BANKRUPTCY AMENDMENT REGULATIONS 2004 (NO. 1) 2004 NO. 256

Commonwealth Numbered Regulations - Explanatory Statements

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BANKRUPTCY AMENDMENT REGULATIONS 2004 (NO. 1) 2004 NO. 256

EXPLANATORY STATEMENT

Statutory Rules 2004 No. 256

Bankruptcy Amendment Regulations 2004 (No. 1)

Subsection 315(1) of the Bankruptcy Act 1966 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

Part X of the Act is a formal alternative to bankruptcy which allows a debtor to come to a binding arrangement with his or her creditors for payment and/or settlement of outstanding debts. A review of the operation of Part X was conducted by Insolvency and Trustee Service Australia and the Attorney-General's Department, who reported in June 2003.

Most of the proposals were largely effected in amendments made to the Act by Schedules 1 to 5 of the Bankruptcy Legislation Amendment Act 2004 (BLAA 2004). A separate Minute recommends that a Proclamation be made to fix 1 December 2004 as the day on which Schedules 1 to 5 of the BLAA 2004 commence.

The purpose of the proposed Regulations is to implement the remaining proposals of the review and to make necessary changes to the Bankruptcy Regulations 1996 (the Principal Regulations) as a consequence of changes to be made to the Act by the BLAA 2004.

The Principal Regulations provide modification of general provisions of the Act to enable their application to Part X and post bankruptcy compositions or scheme of arrangements made under Division 6, Part IV, of the Act. The Principal Regulations provide how the Act should be amended before being applied in specified circumstances.

The proposed Regulations would:

• modify other provisions of the Act, including rules of meetings, for the purposes of applying them to Part X, as amended by the BLAA 2004;

• modify relevant new Part X provisions for the purposes of applying them to post bankruptcy compositions or scheme of arrangements made under Division 6, Part IV of the Act;

• prescribe performance standards for a controlling trustee's or trustee's conduct of personal insolvency administrations;

• require that prescribed information about Part X be provided to a debtor or creditor;

• require that the Official Receiver be notified of the status of, or orders affecting, a Part X agreement for the purposes of the National Personal Insolvency Index;

• require newspaper advertising of the first creditors meeting held under section 188 of the Act;

• provide for greater disclosure of a creditor's relationships with the debtor; and

• make other minor and technical amendments.

Regulation Impact Statement

Proposed amendments to the Bankruptcy Regulations in relation to the performance standards of trustees

The review proposed that legislative amendments be made to prescribe the fundamental obligations of controlling trustees and trustees of Part X arrangements. It was also proposed that a regulation making power be introduced to provide for:

• Standards of performance of the defined obligations of practitioners

• Compulsory actions and matters that must be dealt with in order to comply with these obligations.

Schedule 3 of the Bankruptcy Legislation Amendment Act 2004 deals with amendments relating to performance standards of trustees. Items 1 to 3 of that Schedule provide for the consideration of performance standards in decisions whether to continue with the trustee's registration. In particular, new s 155H(5) provides a regulation making power to prescribe performance standards applicable to all trustees. In considering whether the trustee should continue to remain registered, the committee will take into consideration the trustee's failure to comply with a prescribed standard.

It was considered that because details of the performance standards would be provided in amendments to the Regulations, it would be more meaningful for a Regulation Impact Statement to be provided with the these amendments.

Background

Part X of the Bankruptcy Act provides a process for a debtor to come to an arrangement with creditors to satisfy their debts without the debtor undergoing bankruptcy. In general terms, the process involves the debtor appointing a person to take control of his or her affairs (the 'controlling trustee') with a view to putting a proposal to creditors. The controlling trustee then convenes a meeting of creditors who vote on the debtor's proposal.

Prior to the creditors' meeting, the controlling trustee must prepare a report summarising and commenting on information about the debtor's affairs. That report must also state the controlling trustee's opinion as to whether the creditors' interests would be better served by accepting the debtor's proposal or by the debtor's bankruptcy. This report is an important part of the process as it is intended to assist creditors in making an informed decision about the debtor's proposal.

