of response

             (2)  The response to a return of particulars by a company, or by the responsible entity of a registered scheme:

                     (a)  must be lodged with ASIC within 2 months after the date of issue of the return; and

                     (b)  must be in the prescribed form; and

                     (c)  must be signed or authenticated; and

                     (d)  if, as at the date that the response is signed or authenticated, any particular set out in the return is not correct—must be such that the particulars set out in the return, taken together with the response, are correct as at the date the response is signed or authenticated; and

                     (e)  if the return includes a requirement that the company or responsible entity of the scheme provide a particular under section 348B—must provide the required particular, correct as at the date the response is signed or authenticated; and

                      (f)  if the return includes a requirement to comply with a subsection of section 348C—must include the statement required by the subsection that the company chooses to comply with.

Response satisfies other requirements to notify

             (3)  If a company responds to a return of particulars:

                     (a)  correcting a particular; or

                     (b)  providing a particular;

in accordance with subsection (2), any requirement elsewhere in this Act to lodge a prescribed form in relation to the particular is satisfied by the response.

             (4)  Subsection (3) does not affect the company’s liability for late lodgment fees incurred before the response to the return of particulars is lodged or continuing offences committed before that time.

Strict liability offences

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

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

Part 2N.5—Notice by proprietary companies of changes to ultimate holding company

  

349A  Proprietary companies must notify ASIC of changes to ultimate holding company

             (1)  If an event mentioned in section 349B, 349C or 349D happens in relation to a proprietary company, the proprietary company must notify ASIC, in the prescribed form and within 28 days after the event, of the details required by that section.

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

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

349B  Another company becomes an ultimate holding company

                   If another company becomes an ultimate holding company in relation to a proprietary company, the proprietary company must notify ASIC of:

                     (a)  the other company’s name; and

                     (b)  either:

                              (i)  if the other company is registered in Australia—its ABN, ACN or ARBN; or

                             (ii)  if the other company is not registered in Australia—the place at which it was incorporated or formed; and

                     (c)  the date on which the other company became an ultimate holding company in relation to the proprietary company.

349C  A company ceases to be an ultimate holding company

                   If a company ceases to be an ultimate holding company in relation to a proprietary company, the proprietary company must notify ASIC of:

                     (a)  the name of the company that ceased to be an ultimate holding company in relation to the proprietary company; and

                     (b)  the date the cessation occurred.

349D  Ultimate holding company changes its name

                   If an ultimate holding company in relation to a proprietary company changes its name, the proprietary company must notify ASIC of the new name of the ultimate holding company.

Chapter 2P—Lodgments with ASIC

  

  

350  Forms for documents to be lodged with ASIC

             (1)  A document that this Act requires to be lodged with ASIC in a prescribed form must:

                     (a)  if a form for the document is prescribed in the regulations:

                              (i)  be in the prescribed form; and

                             (ii)  include the information, statements, explanations or other matters required by the form; and

                            (iii)  be accompanied by any other material required by the form; or

                     (b)  if a form for the document is not prescribed in the regulations but ASIC has approved a form for the document:

                              (i)  be in the approved form; and

                             (ii)  include the information, statements, explanations or other matters required by the form; and

                            (iii)  be accompanied by any other material required by the form.

             (2)  A reference in this Act to a document that has been lodged (being a document to which subsection (1) applies), includes, unless a contrary intention appears, a reference to any other material lodged with the document as required by the relevant form.

             (3)  If:

                     (a)  this Act requires a document to be lodged with ASIC in a prescribed form; and

                     (b)  a provision of this Act either specifies, or provides for regulations to specify, information, statements, explanations or other matters that must be included in the document, or other material that must accompany the document;

that other provision is not taken to exclude or limit the operation of subsection (1) in relation to the prescribed form (and so the prescribed form may also require information etc. to be included in the form or material to accompany the form).

351  Signing documents lodged with ASIC

             (1)  A document lodged with ASIC in writing by, or on behalf of, a body or a registered scheme must be signed by a director or secretary of the body or of the responsible entity of the registered scheme. If the body is a foreign company, it may be signed by:

                     (a)  its local agent; or

                     (b)  if the local agent is a company—a director or secretary of the company.

             (2)  An individual who lodges a document with ASIC in writing must sign it.

             (3)  The person’s name must be printed next to the signature.

352  Documents lodged with ASIC electronically

             (1)  A document may be lodged with ASIC electronically only if:

                     (a)  ASIC and the person seeking to lodge it (either on their own behalf or as agent) have agreed, in writing, that it may be lodged electronically; or

                     (b)  ASIC has approved, in writing, the electronic lodgment of documents of that kind.

The document is taken to be lodged with ASIC if it is lodged in accordance with the agreement or approval (including any requirements of the agreement or approval as to authentication).

          (1A)  For the purposes of paragraph (1)(b), ASIC may approve:

                     (a)  a particular kind of document; or

                     (b)  documents in a particular class of documents.

             (2)  Subsection (1) does not apply to a document covered by section 353 or a notice lodged under subsection 1015D(2).

353  Electronic lodgment of certain documents

             (1)  ASIC may determine conditions in relation to the electronic lodgment of documents:

                     (a)  that must be given to a relevant market operator under section 205G; or

                     (b)  that must be given to ASIC under section 792C.

             (2)  The electronic lodgment of a document covered by a determination under subsection (1) is only effective if the lodgment complies with the conditions determined.

             (3)  ASIC must publish in the Gazette a copy of any determination under subsection (1).

354  Telephone notice of certain changes

             (1)  ASIC may, in its discretion, accept telephone notice of a change to a particular in relation to a company or a registered scheme if:

                     (a)  either:

                              (i)  the change relates to a misspelling or other minor typographical error; or

                             (ii)  the change is to a particular included on a list published by ASIC on the internet for the purposes of this section; and

                     (b)  the notice satisfies the authentication requirements published by ASIC on the internet for the purposes of this section.

             (2)  If ASIC accepts telephone notice of a change to a particular under subsection (1), any obligation elsewhere in this Act to lodge a prescribed form in relation to the change is satisfied by the telephone notice. However, this does not affect the company’s liability for late lodgment fees incurred before the notice is given or continuing offences committed before that time.

Chapter 5—External administration

Part 5.1—Arrangements and reconstructions

  

410  Interpretation

                   A reference in this Part, in relation to a Part 5.1 body, to the directors is a reference to the directors of the body or any one or more of them.

411  Administration of compromises etc.

             (1)  Where a compromise or arrangement is proposed between a Part 5.1 body and its creditors or any class of them or between a Part 5.1 body and its members or any class of them, the Court may, on the application in a summary way of the body or of any creditor or member of the body, or, in the case of a body being wound up, of the liquidator, order a meeting or meetings of the creditors or class of creditors or of the members of the body or class of members to be convened in such manner, and to be held in such place or places (in this jurisdiction or elsewhere), as the Court directs and, where the Court makes such an order, the Court may approve the explanatory statement required by paragraph 412(1)(a) to accompany notices of the meeting or meetings.

          (1A)  Where:

                     (a)  a compromise or arrangement is proposed:

                              (i)  between 30 or more Part 5.1 bodies that are wholly‑owned subsidiaries of a holding company and the creditors or a class of the creditors of each of those subsidiaries; and

                             (ii)  between the holding company and the creditors or a class of the creditors of the holding company; and

                     (b)  the proposed compromise or arrangement in relation to each subsidiary includes a term that orders will be sought under section 413 transferring the whole of the undertaking and of the property and liabilities of the subsidiary to the holding company; and

                     (c)  the Court is satisfied, on the application in a summary way:

                              (i)  of the holding company or of a creditor of the holding company; or

                             (ii)  if the holding company is being wound up—of the liquidator;

                            that the number of meetings that would be required between creditors in order to consider the proposed compromises or arrangements would be so great as to result in a significant impediment to the timely and effective consideration by those creditors of the terms of the compromises or arrangements;

the Court may order a meeting or meetings, on a consolidated basis, of the creditors of the holding company and of each of the subsidiaries or of such class or classes of those creditors as the Court determines and, where the Court makes such an order, the Court may approve the explanatory statement required by paragraph 412(1)(a) to accompany notices of the meeting or meetings.

          (1B)  Where:

                     (a)  there are fewer than 30 wholly‑owned subsidiaries of the holding company but the matters referred to in paragraphs (1A)(b) and (c) are satisfied; and

                     (b)  the Court considers that circumstances exist that would justify its doing so;

the Court may make an order under subsection (1A) in relation to the proposed compromise or arrangement.

          (1C)  Where an order is made under subsection (1A) in relation to a proposed compromise or arrangement, the succeeding provisions of this Part apply to the compromise or arrangement as if:

                     (a)  references in this Part to a company included references to all of the Part 5.1 bodies to which the order relates; and

                     (b)  references in this Part to creditors of a company included references to the creditors of all the Part 5.1 bodies to which the order relates; and

                     (c)  references in this Part to a class of the creditors of a company were references to the relevant class of creditors of all of the Part 5.1 bodies to which the order relates.

             (2)  The Court must not make an order pursuant to an application under subsection (1) or (1A) unless:

                     (a)  14 days notice of the hearing of the application, or such lesser period of notice as the Court or ASIC permits, has been given to ASIC; and

                     (b)  the Court is satisfied that ASIC has had a reasonable opportunity:

                              (i)  to examine the terms of the proposed compromise or arrangement to which the application relates and a draft explanatory statement relating to the proposed compromise or arrangement; and

                             (ii)  to make submissions to the Court in relation to the proposed compromise or arrangement and the draft explanatory statement.

             (3)  In subsection (2), draft explanatory statement, in relation to a proposed compromise or arrangement between a body and its creditors or any class of them or between a body and its members or any class of them, means a statement:

                     (a)  explaining the effect of the proposed compromise or arrangement and, in particular, stating any material interests of the directors of the body, whether as directors, as members or creditors of the body or otherwise, and the effect on those interests of the proposed compromise or arrangement in so far as that effect is different from the effect on the like interests of other persons; and

                     (b)  setting out such information as is prescribed and any other information that is material to the making of a decision by a creditor or member of the body whether or not to agree to the proposed compromise or arrangement, being information that is within the knowledge of the directors of the body and has not previously been disclosed to the creditors or members of the body.

          (3A)  In considering whether to make an order under subsection (1) or (1A) for a meeting to be held outside this jurisdiction, the Court must have regard to where the creditors or members, or the creditors or members included in the class concerned, as the case requires, reside.

             (4)  A compromise or arrangement is binding on the creditors, or on a class of creditors, or on the members, or on a class of members, as the case may be, of the body and on the body or, if the body is in the course of being wound up, on the liquidator and contributories of the body, if, and only if:

                     (a)  at a meeting convened in accordance with an order of the Court under subsection (1) or (1A):

                              (i)  in the case of a compromise or arrangement between a body and its creditors or a class of creditors—the compromise or arrangement is agreed to by a majority in number of the creditors, or of the creditors included in that class of creditors, present and voting, either in person or by proxy, being a majority whose debts or claims against the company amount in the aggregate to at least 75% of the total amount of the debts and claims of the creditors present and voting in person or by proxy, or of the creditors included in that class present and voting in person or by proxy, as the case may be; and

                             (ii)  in the case of a compromise or arrangement between a body and its members or a class of members—a resolution in favour of the compromise or arrangement is:

                                        (A)  unless the Court orders otherwise—passed by a majority in number of the members, or members in that class, present and voting (either in person or by proxy); and

                                        (B)  if the body has a share capital—passed by 75% of the votes cast on the resolution; and

                     (b)  it is approved by order of the Court.

