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CORPORATIONS ACT 2001 - SECT 415D

Stay on enforcing rights merely because of a proceeding under this Part etc.

Stay on enforcing rights

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

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

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

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

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

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

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

                             (ii)  the body's financial position;

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

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

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

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

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

Period of the stay

             (2)  The right cannot be enforced as described in subsection (1) during the period (the stay period ) that:

                     (a)  starts:

                              (i)  if the body makes an announcement referred to in paragraph (1)(a)--when the announcement is made; or

                             (ii)  otherwise--when the application under section 411 is made; and

                     (b)  ends:

                              (i)  if the body makes an announcement referred to in paragraph (1)(a), and fails to make the announced application within the next 3 months or within any period ordered under subsection (3) for the body--at the end of the longer of those periods; or

                             (ii)  when the application under section 411 is withdrawn or when the Court dismisses the application; or

                            (iii)  unless subparagraph (iv) applies--at the end of any compromise or arrangement approved under this Part as a result of the application under section 411; or

                            (iv)  if such a compromise or arrangement ends because of a resolution or order for the body to be wound up--when the body's affairs have been fully wound up.

             (3)  The Court may order a longer period than the 3 months otherwise applying under subparagraph (2)(b)(i) for the body if the Court is satisfied that the longer period is appropriate having regard to the interests of justice.

Enforcing rights after the stay for reasons relating to earlier circumstances

             (4)  The right is unenforceable against the body indefinitely after the end of the stay period to the extent that a reason for seeking to enforce the right:

                     (a)  is the body's financial position before the end of the stay period; or

                     (b)  is the body having been the subject of any of the following before the end of the stay period:

                              (i)  an announcement referred to in paragraph (1)(a);

                             (ii)  an application under section 411;

                            (iii)  a compromise or arrangement approved under this Part as a result of an application under section 411; or

                     (c)  is a reason, prescribed by the regulations for the purposes of this paragraph, relating to circumstances in existence during the stay period; or

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

Application must be made to avoid insolvency

             (5)  However, subsection (1) does not apply, and is taken never to have applied, if the application under section 411 fails to state that it is being made for the purpose of the body avoiding being wound up in insolvency.

Rights not subject to the stay

             (6)  Subsection (1) does not apply to the right if it is:

                     (a)  a right under a contract, agreement or arrangement entered into after the day the order (if any) approving under this Part a compromise or arrangement as a result of the application takes effect; or

                     (b)  a right contained in a kind of contract, agreement or arrangement:

                              (i)  prescribed by the regulations for the purposes of this subparagraph; or

                             (ii)  declared under paragraph (7)(a); or

                     (c)  a right of a kind:

                              (i)  prescribed by the regulations for the purposes of this subparagraph; or

                             (ii)  declared under paragraph (7)(b); or

                     (d)  a right of a kind declared under paragraph (7)(c), and the circumstances specified in that declaration exist.

Note:          For paragraph (a), subsection 411(10) sets out when the order takes effect.

             (7)  For the purposes of subsection (6), the Minister may, by legislative instrument:

                     (a)  declare kinds of contracts, agreements or arrangements referred to in a specified law of the Commonwealth; or

                     (b)  declare kinds of rights to which subsection (1) does not apply; or

                     (c)  declare kinds of rights to which subsection (1) does not apply in specified circumstances.

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

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

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

has consented in writing to the enforcement of the right.

Stay on body's right to new advance of money or credit

             (9)  If:

                     (a)  one or more rights of an entity cannot be enforced against a body for a period because of subsection (1); and

                     (b)  the body has a right under a contract, agreement or arrangement against the entity for a new advance of money or credit;

that right of the body cannot be enforced during the same period.



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