The creditors can either accept or reject the proposal. If they reject the proposal, they can also require the debtor to petition for his or her own bankruptcy. Under Part X, the decision on the debtor's future is given over to the creditors who will make a judgement about the merits of the proposal based on their own knowledge of the debtor, a report given by the controlling trustee and information obtained at the creditors' meeting. In essence, the creditors make a decision on commercial grounds.

If the creditors resolve to accept the debtor's proposal, they will also appoint a trustee who is responsible for realising and distributing property under the deed or composition. The trustee can be, but is not necessarily, the same person as the controlling trustee.

Any decision by the creditors in relation to the debtor's proposal requires a 'special resolution'. This means it must be passed by a majority in number and at least 75% in value of the creditors voting at the meeting.

The competency of a controlling trustee and trustee is critical to the efficient and effective management of the Part X process. The matters to be considered in whether to continued registration of a trustee is dealt with in section 155H of the Bankruptcy Act. One of the matters to be considered in the involuntary termination of registration of a trustee registered under that Act, is that the trustee failed to exercise the powers, or carry out the duties, of a registered trustee properly. The regulations will prescribe the standards applicable to the exercise of powers, or the carrying out of duties, of registered trustees.

Problem

Submissions to the Part X review were concerned about the technical proficiency of controlling trustees. Particular concerns were raised about the inadequacies in reports to creditors, poor compliance with meeting procedures and errors in determining a creditor's right to vote. It was suggested that a combination of these trustee administration deficiencies lead to perceptions about some debtors or creditors being able to manipulate the Part X process.

It was also suggested that these problems occur more often when the controlling trustee is a solicitor rather than a registered trustee. It was suggested that this may be because solicitors only deal with these administrations occasionally and, as a result, do not have the continuing experience to support their practice in this area. It was also suggested that problems arise because a solicitor generally owes a duty to act in the interests of his or her client. When acting as a controlling trustee, a solicitor may face difficulties in distinguishing between duties owed to the creditors and duties owed to the debtor (given that the solicitor is appointed by the debtor for the purposes of Part X).

Another suggestion was that these deficiencies may arise due to lack of proper training in Part X fundamentals, particularly for practitioners who deal with Part X on an occasional basis. Those areas perceived to be deficient include meeting procedures, reports to creditors, remuneration and the role and duties of a controlling trustee.

The concerns identified above indicated a degree of unacceptable behaviour by Part X controlling trustees and trustees which appeared to be widespread in Australia. Some possible reasons for the identified deficiencies broadly relate to the trustee's lack of knowledge about the role of a Part X controlling trustee or Part X trustee, Part X processes and the lack of information to participants about the relationship of its participants, including the trustee's relationship with the debtor.

A Part X administration is one of the many personal insolvency administrations that can be performed by registered trustees under the Bankruptcy Act. Registered trustees perform the majority of personal insolvency administrations under the Bankruptcy Act.

Personal Insolvency National Standards (PINS) were jointly developed by ITSA and the IPAA in December 1998. The stated aims of PINS are:

• to ensure that personal insolvency administrations are maintained at a consistently high level by the Official Trustee and registered trustees

• to ensure that a level playing field applies to the regulation of all trustees, both the Official Trustee and registered trustees, by applying agreed national standards

• to increase the confidence of clients and stakeholders as to the level of consistency in the application of bankruptcy law and practice

• to encourage the identification and application of best practice in estate administration to the work conducted by all trustees

There is no legislative basis to PINS. Breach of the PINS does not give rise to a basis for disciplinary action by the regulator or professional bodies. At best the status of PINS in any court matter is as evidence of generally accepted standards of professional conduct in the industry.

PINS does not deal separately with Part X controlling trustees or trustees. Nor are the common law duties of a Part X controlling trustee clearly specified.

For consistency in the trustee standards of performance in administrations performed under the Bankruptcy Act, it is considered necessary that the performance standards extend to all personal insolvency administrations under the Bankruptcy Act, as appropriate. Because of the fundamental differences in administrations performed under Part IX and where a court orders control of a debtor's property before bankruptcy under section 50 of that Act, the standards would not apply to those administrations.

In the financial year 2002/2003, there were approximately 405 Part X administrations; all, except 6, are administered by registered trustees. Dividends declared and paid during that year amounted to about $9.8 million.