             (5)  Where the Court orders 2 or more meetings of creditors or of a class of creditors, or 2 or more meetings of members or of a class of members, to be held in relation to the proposed compromise or arrangement:

                     (a)  in the case of meetings of creditors—the meetings are, for the purposes of subsection (4), taken together to constitute a single meeting and the votes in favour of the proposed compromise or arrangement cast at each of the meetings are to be aggregated, and the votes against the proposed compromise or arrangement cast at each of the meetings are to be aggregated, accordingly; or

                     (b)  in the case of meetings of members—the meetings are, for the purposes of subsection (4), taken together to constitute a single meeting and the votes in favour of the proposed compromise or arrangement cast at each of the meetings is to be aggregated, and the votes against the proposed compromise or arrangement cast at each of the meetings is to be aggregated, accordingly.

          (5A)  If the compromise or arrangement:

                     (a)  involves creditors of the Part 5.1 body with subordinate claims (within the meaning of subsection 563A(2)); and

                     (b)  is approved by the Court;

those creditors are also bound by the compromise or arrangement despite the fact that a meeting of those creditors has not been ordered by the Court under subsection (1) or (1A).

             (6)  The Court may grant its approval to a compromise or arrangement subject to such alterations or conditions as it thinks just.

          (6A)  If:

                     (a)  the Court has granted its approval to a compromise or arrangement subject to an alteration or condition; and

                     (b)  the body concerned contravenes:

                              (i)  in the case of an alteration—the provision or provisions of the compromise or arrangement to which the alteration relates; or

                             (ii)  in the case of a condition—the condition; and

                     (c)  the Court is satisfied that a person suffered loss or damage as a result of the contravention;

the Court may make such order as it thinks just.

          (6B)  The Court may make either or both of the following orders under subsection (6A):

                     (a)  an order that the body concerned pay compensation to the person of such amount as the order specifies;

                     (b)  an order directing the body concerned to comply with:

                              (i)  in the case of an alteration—the provision or provisions of the compromise or arrangement to which the alteration relates; or

                             (ii)  in the case of a condition—the condition.

          (6C)  Subsection (6B) does not limit subsection (6A).

             (7)  Except with the leave of the Court, a person must not be appointed to administer, and must not administer, a compromise or arrangement approved under this Act between a body and its creditors or any class of them or between a body and its members or any class of them, whether by the terms of that compromise or arrangement or pursuant to a power given by the terms of a compromise or arrangement, if the person:

                     (a)  is a secured party in relation to any property (including PPSA retention of title property) of the body; or

                     (b)  is an auditor of the body; or

                   (ba)  is a director, secretary, senior manager or employee of the body; or

                     (c)  is a director, secretary, senior manager or employee of a body corporate that is a secured party in relation to any property (including PPSA retention of title property) of the body; or

                     (d)  is not a registered liquidator; or

                     (e)  is a director, secretary, senior manager or employee of a body corporate related to the body; or

                      (f)  unless ASIC directs in writing that this paragraph does not apply in relation to the person in relation to the body—has at any time within the last 12 months been an officer or promoter of the body or of a related body corporate.

             (8)  Paragraph (7)(d) does not apply in relation to a body corporate authorised by or under a law of a State or Territory in this jurisdiction to administer the compromise or arrangement concerned.

          (8A)  Subsection (7) does not disqualify a person from administering a compromise or arrangement under an appointment validly made before 1 January 1991.

             (9)  Where a person is or persons are appointed by, or under a power given by, the terms of a compromise or arrangement, to administer the compromise or arrangement:

                     (a)  section 425, subsections 427(2) and (4) and sections 428, 432 and 434 apply in relation to that person or those persons as if:

                              (i)  the appointment of the person or persons to administer the compromise or arrangement were an appointment of the person or persons as a receiver and manager, or as receivers and managers, of property of the body; and

                             (ii)  a reference in any of those sections or subsections to a receiver, or to a receiver of property, of a corporation were a reference to that person or to those persons; and

                     (b)  section 536 applies in relation to that person or those persons as if:

                              (i)  the appointment of the person or persons to administer the compromise or arrangement were an appointment of the person or persons as a liquidator of the body; and

                             (ii)  a reference in that section to a liquidator were a reference to that person or to those persons.

           (10)  An order of the Court made for the purposes of paragraph (4)(b) does not have any effect until an office copy of the order is lodged with ASIC, and upon being so lodged, the order takes effect, or is taken to have taken effect, on and from the date of lodgment or such earlier date as the Court determines and specifies in the order.

           (11)  Subject to subsection (12), a copy of every order of the Court made for the purposes of paragraph (4)(b) must be annexed to every copy of the constitution of the body issued after the order has been made.

           (12)  The Court may, by order, exempt a body from compliance with subsection (11) or determine the period during which the body must comply with that subsection.

           (13)  Where a compromise or arrangement referred to in subsection (1) or (1A) (whether or not for the purposes of or in connection with a scheme for the reconstruction of a body or bodies or the amalgamation of any 2 or more bodies) has been proposed, the directors of the body must:

                     (a)  if a meeting of the members of the body by resolution so directs—instruct such accountants or solicitors or both as are named in the resolution to report on the proposals and send their report or reports to the directors as soon as practicable; and

                     (b)  if a report or reports is or are obtained pursuant to paragraph (a)—make the report or reports available at the registered office of the body for inspection by the shareholders and creditors of the body at least 7 days before the day of the meeting ordered by the Court to be convened as provided in subsection (1) or (1A), as the case may be.

           (14)  If default is made in complying with subsection (11), the body contravenes this subsection.

           (15)  If default is made in complying with subsection (13), each director of the body contravenes this subsection.

           (16)  Where no order has been made or resolution passed for the winding up of a Part 5.1 body and a compromise or arrangement has been proposed between the body and its creditors or any class of them, the Court may, in addition to exercising any of its other powers, on the application in a summary way of the body or of any member or creditor of the body, restrain further proceedings in any action or other civil proceeding against the body except by leave of the Court and subject to such terms as the Court imposes.

           (17)  The Court must not approve a compromise or arrangement under this section unless:

                     (a)  it is satisfied that the compromise or arrangement has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6; or

                     (b)  there is produced to the Court a statement in writing by ASIC stating that ASIC has no objection to the compromise or arrangement;

but the Court need not approve a compromise or arrangement merely because a statement by ASIC stating that ASIC has no objection to the compromise or arrangement has been produced to the Court as mentioned in paragraph (b).

412  Information as to compromise with creditors

             (1)  Where a meeting is convened under section 411, the body must:

                     (a)  with every notice convening the meeting that is sent to a creditor or member, send a statement (in this section called the explanatory statement):

                              (i)  explaining the effect of the compromise or arrangement and, in particular, stating any material interests of the directors, whether as directors, as members or creditors of the body or otherwise, and the effect on those interests of the compromise or arrangement in so far as that effect is different from the effect on the like interests of other persons; and

                             (ii)  setting out such information as is prescribed and any other information that is material to the making of a decision by a creditor or member whether or not to agree to the compromise or arrangement, being information that is within the knowledge of the directors and has not previously been disclosed to the creditors or members; and

                     (b)  in every notice convening the meeting that is given by advertisement or that is published in the prescribed manner, include either a copy of the explanatory statement or a notification of the place at which and the manner in which creditors or members entitled to attend the meeting may obtain copies of the explanatory statement.

             (2)  In the case of a creditor whose debt does not exceed $200, paragraph (1)(a) does not apply unless the Court otherwise orders but the notice convening the meeting that is sent to such a creditor must specify a place at which a copy of the explanatory statement can be obtained on request and, where the creditor makes such a request, the body must as soon as practicable comply with the request.

             (3)  Where the compromise or arrangement affects the rights of debenture holders, the explanatory statement must specify any material interests of the trustees for the debenture holders, whether as such trustees, as members or creditors of the body or otherwise, and the effect on those interests of the compromise or arrangement in so far as that effect is different from the effect on the like interests of other persons.

             (4)  Where a notice given by advertisement, or published in the prescribed manner, includes a notification that copies of the explanatory statement can be obtained in a particular manner, every creditor or member entitled to attend the meeting must, on making application in that matter, be furnished by the body free of charge with a copy of the explanatory statement.

             (5)  Each person who is a director or trustee for debenture holders must give notice to the body of such matters relating to the person as are required to be included in the explanatory statement.

             (6)  In the case of a compromise or arrangement that is not, or does not include, a compromise or arrangement between a Part 5.1 body and its creditors or any class of them, the body must not send out an explanatory statement pursuant to subsection (1) unless a copy of that statement has been registered by ASIC.

             (7)  Where an explanatory statement sent out under subsection (1) is not required by subsection (6) to be registered by ASIC, the Court must not make an order approving the compromise or arrangement unless it is satisfied that ASIC has had a reasonable opportunity to examine the explanatory statement and to make submissions to the Court in relation to that statement.

             (8)  Where a copy of an explanatory statement is lodged with ASIC for registration under subsection (6), ASIC must not register the copy of the statement unless the statement appears to comply with this Act and ASIC is of the opinion that the statement does not contain any matter that is false in a material particular or materially misleading in the form or context in which it appears.

             (9)  Where a body contravenes this section, a person involved in the contravention contravenes this subsection.

           (10)  It is a defence to a prosecution for a contravention of this section if it is proved that the contravention was due to the failure of a person (other than the defendant), being a director of the body or a trustee for debenture holders of the body, to supply for the purposes of the explanatory statement particulars of the person’s interests.

413  Provisions for facilitating reconstruction and amalgamation of Part 5.1 bodies

             (1)  Where an application is made to the Court under this Part for the approval of a compromise or arrangement and it is shown to the Court that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of a Part 5.1 body or Part 5.1 bodies or the amalgamation of 2 or more Part 5.1 bodies and that, under the scheme, the whole or any part of the undertaking or of the property of a body concerned in the scheme (in this section called the transferor body) is to be transferred to a company (in this section called the transferee company), the Court may, either by the order approving the compromise or arrangement or by a later order, provide for all or any of the following matters:

                     (a)  the transfer to the transferee company of the whole or a part of the undertaking and of the property or liabilities of the transferor body;

                     (b)  the allotting or appropriation by the transferee company of shares, debentures, policies or other interests in that company that, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person;

                     (c)  the continuation by or against the transferee company of any legal proceedings pending by or against the transferor body;

                     (d)  if the transferor body is a company—the deregistration by ASIC, without winding up, of the transferor body;

                     (e)  the provision to be made for any persons who, within such time and in such manner as the Court directs, dissent from the compromise or arrangement;

                      (f)  the transfer or allotment of any interest in property to any person concerned in the compromise or arrangement;

                     (g)  such incidental, consequential and supplemental matters as are necessary to ensure that the reconstruction or amalgamation is fully and effectively carried out.

             (2)  Where an order made under this section provides for the transfer of property or liabilities, then, by virtue of the order, that property is transferred to and vests in, and those liabilities are transferred to and become the liabilities of, the transferee company, free, in the case of any particular property if the order so directs, from any security interest that is, by virtue of the compromise or arrangement, to cease to have effect.

             (3)  Where an order is made under this section, each body to which the order relates must, within 14 days after the making of the order, lodge with ASIC an office copy of the order.

             (4)  In this section:

liabilities includes duties of any description, including duties that are of a personal character or are incapable under the general law of being assigned or performed vicariously.

property includes rights and powers of any description, including rights and powers that are of a personal character and are incapable under the general law of being assigned or performed vicariously.

414  Acquisition of shares of shareholders dissenting from scheme or contract approved by majority

             (1)  In this section:

dissenting shareholder, in relation to a scheme or contract, means a shareholder who has not assented to the scheme or contract or who has failed to transfer his, her or its shares in accordance with the scheme or contract.

excluded shares, in relation to a scheme or contract involving a transfer to a person of shares in a class of shares in a company, means shares in that class that, when the offer relating to the scheme or contract is made, are held by:

                     (a)  in any case—the person or a nominee of the person; or

                     (b)  if the person is a body corporate—a subsidiary of the body.

