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In this issue: How the new debt agreement system will work The new debt agreement system commenced operation on 1 July 2007. Major changes in the new debt agreement system are that the offer is based on a system of registering administrators, the debtor’s ability to pay, all debts rank equally, and notification of default. Important changes include unrelated creditors vote for the full amount of debt purchased, certainty of rights of secured and undisclosed creditors and debtors are released from debts only when they complete the agreement. A three year review of the amendments is planned for 2010. Getting ready for the new system Information sessions were provided in Brisbane, Sydney, Melbourne, Perth, Hobart, and Adelaide during April. Positive feedback on the sessions was received from the 450 creditors, financial counsellors, administrators, registered trustees and insolvency lawyers who attended the sessions. Click here to download a copy of the notes “How the debt agreement system will work from 1 July” which are available on our website. Bankruptcy Regulation has registered twenty-one primary debt agreement administrators and there are three registered trustees active in administering agreements. Click here to see the updated contact list of registered debt agreement administrators. Major creditors support new system Major creditors met in a forum facilitated by ITSA on 26 June 2007. Creditors’ issues including insolvency of debtor, proximity of last borrowing to proposal, disparity of fees, access to online information, dividend timing and undisclosed creditors were addressed. Clarification was given on the rights of secured creditors and the treatment of joint and several debts. Representatives of major creditors expressed support for the new system and it was obvious they had prepared for debt agreements based on capacity to pay, full disclosure by the debtor and registration of administrators. This was an opportunity to develop trust in the processes of administrators in preparing proposals. Revised forms The following forms are now available on the ITSA website in Word and pdf format: Debt Agreement Proposal, Explanatory Statement, Debt Agreement Statement of Affairs, Certificate of Administrator, Termination Proposal, Statement of Claim and Voting, Debt Agreement fact sheet and two page Prescribed Information. The Variation Proposal is being reviewed and copies will be sent to administrators as soon as the form becomes available. Click here to see the updated fact sheet and here for other updated forms. Certainty for creditors The rights of secured creditors have been clarified. Secured creditors are entitled to vote and receive dividends on the amount by which the amount owed to them exceeds the value of their security at the proposal date. If the security is realised during the debt agreement the secured creditor will receive dividends based on the amount of the actual shortfall on realisation. Undisclosed creditors are entitled to receive a dividend after they have established their claim. Debtor made bankrupt during DA voting period A sequestration order was made during the voting stage of a debt agreement proposal. It was held that applying for and making a sequestration order is not enforcement of a remedy which is prevented during the voting stage of a proposal by s185F. However s185K prohibits presentation or proceeding further with a creditor’s petition once a debt agreement has been made except in certain circumstances. Click here to see Accounts Control Management Services Pty Ltd v Elmer [2007] FMCA 733 (27 April 2007). Debt agreement set aside A debt agreement was set aside and a sequestration order made because the statement of affairs omitted a material debt. The creditor’s petition was filed while the debt agreement was in place. See Tolhurst Ltd v Thomas 2007 FMCA 1111. AAT upholds Official Receiver’s decision The AAT affirmed the decision not to accept a debt agreement proposal for processing because it was not in the interest of creditors. The approved form had been altered, a form had been attached to make submission of the proposal conditional and the amount of administrator’s fees had not been disclosed. The Tribunal ruled that neither the Official Receiver nor the applicant has the power to override the requirement of the Act and Regulations that the debtor’s name and date of birth be recorded on the NPII and that the proposal did not show how the debtor’s property was to be distributed. Click here to see Hill and Official Receiver [2007] AATA 1420 (8 June 2007). Quarterly debt agreements and bankruptcies
Feedback ITSA values the participation of our stakeholders in the debt agreement system. Your comments and suggestions for the DAS are welcomed by Digby Ross, National Manager of the DAS on (07) 3360 5400 and Vanessa Goodey, Operations Manager on (07) 3360 5435. Please continue to direct your queries on individual matters to the DAS teams in Perth and Brisbane. OFFICE ADDRESS: Level 12, Durack Centre, 263 Adelaide Terrace, PERTH WA 6000 / Level 16, 340 Adelaide Street, BRISBANE QLD 4000 POSTAL ADDRESS: GPO Box H536, PERTH WA 6841 / PO Box 10443 ADELAIDE STREET, BRISBANE QLD 4000 TELEPHONE: 1300 364 785 FACSIMILE: (08) 9268 1218 / (07) 3360 5466 EMAIL itsa.wa.da@itsa.gov.au / itsa.qld.da@itsa.gov.au INTERNET: www.itsa.gov.au OFFICES IN ADELAIDE BRISBANE CANBERRA HOBART MELBOURNE PERTH SYDNEY TOWNSVILLE |
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