In the period 1 July 1999 to 31 December 2002, ITSA's attendance at Part X meeting addressed the following matters:

• Requests for Supplementary information to be reported to creditors at meeting or meeting adjourned whilst controlling trustee investigated and reported

• Questioned debtor to clarify apparent inconsistencies

• Non compliance of meeting procedures re quorum.

• Queried admission of proxy/claim for voting.

• Advised that information of likely quantum of creditors claims should be provided in s.189A report as per PINS.

• Advised at meeting that related creditor claims should be better substantiated.

• Trustees fees weren't capped.

• Failure to propose resolution for appointment of trustee.

• Referred debtor to Bankruptcy Fraud Investigation for failing to disclose creditors, dealing with property during the s.188 and possible fake creditor at meeting.

• Failure to adjourn meeting when lack of quorum

• Breach of law in allowing creditor to vote at adjourned meeting who had not a proxy at first meeting.

In 2002/2003, a total of 124 complaints about trustees across all personal insolvency administrations were received. Of the complaints considered justified, they raised the following matters:

• inadequate investigation and reporting in Part X matters;

• breach of controlling trustee's and trustee's duties;

• inadequate investigations of antecedent transactions;

• failure of trustee to keep debtor or creditors adequately informed.

Except for amendments relating to performance standards, other amendments intended to reduce the incidence of unacceptable industry behaviour are considered to be minor or machinery and do not require a RIS. Those amendments are detailed elsewhere in this Explanatory Memorandum.

Objectives

To reduce the incidence of unacceptable behaviour by Part X controlling trustees and trustees in managing the Part X process and administration, and thereby contribute to the integrity of the Part X process.

Options

Options for addressing the problems raised in the review were considered, including:

1. Option One--the option of preserving the status quo, that is, not regulating but allowing the industry to self regulate.

2. Option Two--for ITSA, the Insolvency Practitioners Association of Australia and Continuing Legal Education organisations to work together to provide regular training and information to practitioners who act as controlling trustees, including providing regular updates to practitioners about common problem areas and how these might be addressed.

3. Option Three--provide regulation to reduce the incidence of unacceptable industry behaviour. Regulation would be provided in identified areas including prescribing performance standards which will be based on the existing PINS.

Impact Analysis

The groups affected by the problems resulting from a lack of clearly defined set of performance standards for Bankruptcy Act controlling trustees and trustees include debtors, bankrupts, creditors and the practitioners themselves.

In light of concerns expressed in the Part X review, to maintain the status quo in Option One, would have an unfavourable impact on debtors, creditors and practitioners. Given the history of the insufficiency of PINS, it was unlikely market forces would provide sufficient incentive for practitioners to develop and comply with self regulatory arrangements.

Preserving the status quo in Option One would have no effect on all participants in Part X. However, the costs of not addressing the concerns would lead to a deterioration in the integrity of one aspect of the personal insolvency system.

As for the option of ITSA providing training and information sessions in Option Two, it was recognised that ITSA had little practical involvement in the practice of being a controlling trustee and would need to provide any training in conjunction with private practitioners. This option was considered not to be feasible because of the lack of effective sanctions or incentives to attend these sessions.

Option Two would have minimal impact on debtors, bankrupts, creditors and practitioners because attendance at the information and training sessions would not be compulsory. However, implementation of Option Two would require more resources to be provided to ITSA to develop and present the information and training sessions.

There is a lack of prescription of what is unacceptable behaviour by trustees. Matters to be considered for the involuntary termination of registration include the trustee's failure to exercise powers, or carry out the duties, of a trustee properly. However, apart from PINS, there is no statement of a minimum level of acceptable behaviour. Rather, the status of PINS in any court matter is as evidence of generally accepted standards of professional conduct in the industry.

To prescribe performance standards by regulation in the implementation of Option Three would be beneficial for all participants in the Part X process because the standards will clearly state the minimum level of acceptable conduct and performance of controlling trustees and trustees. Associated with prescribing clear standards of those participants, other participants including the Inspector-General, would be better informed about the management and administration of the estate.