             (2)  Where a scheme or contract (not being a scheme or contract arising out of the making of offers under a takeover bid) involving a transfer of shares in a class of shares in a company (in this section called the transferor company) to a person (in this section called the transferee) has, within 4 months after the making of the offer relating to the scheme or contract by the transferee, been approved by members holding shares in that class carrying at least 90% of the votes attached to shares in that class (other than excluded shares), the transferee may, within 2 months after the offer has been so approved, give notice as prescribed to a dissenting shareholder that the transferee wishes to acquire the shares held by that shareholder.

             (3)  Where such a notice is given, then, unless the Court orders otherwise on an application by a dissenting shareholder made within one month after the day on which the notice was given or within 14 days after a statement is supplied under subsection (7) to a dissenting shareholder, whichever is the later, the transferee is entitled and bound, subject to this section, to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders are to be transferred to the transferee.

             (4)  Where alternative terms were offered to the approving shareholders, the dissenting shareholder is entitled to elect not later than the end of one month after the date on which the notice is given under subsection (2) or 14 days after a statement is supplied under subsection (7), whichever is the later, which of those terms he, she or it prefers and, if he, she or it fails to make the election within the time allowed by this subsection, the transferee may, unless the Court otherwise orders, determine which of those terms is to apply to the acquisition of the shares of the dissenting shareholder.

             (5)  Despite subsections (3) and (4), if the number of votes attached to the excluded shares is more than 10% of the votes attached to the excluded shares and the shares (other than excluded shares) to be transferred under the scheme or contract, those subsections do not apply unless:

                     (a)  the transferee offers the same terms to all holders of the shares (other than excluded shares) to be transferred under the scheme or contract; and

                     (b)  the holders who approve the scheme or contract hold shares to which are attached at least 90% of the votes attached to the shares (other than excluded shares) to be transferred under the scheme or contract and are also at least 75% in number of the holders of those shares.

             (6)  For the purposes of paragraph (5)(b), 2 or more persons registered as holding shares jointly are to be counted as one person.

             (7)  When a notice is given under subsection (2), the dissenting shareholder may, by written notice given to the transferee within one month after the day on which the notice was given under subsection (2), ask for a statement in writing of the names and addresses of all other dissenting shareholders as shown in the register of members.

             (8)  Where a notice is given under subsection (7), the transferee must comply with it.

             (9)  Where, under a scheme or contract referred to in subsection (2), the transferee becomes beneficially entitled to shares in the transferor company which, together with any other shares in the transferor company to which the transferee or, where the transferee is a body corporate, a body corporate related to the transferee is beneficially entitled, have attached to them at least 90% of the votes attached to the shares included in the class of shares concerned, then:

                     (a)  the transferee must, within one month after the date on which he, she or it becomes beneficially entitled to those shares (unless in relation to the scheme or contract he, she or it has already complied with this requirement), give notice of the fact as prescribed to the holders of the remaining shares included in that class who, when the notice was given, had not assented to the scheme or contract or been given notice by the transferee under subsection (2); and

                     (b)  such a holder may, within 3 months after the giving of the notice to him, her or it by notice to the transferee, require the transferee to acquire his, her or its share and, where alternative terms were offered to the approving shareholders, elect which of those terms he, she or it will accept.

           (10)  Where a shareholder gives notice under paragraph (9)(b) with respect to his, her or its shares, the transferee is entitled and bound to acquire those shares:

                     (a)  on the terms on which under the scheme or contract the shares of the approving shareholders were transferred to him, her or it and, where alternative terms were offered to those shareholders, on the terms for which the shareholder has elected, or where he, she or it has not so elected, for whichever of the terms the transferee determines; or

                     (b)  on such other terms as are agreed or as the Court, on the application of the transferee or of the shareholder, thinks fit to order.

           (11)  Subsections (12) and (13) apply where a notice has been given under subsection (1) unless the Court, on an application made by the dissenting shareholder, orders to the contrary.

           (12)  The transferee must, within 14 days after:

                     (a)  the end of one month after the day on which the notice was given; or

                     (b)  the end of 14 days after a statement under subsection (7) is supplied; or

                     (c)  if an application has been made to the Court by a dissenting shareholder—the application is disposed of;

whichever last happens:

                     (d)  send a copy of the notice to the transferor company together with an instrument of transfer that relates to the shares that the transferee is entitled to acquire under this section and is executed, on the shareholder’s behalf, by a person appointed by the transferee and, on the transferee’s own behalf, by the transferee; and

                     (e)  pay, allot or transfer to the transferor company the consideration for the shares.

           (13)  When the transferee has complied with subsection (12), the transferor company must register the transferee as the holder of the shares.

           (14)  All sums received by the transferor company under this section must be paid into a separate bank account and those sums, and any other consideration so received, must be held by that company in trust for the several persons entitled to the shares in respect of which they were respectively received.

           (15)  Where a sum or other property received by a company under this section has been held in trust by the company for a person for at least 2 years (whether or not that period began before the commencement of this Act), the company must, before the end of 10 years after the day on which the sum was paid, or the consideration was allotted or transferred, to the company, pay the sum or transfer the consideration, and any accretions to it and any property that may become substituted for it or for part of it, to ASIC to be dealt with under Part 9.7.

415  Notification of appointment of scheme manager and power of Court to require report

             (1)  Within 14 days after being appointed to administer a compromise or arrangement approved under this Part, a person must lodge a notice in writing of the appointment.

             (2)  Where an application is made to the Court under this Part in relation to a proposed compromise or arrangement, the Court may:

                     (a)  before making any order on the application, require ASIC or another person specified by the Court to give to the Court a report as to the terms of the compromise or arrangement or of the scheme for the purposes of or in connection with which the compromise or arrangement has been proposed, the conduct of the officers of the body or bodies concerned and any other matters that, in the opinion of ASIC or that person, ought to be brought to the attention of the Court;

                     (b)  in deciding the application, have regard to anything contained in the report; and

                     (c)  make such order or orders as to the payment of the costs of preparing and giving the report as the Court thinks fit.

Part 5.2—Receivers, and other controllers, of property of corporations

  

416  Definitions

                   In this Part, unless the contrary intention appears:

officer, in relation to a registered foreign company, includes a local agent of the foreign company.

property, in relation to a corporation, means property:

                     (a)  in the case of a company—in Australia or outside Australia; or

                     (b)  in the case of a registered foreign company—in this jurisdiction or an external Territory; or

                     (c)  in the case of a registrable Australian body—in this jurisdiction but outside the body’s place of origin.

receiver, in relation to property of a corporation, includes a receiver and manager.

417  Application of Part

             (1)  Except so far as the contrary intention appears in this Part or Part 11.2, this Part applies in relation to a receiver of property of a corporation who is appointed after 1 January 1991, even if the appointment arose out of a transaction entered into, or an act or thing done, before 1 January 1991.

             (2)  To avoid doubt, this Part does not apply, of its own force, to the property of a corporation that is an Aboriginal and Torres Strait Islander corporation.

Note 1:       The definition of property in section 416 does not define that term in relation to a corporation that is an Aboriginal and Torres Strait Islander corporation.

Note 2:       Section 516‑1 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 applies this Part to a corporation that is an Aboriginal and Torres Strait Islander corporation with the modifications provided for in that section.

418  Persons not to act as receivers

             (1)  A person is not qualified to be appointed, and must not act, as receiver of property of a corporation if the person:

                     (a)  is a secured party in relation to any property (including PPSA retention of title property) of the corporation; or

                     (b)  is an auditor or a director, secretary, senior manager or employee of the corporation; or

                     (c)  is a director, secretary, senior manager or employee of a body corporate that is a secured party in relation to any property (including PPSA retention of title property) of the corporation; or

                     (d)  is not a registered liquidator; or

                     (e)  is a director, secretary, senior manager or employee of a body corporate related to the corporation; or

                      (f)  unless ASIC directs in writing that this paragraph does not apply in relation to the person in relation to the corporation—has at any time within the last 12 months been a director, secretary, senior manager, employee or promoter of the corporation or of a related body corporate.

             (3)  Paragraph (1)(d) does not apply in relation to a body corporate authorised by or under a law of the Commonwealth, of a State or of a Territory to act as receiver of property of the corporation concerned.

418A  Court may declare whether controller is validly acting

             (1)  Where there is doubt, on a specific ground, about:

                     (a)  whether a purported appointment of a person, after 23 June 1993, as receiver of property of a corporation is valid; or

                     (b)  whether a person who has entered into possession, or assumed control, of property of a corporation after 23 June 1993 did so validly under the terms of a security interest in that property;

the person, the corporation or any of the corporation’s creditors may apply to the Court for an order under subsection (2).

             (2)  On an application, the Court may make an order declaring whether or not:

                     (a)  the purported appointment was valid; or

                     (b)  the person entered into possession, or assumed control, validly under the terms of the security interest;

as the case may be, on the ground specified in the application or on some other ground.

419  Liability of controller

             (1)  A receiver, or any other authorised person, who, whether as agent for the corporation concerned or not, enters into possession or assumes control of any property of a corporation for the purpose of enforcing any security interest is, notwithstanding any agreement to the contrary, but without prejudice to the person’s rights against the corporation or any other person, liable for debts incurred by the person in the course of the receivership, possession or control for services rendered, goods purchased or property hired, leased (including a lease of goods that gives rise to a PPSA security interest in the goods), used or occupied.

             (2)  Subsection (1) does not constitute the person entitled to the security interest a mortgagee in possession.

             (3)  Where:

                     (a)  a person (in this subsection called the controller) enters into possession or assumes control of property of a corporation; and

                     (b)  the controller purports to have been properly appointed as a receiver in respect of that property under a power contained in an instrument, but has not been properly so appointed; and

                     (c)  civil proceedings in an Australian court arise out of an act alleged to have been done by the controller;

the court may, if it is satisfied that the controller believed on reasonable grounds that the controller had been properly so appointed, order that:

                     (d)  the controller be relieved in whole or in part of a liability that the controller has incurred but would not have incurred if the controller had been properly so appointed; and

                     (e)  a person who purported to appoint the controller as receiver be liable in respect of an act, matter or thing in so far as the controller has been relieved under paragraph (d) of liability in respect of that act, matter or thing.

419A  Liability of controller under pre‑existing agreement about property used by corporation

             (1)  This section applies if:

                     (a)  under an agreement made before the control day in relation to a controller of property of a corporation, the corporation continues after that day to use or occupy, or to be in possession of, property (the third party property) of which someone else is the owner or lessor; and

                     (b)  the controller is controller of the third party property.

             (2)  Subject to subsections (4) and (7), the controller is liable for so much of the rent or other amounts payable by the corporation under the agreement as is attributable to a period:

                     (a)  that begins more than 7 days after the control day; and

                     (b)  throughout which:

                              (i)  the corporation continues to use or occupy, or to be in possession of, the third party property; and

                             (ii)  the controller is controller of the third party property.

             (3)  Within 7 days after the control day, the controller may give to the owner or lessor a notice that specifies the third party property and states that the controller does not propose to exercise rights in relation to that property as controller of the property, whether on behalf of the corporation or anyone else.

             (4)  Despite subsection (2), the controller is not liable for so much of the rent or other amounts payable by the corporation under the agreement as is attributable to a period during which a notice under subsection (3) is in force, but such a notice does not affect a liability of the corporation.

             (5)  A notice under subsection (3) ceases to have effect if:

                     (a)  the controller revokes it by writing given to the owner or lessor; or

                     (b)  the controller exercises, or purports to exercise, a right in relation to the third party property as controller of the property, whether on behalf of the corporation or anyone else.

             (6)  For the purposes of subsection (5), the controller does not exercise, or purport to exercise, a right as mentioned in paragraph (5)(b) merely because the controller continues to be in possession, or to have control, of the third party property, unless the controller:

                     (a)  also uses the property; or

                     (b)  asserts a right, as against the owner or lessor, so to continue.

             (7)  Subsection (2) does not apply in so far as a court, by order, excuses the controller from liability, but an order does not affect a liability of the corporation.

             (8)  The controller is not taken because of subsection (2):

                     (a)  to have adopted the agreement; or

                     (b)  to be liable under the agreement otherwise than as mentioned in subsection (2).

420  Powers of receiver

             (1)  Subject to this section, a receiver of property of a corporation has power to do, in Australia and elsewhere, all things necessary or convenient to be done for or in connection with, or as incidental to, the attainment of the objectives for which the receiver was appointed.

             (2)  Without limiting the generality of subsection (1), but subject to any provision of the court order by which, or the instrument under which, the receiver was appointed, being a provision that limits the receiver’s powers in any way, a receiver of property of a corporation has, in addition to any powers conferred by that order or instrument, as the case may be, or by any other law, power, for the purpose of attaining the objectives for which the receiver was appointed:

                     (a)  to enter into possession and take control of property of the corporation in accordance with the terms of that order or instrument; and

                     (b)  to lease, let on hire or dispose of property of the corporation; and

                     (c)  to grant options over property of the corporation on such conditions as the receiver thinks fit; and

                     (d)  to borrow money on the security of property of the corporation; and

                     (e)  to insure property of the corporation; and

                      (f)  to repair, renew or enlarge property of the corporation; and

                     (g)  to convert property of the corporation into money; and

                     (h)  to carry on any business of the corporation; and

                      (j)  to take on lease or on hire, or to acquire, any property necessary or convenient in connection with the carrying on of a business of the corporation; and

                     (k)  to execute any document, bring or defend any proceedings or do any other act or thing in the name of and on behalf of the corporation; and

                    (m)  to draw, accept, make and indorse a bill of exchange or promissory note; and

                     (n)  to use a seal of the corporation; and

                     (o)  to engage or discharge employees on behalf of the corporation; and

                     (p)  to appoint a solicitor, accountant or other professionally qualified person to assist the receiver; and

                     (q)  to appoint an agent to do any business that the receiver is unable to do, or that it is unreasonable to expect the receiver to do, in person; and

                      (r)  where a debt or liability is owed to the corporation—to prove the debt or liability in a bankruptcy, insolvency or winding up and, in connection therewith, to receive dividends and to assent to a proposal for a composition or a scheme of arrangement; and

                      (s)  if the receiver was appointed under an instrument that created a security interest in uncalled share capital of the corporation:

                              (i)  to make a call in the name of the corporation for the payment of money unpaid on the corporation’s shares; or

                             (ii)  on giving a proper indemnity to a liquidator of the corporation—to make a call in the liquidator’s name for the payment of money unpaid on the corporation’s shares; and

                      (t)  to enforce payment of any call that is due and unpaid, whether the calls were made by the receiver or otherwise; and

                     (u)  to make or defend an application for the winding up of the corporation; and

                    (w)  to refer to arbitration any question affecting the corporation.

             (3)  The conferring by this section on a receiver of powers in relation to property of a corporation does not affect any rights in relation to that property of any other person other than the corporation.

             (4)  In this section, a reference, in relation to a receiver, to property of a corporation is, unless the contrary intention appears, a reference to the property of the corporation in relation to which the receiver was appointed.

             (5)  In this section:

lease includes a lease of goods that gives rise to a PPSA security interest in the goods.

420A  Controller’s duty of care in exercising power of sale

             (1)  In exercising a power of sale in respect of property of a corporation, a controller must take all reasonable care to sell the property for:

                     (a)  if, when it is sold, it has a market value—not less than that market value; or

                     (b)  otherwise—the best price that is reasonably obtainable, having regard to the circumstances existing when the property is sold.

             (2)  Nothing in subsection (1) limits the generality of anything in section 180, 181, 182, 183 or 184.

420B  Court may authorise managing controller to dispose of property despite prior security interest

             (1)  On the application of a managing controller of property of a corporation, the Court may by order authorise the controller to sell, or to dispose of in some other specified way, specified property of the corporation, even though it is subject to a security interest (the prior security interest) that has priority over a security interest (the controller’s security interest) in that property that the controller is enforcing.

             (2)  However, the Court may only make an order if satisfied that:

                     (a)  apart from the existence of the prior security interest, the controller would have power to sell, or to so dispose of, the property; and

                     (b)  the controller has taken all reasonable steps to obtain the consent of the secured party in relation to the prior security interest to the sale or disposal, but has not obtained that consent; and

                     (c)  sale or disposal of the property under the order is in the best interests of the corporation’s creditors and of the corporation; and

                     (d)  sale or disposal of the property under the order will not unreasonably prejudice the rights or interests of the secured party in relation to the prior security interest.

             (3)  The Court is to have regard to the need to protect adequately the rights and interests of the secured party in relation to the prior security interest.

             (4)  If the property would be sold or disposed of together with other property that is subject to the controller’s security interest, the Court may have regard to:

                     (a)  the amount (if any) by which it is reasonable to expect that the net proceeds of selling or disposing of that other property otherwise than together with the first‑mentioned property would be less than so much of the net proceeds of selling or disposing of all the property together as would be attributable to that other property; and

                     (b)  the amount (if any) by which it is reasonable to expect that the net proceeds of selling or disposing of the first‑mentioned property otherwise than together with the other property would be greater than so much of the net proceeds of selling or disposing of all the property together as would be attributable to the first‑mentioned property.

             (5)  Nothing in subsection (3) or (4) limits the matters to which the Court may have regard for the purposes of subsection (2).

             (6)  An order may be made subject to conditions, for example (but without limitation):

                     (a)  a condition that:

                              (i)  the net proceeds of the sale or disposal; and

                             (ii)  the net proceeds of the sale or disposal of such other property (if any) as is specified in the condition and is subject to the controller’s security interest;

                            or a specified part of those net proceeds, be applied in payment of specified amounts secured by the prior security interest; or

                     (b)  a condition that the controller apply a specified amount in payment of specified amounts secured by the prior security interest.

420C  Receiver’s power to carry on corporation’s business during winding up

             (1)  A receiver of property of a corporation that is being wound up may:

                     (a)  with the written approval of the corporation’s liquidator or with the approval of the Court, carry on the corporation’s business either generally or as otherwise specified in the approval; and

                     (b)  do whatever is necessarily incidental to carrying on that business under paragraph (a).

             (2)  Subsection (1) does not:

                     (a)  affect a power that the receiver has otherwise than under that subsection; or

                     (b)  empower the receiver to do an act that he or she would not have power to do if the corporation were not being wound up.

             (3)  A receiver of property of a corporation who carries on the corporation’s business under subsection (1) does so:

                     (a)  as agent for the corporation; and

                     (b)  in his or her capacity as receiver of property of the corporation.

             (4)  The consequences of subsection (3) include, but are not limited to, the following:

                     (a)  for the purposes of subsection 419(1), a debt that the receiver incurs in carrying on the business as mentioned in subsection (3) of this section is incurred in the course of the receivership;

                     (b)  a debt or liability that the receiver incurs in so carrying on the business is not a cost, charge or expense of the winding up.

421  Managing controller’s duties in relation to bank accounts and financial records

             (1)  A managing controller of property of a corporation must:

                     (a)  open and maintain an account, with an Australian ADI, bearing:

                              (i)  the managing controller’s own name; and

                             (ii)  in the case of a receiver of the property—the title “receiver”; and

                            (iii)  otherwise—the title “managing controller”; and

                            (iv)  the corporation’s name;

                            or 2 or more such accounts; and

                     (b)  within 3 business days after money of the corporation comes under the control of the managing controller, pay that money into such an account that the managing controller maintains; and

                     (c)  ensure that no such account that the managing controller maintains contains money other than money of the corporation that comes under the control of the managing controller; and

                     (d)  keep such financial records as correctly record and explain all transactions that the managing controller enters into as the managing controller.

             (2)  Any director, creditor or member of a corporation may, unless the Court otherwise orders, personally or by an agent, inspect records kept by a managing controller of property of the corporation for the purposes of paragraph (1)(d).

421A  Managing controller to report within 2 months about corporation’s affairs

             (1)  A managing controller of property of a corporation must prepare a report about the corporation’s affairs that is in the prescribed form and is made up to a day not later than 30 days before the day when it is prepared.

             (2)  The managing controller must prepare and lodge the report within 2 months after the control day.

             (4)  If, in the managing controller’s opinion, it would seriously prejudice:

                     (a)  the corporation’s interests; or

                     (b)  the achievement of the objectives for which the controller was appointed, or entered into possession or assumed control of property of the corporation, as the case requires;

if particular information that the controller would otherwise include in the report were made available to the public, the controller need not include the information in the report.

             (5)  If the managing controller omits information from the report as permitted by subsection (4), the controller must include instead a notice:

                     (a)  stating that certain information has been omitted from the report; and

                     (b)  summarising what the information is about, but without disclosing the information itself.

422  Reports by receiver or managing controller

             (1)  If it appears to the receiver or managing controller of property of a corporation that:

                     (a)  a past or present officer or employee, or a member, of the corporation may have been guilty of an offence in relation to the corporation; or

                     (b)  a person who has taken part in the formation, promotion, administration, management or winding up of the corporation:

                              (i)  may have misapplied or retained, or may have become liable or accountable for, any money or property (whether the property is in Australia or elsewhere) of the corporation; or

                             (ii)  may have been guilty of any negligence, default, breach of duty or breach of trust in relation to the corporation;

the receiver or managing controller must:

                     (c)  lodge as soon as practicable a report about the matter; and

                     (d)  give to ASIC such information, and such access to and facilities for inspecting and taking copies of any documents, as ASIC requires.

             (2)  The receiver or managing controller may also lodge further reports specifying any other matter that, in the opinion of the receiver or managing controller, it is desirable to bring to the notice of ASIC.

             (3)  If it appears to the Court:

                     (a)  that a past or present officer or employee, or a member, of a corporation in respect of property of which a receiver has been appointed has been guilty of an offence in relation to the corporation; or

                     (b)  that a person who has taken part in the formation, promotion, administration, management or winding up of a corporation in respect of property of which a receiver has been appointed has engaged in conduct referred to in paragraph (1)(b) in relation to the corporation;

and that the receiver has not lodged a report about the matter, the Court may, on the application of a person interested in the appointment of the receiver, direct the receiver to lodge such a report.

             (4)  If:

                     (a)  there is a managing controller in relation to property of a corporation; and

                     (b)  it appears to the Court that:

                              (i)  a past or present officer or employee, or a member, of the corporation has been guilty of an offence in relation to the corporation; or

                             (ii)  a person who has taken part in the formation, promotion, administration, management or winding up of the corporation has engaged in conduct referred to in paragraph (1)(b) in relation to the corporation; and

                     (c)  it appears to the Court that the managing controller has not lodged a report about the matter;

the Court may, on the application of a person interested in the appointment of the managing controller, direct the managing controller to lodge such a report.

423  Supervision of controller

             (1)  If:

                     (a)  it appears to the Court or to ASIC that a controller of property of a corporation has not faithfully performed, or is not faithfully performing, the controller’s functions or has not observed, or is not observing, a requirement of:

                              (i)  in the case of a receiver—the order by which, or the instrument under which, the receiver was appointed; or

                             (ii)  otherwise—an instrument under which the controller entered into possession, or took control, of that property; or

                            (iii)  in any case—the Court; or

                            (iv)  in any case—this Act, the regulations or the rules; or

                     (b)  a person complains to the Court or to ASIC about an act or omission of a controller of property of a corporation in connection with performing or exercising any of the controller’s functions and powers;

the Court or ASIC, as the case may be, may inquire into the matter and, where the Court or ASIC so inquires, the Court may take such action as it thinks fit.