The performance standards would draw on the existing standards in the PINS and detail the standards required of controlling trustees or trustees, generally, and in specific administrations. They would be developed to meet these desired outcomes:

• Be comprehensive

• Be determined in conjunction with industry and stakeholder groups and codify what the profession already generally recognises is expected of them;

• Not inhibit the flexible use of the system;

• Not add undue an regulatory burden and costs;

• Sufficiently clear to provide guidance to debtors, creditors and practitioners;

• Sufficiently specific to be utilised by the courts and the regulator in maintaining professionalism in the industry.

The performance standards incorporate the PINS dealing with the management and administration of estates and will deal specifically with standards for Part X controlling trustees and trustees. They will include standards related to a trustee's propriety such as a trustee's duty to act honestly and impartially.

Because the performance standards include matters already in the PINS, practitioners would not be taken by surprise in terms of the standards expected of them and there would be minimal costs associated with complying with the new standards. Particularly, given that the peak industry body has been involved in developing the standards.

The purpose of prescribing theses performance standards is to assist in decisions on assessing the eligibility of a controlling trustee or on whether to continue the registration of a trustee and if necessary, with conditions.

A person who is or has been a controlling trustee will not be eligible to act as a controlling trustee if the Inspector-General determines that the person has failed to properly carry out the duties of a controlling trustee including meeting a standard applicable to a controlling trustee.

If the Inspector-General believes that a registered trustee has failed to comply with a standard, the Inspector-General may ask the trustee to give a written explanation why the trustee should continue to be registered. If the Inspector-General does not receive an explanation within a reasonable time, or is not satisfied with the explanation, the Inspector-General must convene a committee to consider whether the trustee should continue to be registered.

Matters that the decision makers might consider include:

(a) the importance of a standard that has not been complied with; and

(b) the seriousness of the effect of a failure to comply with a standard, including the impact the failure to comply has on a particular estate; and

Consultation

In light of the concerns raised in the review, to not take any action (Option One) was not an option. A draft report on the Part X review canvassing Options Two and Three was provided to the Bankruptcy Reform Consultative Forum. The Forum comprises representatives from ITSA, the Insolvency Practitioners Association of Australia (IPAA), the Australian Finance Conference, the Law Council of Australia, the Australian Bankers Association, the Australian Taxation Office, Credit Union Services Corporation Australia Limited, and the Australian Financial Counselling & Credit Reform Association.

There was further liaison specifically with representatives of the IPAA and the Law Council during drafting of the performance standards. It is their view that regulation will provide guidance to practitioners on what is minimum acceptable behaviour.

Draft performance standards were provided for comment to the Forum members. Apart from minor drafting suggestions, there were no unfavourable comments.

Conclusion and Recommended Option

Clear expressly stated standards provided by legislation would:

• Provide guidance to participants in the system (trustees, creditors, debtors and the regulator) as to what is expected; and

• Assist in decisions on imposing penalties, removal or placement of conditions on practice and other regulatory functions; and

• Improve accountability and measurement of performance of both practitioners and the regulator.

Given the dissatisfaction about trustee performance standards expressed by submissions in the Part X review and the significant amount of debt involved in Part X administrations, it is considered appropriate that the performance standards should be prescribed by legislation and implemented by Option Three. The reasons for favouring regulation include the significance of the problem of unacceptable behaviour in reducing the integrity of the Part X process which is an important component of the personal insolvency system. Therefore, the certainty provided by providing performance standards in regulation and its universal application will address those concerns.

Implementation and Review

The performance standards will be implemented by amendments to the Bankruptcy Regulations which will commence on the same date as other Part X reforms. There will be a lead in time for business to prepare for compliance with the standards on their commencement. In that time ITSA will provide information sessions in all State and Territory capital cities on the Part X reforms, including these performance standards.

The standards will be reviewed regularly, as part of the Bankruptcy Regulation functions, to ensure that the standards are meeting their objectives.

Details of the proposed regulations are provided in the Attachment.

ATTACHMENT

Details of the proposed Bankruptcy Amendment Regulations 2004 (No. 1)

Regulation 1--Name of Regulations

This proposed Regulation is a formal provision specifying the title of the Bankruptcy Amendment Regulations 2004 (No. 1).