             (2)  ASIC may report to the Court any matter that in its opinion is a misfeasance, neglect or omission on the part of a controller of property of a corporation and the Court may order the controller to make good any loss that the estate of the corporation has sustained thereby and may make such other order or orders as it thinks fit.

             (3)  The Court may at any time:

                     (a)  require a controller of property of a corporation to answer questions about the performance or exercise of any of the controller’s functions and powers as controller; or

                     (b)  examine a person about the performance or exercise by such a controller of any of the controller’s functions and powers as controller; or

                     (c)  direct an investigation to be made of such a controller’s books.

424  Controller may apply to Court

             (1)  A controller of property of a corporation may apply to the Court for directions in relation to any matter arising in connection with the performance or exercise of any of the controller’s functions and powers as controller.

             (2)  In the case of a receiver of property of a corporation, subsection (1) applies only if the receiver was appointed under a power contained in an instrument.

425  Court’s power to fix receiver’s remuneration

             (1)  The Court may by order fix the amount to be paid by way of remuneration to any person who, under a power contained in an instrument, has been appointed as receiver of property of a corporation.

             (2)  The power of the Court to make an order under this section:

                     (a)  extends to fixing the remuneration for any period before the making of the order or the application for the order; and

                     (b)  is exercisable even if the receiver has died, or ceased to act, before the making of the order or the application for the order; and

                     (c)  if the receiver has been paid or has retained for the receiver’s remuneration for any period before the making of the order any amount in excess of that fixed for that period—extends to requiring the receiver or the receiver’s personal representatives to account for the excess or such part of the excess as is specified in the order.

             (3)  The power conferred by paragraph (2)(c) must not be exercised in respect of any period before the making of the application for the order unless, in the opinion of the Court, there are special circumstances making it proper for the power to be so exercised.

             (4)  The Court may from time to time vary or amend an order under this section.

             (5)  An order under this section may be made, varied or amended on the application of:

                     (a)  a liquidator of the corporation; or

                     (b)  an administrator of the corporation; or

                     (c)  an administrator of a deed of company arrangement executed by the corporation; or

                     (d)  ASIC.

             (6)  An order under this section may be varied or amended on the application of the receiver concerned.

             (7)  An order under this section may be made, varied or amended only as provided in subsections (5) and (6).

             (8)  In exercising its powers under this section, the Court must have regard to whether the remuneration is reasonable, taking into account any or all of the following matters:

                     (a)  the extent to which the work performed by the receiver was reasonably necessary;

                     (b)  the extent to which the work likely to be performed by the receiver is likely to be reasonably necessary;

                     (c)  the period during which the work was, or is likely to be, performed by the receiver;

                     (d)  the quality of the work performed, or likely to be performed, by the receiver;

                     (e)  the complexity (or otherwise) of the work performed, or likely to be performed, by the receiver;

                      (f)  the extent (if any) to which the receiver was, or is likely to be, required to deal with extraordinary issues;

                     (g)  the extent (if any) to which the receiver was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case;

                     (h)  the value and nature of any property dealt with, or likely to be dealt with, by the receiver;

                      (i)  whether the receiver was, or is likely to be, required to deal with:

                              (i)  one or more other receivers; or

                             (ii)  one or more receivers and managers; or

                            (iii)  one or more liquidators; or

                            (iv)  one or more administrators; or

                             (v)  one or more administrators of deeds of company arrangement;

                      (j)  the number, attributes and behaviour, or the likely number, attributes and behaviour, of the company’s creditors;

                     (k)  if the remuneration is ascertained, in whole or in part, on a time basis:

                              (i)  the time properly taken, or likely to be properly taken, by the receiver in performing the work; and

                             (ii)  whether the total remuneration payable to the receiver is capped;

                      (l)  any other relevant matters.

426  Controller has qualified privilege in certain cases

                   A controller of property of a corporation has qualified privilege in respect of:

                     (a)  a matter contained in a report that the controller lodges under section 421A or 422; or

                     (b)  a comment that the controller makes under paragraph 429(2)(c).

427  Notification of matters relating to controller

             (1)  A person who:

                     (a)  obtains an order for the appointment of a receiver of property of a corporation; or

                     (b)  appoints such a receiver under a power contained in an instrument;

must, within 7 days after obtaining the order or making the appointment, lodge notice that the order has been obtained, or that the appointment has been made, as the case may be.

          (1A)  A person who appoints another person to enter into possession, or take control, of property of a corporation (whether or not as agent for the corporation) for the purpose of enforcing a security interest otherwise than as receiver of that property must, within 7 days after making the appointment, lodge notice of the appointment.

          (1B)  A person who enters into possession, or takes control, as mentioned in subsection (1A) must, within 7 days after entering into possession or taking control, lodge notice that the person has done so, unless another person:

                     (a)  appointed the first‑mentioned person so to enter into possession or take control; and

                     (b)  complies with subsection (1A) in relation to the appointment.

             (2)  Within 14 days after becoming a controller of property of a corporation, a person must lodge notice in the prescribed form of the address of the person’s office.

             (3)  A controller of property of a corporation must, within 14 days after a change in the situation of the controller’s office, lodge notice in the prescribed form of the change.

             (4)  A person who ceases to be a controller of property of a corporation must, within 7 days after so ceasing, lodge notice that the person has so ceased.

428  Statement that receiver appointed or other controller acting

             (1)  Where a receiver of property (whether in or outside this jurisdiction or in or outside Australia) of a corporation has been appointed, the corporation must set out, in every public document, and in every negotiable instrument, of the corporation, after the name of the corporation where it first appears, a statement that a receiver, or a receiver and manager, as the case requires, has been appointed.

             (2)  Where there is a controller (other than a receiver) of property (whether in Australia or elsewhere) of a corporation, the corporation must set out, in every public document, and in every negotiable instrument, of the corporation, after the corporation’s name where it first appears, a statement that a controller is acting.

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

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

429  Officers to report to controller about corporation’s affairs

             (1)  In this section:

reporting officer, in relation to a corporation in respect of property of which a person is controller, means a person who was:

                     (a)  in the case of a company or registrable Australian body—a director or secretary of the company or registrable Australian body; or

                     (b)  in the case of a foreign company—a local agent of the foreign company;

on the control day.

             (2)  Where a person becomes a controller of property of a corporation:

                     (a)  the person must serve on the corporation as soon as practicable notice that the person is a controller of property of the corporation; and

                     (b)  within 14 days after the corporation receives the notice, the reporting officers must make out and submit to the person a report in the prescribed form about the affairs of the corporation as at the control day; and

                     (c)  the person must, within one month after receipt of the report:

                              (i)  lodge a copy of the report and a notice setting out any comments the person sees fit to make relating to the report or, if the person does not see fit to make any comment, a notice stating that the person does not see fit to make any comment; and

                             (ii)  send to the corporation a copy of the notice lodged in accordance with subparagraph (i); and

                            (iii)  if the person became a controller of the property:

                                        (A)  because of an appointment as receiver of the property that was made by or on behalf of the holder of debentures of the corporation; or

                                        (B)  by entering into possession, or taking control, of the property for the purpose of enforcing a security interest securing such debentures;

                                   and there are trustees for the holders of those debentures—send to those trustees a copy of the report and a copy of the notice lodged under subparagraph (i).

             (3)  Where notice has been served on a corporation under paragraph (2)(a), the reporting officers may apply to the controller or to the Court to extend the period within which the report is to be submitted and:

                     (a)  if application is made to the controller—if the controller believes that there are special reasons for so doing, the controller may, by notice in writing given to the reporting officers, extend that period until a specified day; and

                     (b)  if application is made to the Court—if the Court believes that there are special reasons for so doing, the Court may, by order, extend that period until a specified day.

             (4)  As soon as practicable after granting an extension under paragraph (3)(a), the controller must lodge a copy of the notice.

             (5)  As soon as practicable after the Court grants an extension under paragraph (3)(b), the reporting officers must lodge a copy of the order.

             (6)  Subsections (2), (3) and (4) do not apply in a case where a person becomes a controller of property of a corporation:

                     (a)  to act with an existing controller of property of the corporation; or

                     (b)  in place of a controller of such property who has died or ceased to be a controller of such property.

          (6A)  However, if subsection (2) applies in a case where a controller of property of a corporation dies, or ceases to be a controller of property of the corporation, before subsection (2) is fully complied with, then:

                     (a)  the references in paragraphs (2)(b) and (c) to the person; and

                     (b)  the references in subsections (3) and (4) to the controller;

include references to the controller’s successor and to any continuing controller.

             (7)  Where a corporation is being wound up, this section (including subsection (6A)) and section 430 apply even if the controller and the liquidator are the same person, but with any necessary modifications arising from that fact.

430  Controller may require reports

             (1)  A controller of property of a corporation may, by notice given to the person or persons, require one or more persons included in one or more of the following classes of persons to make out as required by the notice, verify by a statement in writing in the prescribed form, and submit to the controller, a report, containing such information as is specified in the notice as to the affairs of the corporation or as to such of those affairs as are specified in the notice, as at a date specified in the notice:

                     (a)  persons who are or have been officers of the corporation;

                     (b)  where the corporation was incorporated within one year before the control day—persons who have taken part in the formation of the corporation;

                     (c)  persons who are employed by the corporation or have been so employed within one year before the control day and are, in the opinion of the controller, capable of giving the information required;

                     (d)  persons who are, or have been within one year before the control day, officers of, or employed by, a corporation that is, or within that year was, an officer of the corporation.

             (2)  Without limiting the generality of subsection (1), a notice under that subsection may specify the information that the controller requires as to affairs of the corporation by reference to information that this Act requires to be included in any other report, statement or notice under this Act.

             (3)  A person making a report and verifying it as required by subsection (1) must, subject to the regulations, be allowed, and must be paid by the controller (or the controller’s successor) out of the controller’s receipts, such costs and expenses incurred in and about the preparation and making of the report and the verification of the report as the controller (or the controller’s successor) considers reasonable.

             (4)  A person must comply with a requirement made under subsection (1).

             (5)  A reference in this section to the controller’s successor includes a reference to a continuing controller.

431  Controller may inspect books

                   A controller of property of a corporation is entitled to inspect at any reasonable time any books of the corporation that relate to that property and a person must not fail to allow the controller to inspect such books at such a time.

432  Lodging controller’s accounts

             (1)  A controller of property of a corporation must lodge an account:

                     (a)  within one month after the end of:

                              (i)  6 months, or such shorter period as the controller determines, after the day when the controller became a controller of property of the corporation; and

                             (ii)  each subsequent period of 6 months throughout which the controller is a controller of property of the corporation; and

                     (b)  within one month after the controller ceases to be a controller of property of the corporation.

          (1A)  An account must be in the prescribed form and show:

                     (a)  the controller’s receipts and payments during:

                              (i)  in the case of an account under paragraph (1)(a)—the 6 months or shorter period, as the case requires; or

                             (ii)  in the case of an account under paragraph (1)(b)—the period beginning at the end of the period to which the last account related, or on the control day, as the case requires, and ending on the day when the controller so ceased; and

                     (b)  except in the case of an account lodged under subparagraph (1)(a)(i)—the respective aggregates of the controller’s receipts and payments since the control day; and

                     (c)  in the case of:

                              (i)  a receiver appointed under a power contained in an instrument; or

                             (ii)  anyone else who is in possession, or has control, of property of the corporation for the purpose of enforcing a security interest;

                            the following:

                            (iii)  the amount (if any) owing under that instrument or security interest:

                                        (A)  in the case of an account lodged under subparagraph (1)(a)(i)—at the end of the control day and at the end of the period to which the account relates; or

                                        (B)  otherwise—at the end of the period to which the account relates;

                            (iv)  the controller’s estimate of the total value, at the end of the period to which the account relates, of the property of the corporation that is subject to the instrument or security interest.