Regulation 2--Commencement

This proposed Regulation specifies that the proposed Regulations will commence on the commencement of Schedule 1 to the Bankruptcy Legislation Amendment Act 2004 (BLAA 2004). A separate Minute recommends that Schedules 1 to 5 to the BLAA 2004 commence on 1 December 2004.

Regulation 3--Amendment of Bankruptcy Regulations 1996

This proposed Regulation provides that Schedule 1 to the proposed Regulations will amend the Bankruptcy Regulations 1996 (the Principal Regulations).

Schedule 1 - Amendments

[1] Paragraph 4.07 (2) (a)

This item makes a consequential change to omit the terms 'an assignment, arrangement or composition under Part X of the Act' and inserts the new terminology of 'a personal insolvency agreement'. This change is necessary following changes to Part X of the Bankruptcy Act 1966 (the Act) which replace the existing three types of arrangement with a single type to be known as a 'personal insolvency agreement'.

[2] Subparagraph 4.11 (1) (e) (ii)

This item corrects the reference to the person to whom a debtor presents a written proposal for a debt agreement under section 185C of the Act. Item 2 substitutes the words 'Official Trustee' with the correct reference to 'Official Receiver' at subparagraph 4.11(1)(e)(ii).

[3] Regulation 6.16

This item omits regulation 6.16 which deals with reasons for an application to the Official Receiver to vary a bankrupt's income contributions liability. The Bankruptcy Legislation Amendment Act 2002 amended this section to enable applications to be made to the trustee of the bankruptcy instead of the Official Receiver. Therefore this regulation is redundant.

[4] Part 8, Division 6, Subdivision 4, heading

This item substitutes a new heading 'Subdivision 4 Other committee related matters'. This amendment is consequential to amendments made by the BLAA 2004 which introduced subsection 155H(5) into the Act as a regulation making power for prescribing standards applicable to the exercise of powers, or the carrying out of the duties, of registered trustees. In considering whether to continue the registration of a trustee, a committee must have regard to the trustee's failure to comply with a prescribed standard.

[5] Part 8, Division 6, after Subdivision 4

This item inserts new Subdivision 4A Standards for trustees and new regulation 8.34A.

New subregulation 8.34A(1) provides that for the purposes of subsection 155H(5) of the Act, the standards applicable to the exercise of powers, or the carrying out of the duties, of registered trustees are set out in Schedule 4A which is inserted by item 19 below.

New subregulation 8.34A(2) provides that the standards in Parts 1, 2 and 5 of Schedule 4A also apply to a solicitor who is a controlling trustee. Under section 188 of the Act, a solicitor may be authorised to take control of a debtor's property. Eligibility requirements for those persons are set out in regulation 8.35.

[6] Paragraph 8.35(1)(e)

Item 6 which omits 'authorisation' and inserts 'authorisation; or' is a drafting device to enable regulation 8.35 to include new paragraph 8.35(1)(f). That new paragraph is inserted by item 7.

Items 7 and 8 below provide new eligibility requirements for solicitors who wish to become controlling trustees. Insolvency practice is a specialised area and a significant number of errors identified by the Inspector-General in Bankruptcy result from practitioners having insufficient knowledge about voting determinations, property recovery assessments and complex income contribution liability. It is considered appropriate that a person who has not gone through the process to become registered as a bankruptcy trustee should be required to meet alternative formal training requirements.

[7] After paragraph 8.35(1)(e)

Item 7 inserts, after paragraph 8.35(1)(e), new paragraph 8.35(1)(f) which provides that a solicitor who wishes to act as a controlling trustee under section 188 of the Act will not be eligible if they have not by 1 December 2006 become a full member of the Insolvency Practitioners Association of Australia or have satisfactorily completed a course in insolvency approved by the Inspector-General.

[8] After subregulation 8.35(1)

This item inserts new subregulation 8.35(1A) which provides that the Inspector-General may approve a course in insolvency by notice published on the Insolvency and Trustee Service Australia's website. It is expected that the Inspector-General would approve courses which are recognised in the industry as providing a solid foundation to practice as an insolvency expert. A note informs readers that paper copies of the notice are available from the Insolvency and Trustee Service Australia (ITSA), on request.