             (2)  ASIC may, of its own motion or on the application of the corporation or a creditor of the corporation, cause the accounts lodged in accordance with subsection (1) to be audited by a registered company auditor appointed by ASIC and, for the purpose of the audit, the controller must furnish the auditor with such books and information as the auditor requires.

             (3)  Where ASIC causes the accounts to be audited on the request of the corporation or a creditor, ASIC may require the corporation or creditor, as the case may be, to give security for the payment of the cost of the audit.

             (4)  The costs of an audit under subsection (2) must be fixed by ASIC and ASIC may if it thinks fit make an order declaring that, for the purposes of subsection 419(1), those costs are taken to be a debt incurred by the controller as mentioned in subsection 419(1) and, where such an order is made, the controller is liable accordingly.

             (5)  A person must comply with a requirement made under this section.

433  Property subject to circulating security interest—payment of certain debts to have priority

             (2)  This section applies where:

                     (a)  a receiver is appointed on behalf of the holders of any debentures of a company or registered body that are secured by a circulating security interest, or possession is taken or control is assumed, by or on behalf of the holders of any debentures of a company or registered body, of any property comprised in or subject to a circulating security interest; and

                     (b)  at the date of the appointment or of the taking of possession or assumption of control (in this section called the relevant date):

                              (i)  the company or registered body has not commenced to be wound up voluntarily; and

                             (ii)  the company or registered body has not been ordered to be wound up by the Court.

             (3)  In the case of a company, the receiver or other person taking possession or assuming control of property of the company must pay, out of the property coming into his, her or its hands, the following debts or amounts in priority to any claim for principal or interest in respect of the debentures:

                     (a)  first, any amount that in a winding up is payable in priority to unsecured debts pursuant to section 562;

                     (b)  next, if an auditor of the company had applied to ASIC under subsection 329(6) for consent to his, her or its resignation as auditor and ASIC had refused that consent before the relevant date—the reasonable fees and expenses of the auditor incurred during the period beginning on the day of the refusal and ending on the relevant date;

                     (c)  subject to subsections (6) and (7), next, any debt or amount that in a winding up is payable in priority to other unsecured debts pursuant to paragraph 556(1)(e), (g) or (h) or section 560.

             (4)  In the case of a registered body, the receiver or other person taking possession or assuming control of property of the registered body must pay, out of the property of the registered body coming into his, her or its hands, the following debts or amounts in priority to any claim for principal or interest in respect of the debentures:

                     (a)  first, any amount that in a winding up is payable in priority to unsecured debts pursuant to section 562;

                     (b)  next, any debt or amount that in a winding up is payable in priority to other unsecured debts pursuant to paragraph 556(1)(e), (g) or (h) or section 560.

             (5)  The receiver or other person taking possession or assuming control of property must pay debts and amounts payable pursuant to paragraph (3)(c) or (4)(b) in the same order of priority as is prescribed by Division 6 of Part 5.6 in respect of those debts and amounts.

             (6)  In the case of a company, if an auditor of the company had applied to ASIC under subsection 329(6) for consent to his, her or its resignation as auditor and ASIC had, before the relevant date, refused that consent, a receiver must, when property comes to the receiver’s hands, before paying any debt or amount referred to in paragraph (3)(c), make provision out of that property for the reasonable fees and expenses of the auditor incurred after the relevant date but before the date on which the property comes into the receiver’s hands, being fees and expenses in respect of which provision has not already been made under this subsection.

             (7)  If an auditor of the company applies to ASIC under subsection 329(6) for consent to his, her or its resignation as auditor and, after the relevant date, ASIC refuses that consent, the receiver must, in relation to property that comes into the receiver’s hands after the refusal, before paying any debt or amount referred to in paragraph (3)(c), make provision out of that property for the reasonable fees and expenses of the auditor incurred after the refusal and before the date on which the property comes into the receiver’s hands, being fees and expenses in respect of which provision has not already been made under this subsection.

             (8)  A receiver must make provision in respect of reasonable fees and expenses of an auditor in respect of a particular period as required by subsection (6) or (7) whether or not the auditor has made a claim for fees and expenses for that period, but where the auditor has not made a claim, the receiver may estimate the reasonable fees and expenses of the auditor for that period and make provision in accordance with the estimate.

             (9)  For the purposes of this section, the references in Division 6 of Part 5.6 to the relevant date are to be read as references to the date of the appointment of the receiver, or of possession being taken or control being assumed, as the case may be.

434  Enforcing controller’s duty to make returns

             (1)  If a controller of property of a corporation:

                     (a)  who has made default in making or lodging any return, account or other document or in giving any notice required by law fails to make good the default within 14 days after the service on the controller, by any member or creditor of the corporation or trustee for debenture holders, of a notice requiring the controller to do so; or

                     (b)  who has become a controller of property of the corporation otherwise than by being appointed a receiver of such property by a court and who has, after being required at any time by the liquidator of the corporation so to do, failed to render proper accounts of, and to vouch, the controller’s receipts and payments and to pay over to the liquidator the amount properly payable to the liquidator;

the Court may make an order directing the controller to make good the default within such time as is specified in the order.

             (2)  An application under subsection (1) may be made:

                     (a)  if paragraph (1)(a) applies—by a member or creditor of the corporation or by a trustee for debenture holders; and

                     (b)  if paragraph (1)(b) applies—by the liquidator of the corporation.

434A  Court may remove controller for misconduct

                   Where, on the application of a corporation, the Court is satisfied that a controller of property of the corporation has been guilty of misconduct in connection with performing or exercising any of the controller’s functions and powers, the Court may order that, on and after a specified day, the controller cease to act as receiver or give up possession or control, as the case requires, of property of the corporation.

434B  Court may remove redundant controller

             (1)  The Court may order that, on and after a specified day, a controller of property of a corporation:

                     (a)  cease to act as receiver, or give up possession or control, as the case requires, of property of the corporation; or

                     (b)  act as receiver, or continue in possession or control, as the case requires, only of specified property of the corporation.

             (2)  However, the Court may only make an order under subsection (1) if satisfied that the objectives for which the controller was appointed, or entered into possession or took control of property of the corporation, as the case requires, have been achieved, so far as is reasonably practicable, except in relation to any property specified in the order under paragraph (1)(b).

             (3)  For the purposes of subsection (2), the Court must have regard to:

                     (a)  the corporation’s interests; and

                     (b)  the interests of the secured party in relation to the security interest that the controller is enforcing; and

                     (c)  the interests of the corporation’s other creditors; and

                     (d)  any other relevant matter.

             (4)  The Court may only make an order under subsection (1) on the application of a liquidator appointed for the purposes of winding up the corporation in insolvency.

             (5)  An order under subsection (1) may also prohibit the secured party from doing any or all of the following, except with the leave of the Court:

                     (a)  appointing a person as receiver of property of the corporation under a power contained in an instrument relating to the security interest;

                     (b)  entering into possession, or taking control, of such property for the purpose of enforcing the security interest;

                     (c)  appointing a person so to enter into possession or take control (whether as agent for the secured party or for the corporation).

434C  Effect of sections 434A and 434B

             (1)  Except as expressly provided in section 434A or 434B, an order under that section does not affect a security interest in property of a corporation.

             (2)  Nothing in section 434A or 434B limits any other power of the Court to remove, or otherwise deal with, a controller of property of a corporation (for example, the Court’s powers under section 423).

434D  Appointment of 2 or more receivers of property of a corporation

                   If 2 or more persons have been appointed as receivers of property of a corporation:

                     (a)  a function or power of a receiver of property of the corporation may be performed or exercised by any one of them, or by any 2 or more of them together, except so far as the order or instrument appointing them otherwise provides; and

                     (b)  a reference in this Act to a receiver, or to the receiver, of property of a corporation is, in the case of the first‑mentioned corporation, a reference to whichever one or more of those receivers the case requires.

434E  Appointment of 2 or more receivers and managers of property of a corporation

                   If 2 or more persons have been appointed as receivers and managers of property of a corporation:

                     (a)  a function or power of a receiver and manager of property of the corporation may be performed or exercised by any one of them, or by any 2 or more of them together, except so far as the order or instrument appointing them otherwise provides; and

                     (b)  a reference in this Act to a receiver and manager, or to the receiver and manager, of property of a corporation is, in the case of the first‑mentioned corporation, a reference to whichever one or more of those receivers and managers the case requires.

434F  Appointment of 2 or more controllers of property of a corporation

                   If 2 or more persons have been appointed as controllers of property of a corporation:

                     (a)  a function or power of a controller of property of the corporation may be performed or exercised by any one of them, or by any 2 or more of them together, except so far as the order or instrument appointing them otherwise provides; and

                     (b)  a reference in this Act to a controller, or to the controller, of property of a corporation is, in the case of the first‑mentioned corporation, a reference to whichever one or more of those controllers the case requires.

434G  Appointment of 2 or more managing controllers of property of a corporation

                   If 2 or more persons have been appointed as managing controllers of property of a corporation:

                     (a)  a function or power of a managing controller of property of the corporation may be performed or exercised by any one of them, or by any 2 or more of them together, except so far as the order or instrument appointing them otherwise provides; and

                     (b)  a reference in this Act to a managing controller, or to the managing controller, of property of a corporation is, in the case of the first‑mentioned corporation, a reference to whichever one or more of those managing controllers the case requires.

Part 5.3A—Administration of a company’s affairs with a view to executing a deed of company arrangement

Division 1—Preliminary

435A  Object of Part

                   The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that:

                     (a)  maximises the chances of the company, or as much as possible of its business, continuing in existence; or

                     (b)  if it is not possible for the company or its business to continue in existence—results in a better return for the company’s creditors and members than would result from an immediate winding up of the company.

435B  Definitions

                   In this Part, unless the contrary intention appears:

property of a company includes any PPSA retention of title property of the company.

Note:          See sections 9 (definition of property) and 51F (PPSA retention of title property). An extended definition of property applies in subsection 444E(3) (see subsection 444E(4)).

receiver includes a receiver and manager.

435C  When administration begins and ends

             (1)  The administration of a company:

                     (a)  begins when an administrator of the company is appointed under section 436A, 436B or 436C; and

                     (b)  ends on the happening of whichever event of a kind referred to in subsection (2) or (3) happens first after the administration begins.

             (2)  The normal outcome of the administration of a company is that:

                     (a)  a deed of company arrangement is executed by both the company and the deed’s administrator; or

                     (b)  the company’s creditors resolve under paragraph 439C(b) that the administration should end; or

                     (c)  the company’s creditors resolve under paragraph 439C(c) that the company be wound up.

             (3)  However, the administration of a company may also end because:

                     (a)  the Court orders, under section 447A or otherwise, that the administration is to end, for example, because the Court is satisfied that the company is solvent; or

                     (b)  the convening period, as fixed by subsection 439A(5), for a meeting of the company’s creditors ends:

                              (i)  without the meeting being convened in accordance with section 439A; and

                             (ii)  without an application being made for the Court to extend under subsection 439A(6) the convening period for the meeting; or

                     (c)  an application for the Court to extend under subsection 439A(6) the convening period for such a meeting is finally determined or otherwise disposed of otherwise than by the Court extending the convening period; or

                     (d)  the convening period, as extended under subsection 439A(6), for such a meeting ends without the meeting being convened in accordance with section 439A; or

                     (e)  such a meeting convened under section 439A ends (whether or not it was earlier adjourned) without a resolution under section 439C being passed at the meeting; or

                      (f)  the company contravenes subsection 444B(2) by failing to execute a proposed deed of company arrangement; or

                     (g)  the Court appoints a provisional liquidator of the company, or orders that the company be wound up; or

                     (h)  management of the general insurer vests in a judicial manager of the company appointed by the Federal Court under Part VB of the Insurance Act 1973 or Part 8 of the Life Insurance Act 1995.

             (4)  During the administration of a company, the company is taken to be under administration.

Division 2—Appointment of administrator and first meeting of creditors

436A  Company may appoint administrator if board thinks it is or will become insolvent

             (1)  A company may, by writing, appoint an administrator of the company if the board has resolved to the effect that:

                     (a)  in the opinion of the directors voting for the resolution, the company is insolvent, or is likely to become insolvent at some future time; and

                     (b)  an administrator of the company should be appointed.

             (2)  Subsection (1) does not apply to a company if a person holds an appointment as liquidator, or provisional liquidator, of the company.

436B  Liquidator may appoint administrator

             (1)  A liquidator or provisional liquidator of a company may by writing appoint an administrator of the company if he or she thinks that the company is insolvent, or is likely to become insolvent at some future time.

             (2)  A liquidator or provisional liquidator of a company must not appoint any of the following persons under subsection (1):

                     (a)  himself or herself;

                     (b)  if he or she is a partner of a partnership—a partner or employee of the partnership;

                     (c)  if he or she is an employee—his or her employer;

                     (d)  if he or she is an employer—his or her employee;

                     (e)  if he or she is a director, secretary, employee or senior manager of a corporation—a director, secretary, employee or senior manager of the corporation;

unless:

                      (f)  at a meeting of the company’s creditors, the company’s creditors pass a resolution approving the appointment; or

                     (g)  the appointment is made with the leave of the Court.

436C  Secured party may appoint administrator

             (1)  A person who is entitled to enforce a security interest in the whole, or substantially the whole, of a company’s property may by writing appoint an administrator of the company if the security interest has become, and is still, enforceable.

          (1A)  Subsection (1) applies in relation to a PPSA security interest only if the security interest is perfected within the meaning of the Personal Property Securities Act 2009.

             (2)  Subsection (1) does not apply to a company if a person holds an appointment as liquidator, or provisional liquidator, of the company.

436D  Company already under administration

                   An administrator cannot be appointed under section 436A, 436B or 436C if the company is already under administration.

436DA  Declarations by administrator—indemnities and relevant relationships

Scope

             (1)  This section applies to an administrator appointed under section 436A, 436B or 436C.

Declaration of relationships and indemnities

             (2)  As soon as practicable after being appointed, the administrator must make:

                     (a)  a declaration of relevant relationships; and

                     (b)  a declaration of indemnities.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

Notification of creditors

             (3)  The administrator must:

                     (a)  give a copy of each declaration under subsection (2) to as many of the company’s creditors as reasonably practicable; and

                     (b)  do so at the same time as the administrator gives those creditors notice of the meeting referred to in section 436E.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (4)  The administrator must table a copy of each declaration under subsection (2) at the meeting referred to in section 436E.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

Updating of declaration

             (5)  If:

                     (a)  at a particular time, the administrator makes:

                              (i)  a declaration of relevant relationships; or

                             (ii)  a declaration of indemnities;

                            under subsection (2) or this subsection; and

                     (b)  at a later time:

                              (i)  the declaration has become out‑of‑date; or

                             (ii)  the administrator becomes aware of an error in the declaration;

the administrator must, as soon as practicable, make:

                     (c)  if subparagraph (a)(i) applies—a replacement declaration of relevant relationships; or

                     (d)  if subparagraph (a)(ii) applies—a replacement declaration of indemnities.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (6)  The administrator must table a copy of a replacement declaration under subsection (5):

                     (a)  if:

                              (i)  there is a committee of creditors; and

                             (ii)  the next meeting of the committee of creditors occurs before the next meeting of the company’s creditors;

                            at the next meeting of the committee of creditors; or

                     (b)  in any other case—at the next meeting of the company’s creditors.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

Defence

             (7)  In a prosecution for an offence constituted by a failure to include a particular matter in a declaration under this section, it is a defence if the defendant proves that:

                     (a)  the defendant made reasonable enquiries; and

                     (b)  after making these enquiries, the defendant had no reasonable grounds for believing that the matter should have been included in the declaration.

436E  Purpose and timing of first meeting of creditors

             (1)  The administrator of a company under administration must convene a meeting of the company’s creditors in order to determine:

                     (a)  whether to appoint a committee of creditors; and

                     (b)  if so, who are to be the committee’s members.

             (2)  The meeting must be held within 8 business days after the administration begins.

             (3)  The administrator must convene the meeting by:

                     (a)  giving written notice of the meeting to as many of the company’s creditors as reasonably practicable; and

                     (b)  causing a notice setting out the prescribed information about the meeting to be published in the prescribed manner;

at least 5 business days before the meeting.

Note:          For electronic notification under paragraph (a), see section 600G.

          (3A)  A notice under paragraph (3)(b) that relates to a company may be combined with a notice under paragraph 450A(1)(b) that relates to the company.

             (4)  At the meeting, the company’s creditors may also pass a resolution:

                     (a)  removing the administrator from office; and

                     (b)  appointing someone else as administrator of the company.

436F  Functions of committee of creditors

             (1)  The functions of a committee of creditors of a company under administration are:

                     (a)  to consult with the administrator about matters relating to the administration; and

                     (b)  to receive and consider reports by the administrator.

             (2)  A committee cannot give directions to the administrator, except as provided in subsection (3).

             (3)  As and when a committee reasonably requires, the administrator must report to the committee about matters relating to the administration.

436G  Membership of committee

             (1)  A person can be a member of a committee of creditors of a company under administration if, and only if, the person is:

                     (a)  a creditor of the company; or

                     (b)  the attorney of such a creditor because of a general power of attorney; or

                     (c)  authorised in writing by such a creditor to be such a member.

             (2)  If a member of such a committee is a body corporate, the member may be represented at meetings of the committee by:

                     (a)  an officer or employee of the member; or

                     (b)  an individual authorised in writing by the member for the purposes of this subsection.

Division 3—Administrator assumes control of company’s affairs

437A  Role of administrator

             (1)  While a company is under administration, the administrator:

                     (a)  has control of the company’s business, property and affairs; and

                     (b)  may carry on that business and manage that property and those affairs; and

                     (c)  may terminate or dispose of all or part of that business, and may dispose of any of that property; and

                     (d)  may perform any function, and exercise any power, that the company or any of its officers could perform or exercise if the company were not under administration.

             (2)  Nothing in subsection (1) limits the generality of anything else in it.

Note:          A PPSA security interest in property of a company that is unperfected (within the meaning of the Personal Property Securities Act 2009) immediately before an administrator of the company is appointed vests in the company at the time of appointment, subject to certain exceptions (see section 267 of that Act).

437B  Administrator acts as company’s agent

                   When performing a function, or exercising a power, as administrator of a company under administration, the administrator is taken to be acting as the company’s agent.

437C  Powers of other officers suspended

             (1)  While a company is under administration, a person (other than the administrator) cannot perform or exercise, and must not purport to perform or exercise, a function or power as an officer or provisional liquidator of the company.

          (1A)  Subsection (1) does not apply to the extent that the performance or exercise, or purported performance or exercise, is with the administrator’s written approval.

Note:          A defendant bears an evidential burden in relation to the matter in subsection (1A), see subsection 13.3(3) of the Criminal Code.

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

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

             (2)  Subsection (1) does not remove an officer or provisional liquidator of a company from his or her office.

             (3)  Section 437D does not limit the generality of subsection (1) of this section.

437D  Only administrator can deal with company’s property

             (1)  This section applies where:

                     (a)  a company under administration purports to enter into; or

                     (b)  a person purports to enter into, on behalf of a company under administration;

a transaction or dealing affecting property of the company.

             (2)  The transaction or dealing is void unless:

                     (a)  the administrator entered into it on the company’s behalf; or

                     (b)  the administrator consented to it in writing before it was entered into; or

                     (c)  it was entered into under an order of the Court.

             (3)  Subsection (2) does not apply to a payment made:

                     (a)  by an Australian ADI out of an account kept by the company with the ADI; and

                     (b)  in good faith and in the ordinary course of the ADI’s banking business; and

                     (c)  after the administration began and on or before the day on which:

                              (i)  the administrator gives to the ADI (under subsection 450A(3) or otherwise) written notice of the appointment that began the administration; or

                             (ii)  the administrator complies with paragraph 450A(1)(b) in relation to that appointment;

                            whichever happens first.

             (4)  Subsection (2) has effect subject to an order that the Court makes after the purported transaction or dealing.

             (5)  If, because of subsection (2), the transaction or dealing is void, or would be void apart from subsection (4), an officer or employee of the company who:

                     (a)  purported to enter into the transaction or dealing on the company’s behalf; or

                     (b)  was in any other way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the transaction or dealing;

contravenes this subsection.

437E  Order for compensation where officer involved in void transaction

             (1)  Where:

                     (a)  a court finds a person guilty of an offence constituted by a contravention of subsection 437D(5) (including such an offence that is taken to have been committed because of section 5 of the Crimes Act 1914); and

                     (b)  the court is satisfied that the company or another person has suffered loss or damage because of the act or omission constituting the offence;

the court may (whether or not it imposes a penalty) order the first‑mentioned person to pay compensation to the company or other person, as the case may be, of such amount as the order specifies.

Note:          Section 73A defines when a court is taken to find a person guilty of an offence.

             (2)  An order under subsection (1) may be enforced as if it were a judgment of the court.

             (3)  The power of a court under section 1318 to relieve a person from liability as mentioned in that section extends to relieving a person from liability to be ordered under this section to pay compensation.

437F  Effect of administration on company’s members

Transfer of shares

             (1)  A transfer of shares in a company that is made during the administration of the company is void except if:

                     (a)  both:

                              (i)  the administrator gives written consent to the transfer; and

                             (ii)  that consent is unconditional; or

                     (b)  all of the following subparagraphs apply:

                              (i)  the administrator gives written consent to the transfer;

                             (ii)  that consent is subject to one or more specified conditions;

                            (iii)  those conditions have been satisfied; or

                     (c)  the Court makes an order under subsection (4) authorising the transfer.

             (2)  The administrator may only give consent under paragraph (1)(a) or (b) if he or she is satisfied that the transfer is in the best interests of the company’s creditors as a whole.

             (3)  If the administrator refuses to give consent under paragraph (1)(a) or (b) to a transfer of shares in the company:

                     (a)  the prospective transferor; or

                     (b)  the prospective transferee; or

                     (c)  a creditor of the company;

may apply to the Court for an order authorising the transfer.

             (4)  If the Court is satisfied, on an application under subsection (3), that the transfer is in the best interests of the company’s creditors as a whole, the Court may, by order, authorise the transfer.

             (5)  If the administrator gives consent under paragraph (1)(b) to a transfer of shares in the company:

                     (a)  the prospective transferor; or

                     (b)  the prospective transferee; or

                     (c)  a creditor of the company;

may apply to the Court for an order setting aside any or all of the conditions to which the consent is subject.

             (6)  If the Court is satisfied, on an application under subsection (5), that any or all of the conditions covered by the application are not in the best interests of the company’s creditors as a whole, the Court may, by order, set aside any or all of the conditions.

             (7)  The administrator is entitled to be heard in a proceeding before the Court in relation to an application under subsection (3) or (5).

Alteration in the status of members

             (8)  An alteration in the status of members of a company that is made during the administration of the company is void except if:

                     (a)  both:

                              (i)  the administrator gives written consent to the alteration; and

                             (ii)  that consent is unconditional; or

                     (b)  all of the following subparagraphs apply:

                              (i)  the administrator gives written consent to the alteration;

                             (ii)  that consent is subject to one or more specified conditions;

                            (iii)  those conditions have been satisfied; or

                     (c)  the Court makes an order under subsection (12) authorising the alteration.

             (9)  The administrator may only give consent under paragraph (8)(a) or (b) if he or she is satisfied that the alteration is in the best interests of the company’s creditors as a whole.

           (10)  The administrator must refuse to give consent under paragraph (8)(a) or (b) if the alteration would contravene Part 2F.2.

           (11)  If the administrator refuses to give consent under paragraph (8)(a) or (b) to an alteration in the status of members of a company:

                     (a)  a member of the company; or

                     (b)  a creditor of the company;

may apply to the Court for an order authorising the alteration.

           (12)  If the Court is satisfied, on an application under subsection (11), that:

                     (a)  the alteration is in the best interests of the company’s creditors as a whole; and

                     (b)  the alteration does not contravene Part 2F.2;

the Court may, by order, authorise the alteration.

           (13)  If the administrator gives consent under paragraph (8)(b) to an alteration in the status of members of a company:

                     (a)  a member of the company; or

                     (b)  a creditor of the company;

may apply to the Court for an order setting aside any or all of the conditions to which the consent is subject.

           (14)  If the Court is satisfied, on an application under subsection (13), that any or all of the conditions covered by the application are not in the best interests of the company’s creditors as a whole, the Court may, by order, set aside any or all of the conditions.

           (15)  The administrator is entitled to be heard in a proceeding before the Court in relation to an application under subsection (11) or (13).

Division 4—Administrator investigates company’s affairs

438A  Administrator to investigate affairs and consider possible courses of action

                   As soon as practicable after the administration of a company begins, the administrator must:

                     (a)  investigate the company’s business, property, affairs and financial circumstances; and

                     (b)  form an opinion about each of the following matters:

                              (i)  whether it would be in the interests of the company’s creditors for the company to execute a deed of company arrangement;

                             (ii)  whether it would be in the creditors’ interests for the administration to end;

                            (iii)  whether it would be in the creditors’ interests for the company to be wound up.

438B  Directors to help administrator

             (1)  As soon as practicable after the administration of a company begins, each director must:

                     (a)  deliver to the administrator all books in the director’s possession that relate to the company, other than books that the director is entitled, as against the company and the administrator, to retain; and

                     (b)  if the director knows where other books relating to the company are—tell the administrator where those books are.

             (2)  Within 5 business days after the administration of a company begins or such longer period as the administrator allows, the directors must give to the administrator a statement about the company’s business, property, affairs and financial circumstances.

             (3)  A director of a company under administration must:

                     (a)  attend on the administrator at such times; and

                     (b)  give the administrator such information about the company’s business, property, affairs and financial circumstances;

as the administrator reasonably requires.

             (4)  A person must not fail to comply with subsection (1), (2) or (3).

             (5)  An offence based on subsection (4) is an offence of strict liability.

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

             (6)  Subsection (4) does not apply to the extent that the person has a reasonable excuse.

Note:          A defendant bears an evidential burden in relation to the matter in subsection (6), see subsection 13.3(3) of the Criminal Code.

438C  Administrator’s rights to company’s books

             (1)  A person is not entitled, as against the administrator of a company under administration:

                     (a)  to retain possession of books of the company; or

                     (b)  to claim or enforce a lien on such books;

but such a lien is not otherwise prejudiced.

             (2)  Paragraph (1)(a) does not apply in relation to books of which a secured creditor of the company is entitled to possession otherwise than because of a lien, but the administrator is entitled to inspect, and make copies of, such books at any reasonable time.

             (3)  The administrator of a company under administration may give to a person a written notice requiring the person to deliver to the administrator, as specified in the notice, books so specified that are in the person’s possession.

             (4)  A notice under subsection (3) must specify a period of at least 3 business days as the period within which the notice must be complied with.

             (5)  A person must comply with a notice under subsection (3).

             (6)  Subsection (5) does not apply to the extent that the person is entitled, as against the company and the administrator, to retain possession of the books.

Note:          A defendant bears an evidential burden in relation to the matter in subsection (6), see subsection 13.3(3) of the Criminal Code.

             (7)  An offence based on subsection (5) is an offence of strict liability.

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

438D  Reports by administrator

             (1)  If it appears to the administrator of a company under administration that:

                     (a)  a past or present officer or employee, or a member, of the company may have been guilty of an offence in relation to the company; or

                     (b)  a person who has taken part in the formation, promotion, administration, management or winding up of the company:

                              (i)  may have misapplied or retained, or may have become liable or accountable for, money or property (in Australia or elsewhere) of the company; or

                             (ii)  may have been guilty of negligence, default, breach of duty or breach of trust in relation to the company;

the administrator must:

                     (c)  lodge a report about the matter as soon as practicable; and

                     (d)  give ASIC such information, and such access to and facilities for inspecting and taking copies of documents, as ASIC requires.

             (2)  The administrator may also lodge further reports specifying any other matter that, in his or her opinion, it is desirable to bring to ASIC’s notice.

             (3)  If it appears to the Court:

                     (a)  that a past or present officer or employee, or a member, of a company under administration has been guilty of an offence in relation to the company; or

                     (b)  that a person who has taken part in the formation, promotion, administration, management or winding up of a company under administration has engaged in conduct of a kind referred to in paragraph (1)(b) in relation to the company;

and that the administrator has not lodged a report about the matter, the Court may, on the application of an interested person, direct the administrator to lodge such a report.

438E  Administrator’s accounts

Accounts to be lodged

             (1)  The administrator of a company under administration must, within one month after:

                     (a)  the end of the 6‑month period beginning on the date of his or her appointment; and

                     (b)  the end of each subsequent 6‑month period during which he or she is the administrator of the company;

lodge an account that:

                     (c)  is in the prescribed form; and

                     (d)  is verified by a written statement; and

                     (e)  shows his or her receipts and payments during the relevant 6‑month period; and

                      (f)  in the case of the second or subsequent account lodged under this subsection—also shows the aggregate amount of receipts and payments during all preceding 6‑month periods since his or her appointment.

             (2)  A person who ceases to be the administrator of a company under administration must, within one month after the cessation, lodge an account that:

                     (a)  is in the prescribed form; and

                     (b)  is verified by a written statement; and

                     (c)  if he or she has previously been required to lodge an account under subsection (1)—shows his or her receipts and payments during the period:

                              (i)  beginning at the end of the 6‑month period to which the most recent account under subsection (1) related; and

                             (ii)  ending at the cessation; and

                     (d)  if he or she has previously been required to lodge an account under subsection (1)—also shows the aggregate amount of receipts and payments during all previous 6‑month periods since his or her appointment; and

                     (e)  if he or she has not previously been required to lodge an account under subsection (1)—shows his or her receipts and payments during the period beginning on:

                              (i)  the date of his or her appointment; and

                             (ii)  ending at the cessation.

Audit

             (3)  If an account is lodged under subsection (1) or (2), ASIC may cause the account to be audited by a registered company auditor.

             (4)  The auditor must prepare a report on the account.

             (5)  For the purposes of the audit under subsection (3), the administrator or former administrator must give the auditor such books and information as the auditor requires.

             (6)  If ASIC causes an account to be audited under subsection (3):

                     (a)  ASIC must give the administrator or former administrator a copy of the report by the auditor; and

                     (b)  subsection 1289(5) applies in relation to the report prepared by the auditor as if it were a document required to be lodged.

             (7)  The costs of an audit under this section are to be fixed by ASIC and form part of the expenses of administration.

Division 5—Meeting of creditors decides company’s future

439A  Administrator to convene meeting and inform creditors

             (1)  The administrator of a company under administration must convene a meeting of the company’s creditors within the convening period as fixed by subsection (5) or extended under subsection (6).

Note:          For body corporate representatives’ powers at a meeting of the company’s creditors, see section 250D.

             (2)  The meeting must be held within 5 business days before, or within 5 business days after, the end of the convening period.

             (3)  The administrator must convene the meeting by:

                     (a)  giving written notice of the meeting to as many of the company’s creditors as reasonably practicable; and

                     (b)  causing a notice setting out the prescribed information about the meeting to be published in the prescribed manner;

at least 5 business days before the meeting.

Note:          For electronic notification under paragraph (a), see section 600G.

             (4)  The notice given to a creditor under paragraph (3)(a) must be accompanied by a copy of:

                     (a)  a report by the administrator about the company’s business, property, affairs and financial circumstances; and

                     (b)  a statement setting out the administrator’s opinion about each of the following matters:

                              (i)  whether it would be in the creditors’ interests for the company to execute a deed of company arrangement;

                             (ii)  whether it would be in the creditors’ interests for the administration to end;

                            (iii)  whether it would be in the creditors’ interests for the company to be wound up;

                            and also setting out:

                            (iv)  his or her reasons for those opinions; and

                             (v)  such other information known to the administrator as will enable the creditors to make an informed decision about each matter covered by subparagraph (i), (ii) or (iii); and

                     (c)  if a deed of company arrangement is proposed—a statement setting out details of the proposed deed.

Note:          For electronic notification, see section 600G.

             (5)  The convening period is:

                     (a)  if the day after the administration begins is in December, or is less than 25 business days before Good Friday—the period of 25 business days beginning on:

                              (i)  that day; or

                             (ii)  if that day is not a business day—the next business day; or

                     (b)  otherwise—the period of 20 business days beginning on:

                              (i)  the day after the administration begins; or

                             (ii)  if that day is not a business day—the next business day.

             (6)  The Court may extend the convening period on an application made during or after the period referred to in paragraph (5)(a) or (b), as the case requires.

             (7)  If an application is made under subsection (6) after the period referred to in paragraph (5)(a) or (b), as the case may be, the Court may only extend the convening period if the Court is satisfied that it would be in the best interests of the creditors if the convening period were extended in accordance with the application.

             (8)  If an application is made under subsection (6) after the period referred to in paragraph (5)(a) or (b), as the case may be, then, in making an order about the costs of the application, the Court must have regard to:

                     (a)  the fact that the application was made after that period; and

                     (b)  any other conduct engaged in by the administrator; and

                     (c)  any other relevant matters.

439B  Conduct of meeting

             (1)  At a meeting convened under section 439A, the administrator is to preside.

             (2)  A meeting convened under section 439A may be adjourned from time to time, but the period of the adjournment, or the total of the periods of adjournment, must not exceed 45 business days.

439C  What creditors may decide

                   At a meeting convened under section 439A, the creditors may resolve:

                     (a)  that the company execute a deed of company arrangement specified in the resolution (even if it differs from the proposed deed (if any) details of which accompanied the notice of meeting); or

                     (b)  that the administration should end; or

                     (c)  that the company be wound up.

Division 6—Protection of company’s property during administration

440A  Winding up company

             (1)  A company under administration cannot be wound up voluntarily, except as provided by section 446A.

             (2)  The Court is to adjourn the hearing of an application for an order to wind up a company if the company is under administration and the Court is satisfied that it is in the interests of the company’s creditors for the company to continue under administration rather than be wound up.

             (3)  The Court is not to appoint a provisional liquidator of a company if the company is under administration and the Court is satisfied that it is in the interests of the company’s creditors for the company to continue under administration rather than have a provisional liquidator appointed.

440B  Restrictions on exercise of third party property rights

General rule

             (1)  During the administration of a company, the restrictions set out in the table at the end of this section apply in relation to the exercise of the rights of a person (the third party) in property of the company, or other property used or occupied by, or in the possession of, the company, as set out in the table.

Note:          The property of the company includes any PPSA retention of title property of the company (see section 435B).

Exception—consent of administrator or leave of court

             (2)  The restrictions set out in the table at the end of this section do not apply in relation to the exercise of a thir