[9] Paragraph 8.35(2)(a)

Subsection 8.35(2) provides additional matters for the ineligibility of solicitors acting as controlling trustees which may be determined by the Inspector-General. One of those matters is where the Inspector-General determines that the person has failed to properly exercise the powers, or carry out the duties or obligations, of a controlling trustee.

Performance standards are prescribed for registered trustees in exercising powers, or carrying out the duties of registered trustees, including as controlling trustees, in performing administrations under the Act. Solicitors who become controlling trustees will be subject to the same standards expected of registered trustees who become controlling trustees. Item 9 substitutes new paragraph 8.35(2)(a) which provides that a person is not eligible to act as a controlling trustee if the Inspector-General determines that the person has failed to properly exercise the powers, or carry out the duties of a controlling trustee, including meeting a standard applicable to a controlling trustee set out in Schedule 4A.

[10] Paragraph 9.04 (1) (b)

Regulation 9.04 provides for the ineligibility of persons who act as debt agreement administrators under Part IX of the Act. In addition to the existing grounds, a registered trustee will be ineligible if their registration ceases for a reason including a failure to comply with a standard prescribed by the Regulations which is provided at paragraph 155H(1)(g).

[11] Part 10

This item substitutes a new heading 'Part 10 Personal insolvency agreements' and inserts new regulations 10.01 to 10.14.

Section 187A applies Part X of the Act, with prescribed modifications, to joint debtors. New regulation 10.01 provides that modifications of Part X for the purposes of section 187A of the Act are specified in new Part 1 of Schedule 6 (see item 20 below).

New regulation 10.02 provides for prescribed information to be given to debtor for the purposes of subsections 188 (2AA) and (2AB). This mirrors the existing requirement in relation to debtors considering bankruptcy or a Part IX debt agreement. It is intended to ensure debtors are fully informed about the processes involved under Part X as well as the consequences of making a personal insolvency agreement.

New regulation 10.03 requires a controlling trustee to sign a consent to act using the approved form and to provide a copy of that consent and the debtor's proposal to the Official Receiver within 2 working days of consenting.

New regulation 10.04 requires the controlling trustee, at least 10 working days before the first creditors' meeting is called, to give certain documents to the Official Receiver, the debtor and each creditor. This is to ensure that all parties are given sufficient time to be aware of the meeting and to consider information relevant to the creditors' decision whether or not to support the debtor's proposal and the controlling trustee's remuneration.

Section 196 of the Act provides for the application of Division 5, Part IV (which deals with meetings of creditors), with any prescribed modifications, to a meeting called under an authority given under section 188 of the Act. New regulation 10.05 provides that modifications of Division 5 of Part IV are specified in new Part 2 of Schedule 6 (see item 20 below).

New regulation 10.06 requires the controlling trustee to give to the Official Receiver a copy of a special resolution passed at the creditors' meeting and certain other information required to be entered on the National Personal Insolvency Index (NPII). This requirement assists the Official Receiver to maintain the NPII in a timely way.

Section 210 of the Act provides that Part VIII of the Act (which deals with trustees), with any prescribed modifications, applies in relation to a controlling trustee and a debtor. New regulation 10.07 provides that modifications of Part VIII are specified in new Part 3 of Schedule 6 (see item 20 below).

Subsection 211(1) which was inserted by the BLAA 2004 provides that certain sections in Division 1 of Part V of the Act and 81 apply with prescribed modifications in relation to a debtor whose property is subject to control under Division 2 of Part X. New regulation 10.08 provides that modifications of Division 1 of Part V (which deals with control over person and property of debtors and bankrupts) are specified in new Part 4 of Schedule 6 (see item 20 below).

New regulation 10.09 provides that a meeting called under subsection 217(1) of the Act (which is a meeting called where the trustee of a personal insolvency agreement does not execute the agreement as required) must be called in accordance with a written notice of the meeting given at least 7 days before the meeting to the debtor, the trustee and each creditor.

New regulation 10.10 provides that the notification to be given by the trustee under paragraph 218(1)(a) of the Act (that is, notification that a personal insolvency agreement has been executed) must be given in writing.

New regulation 10.11 provides for notification to be given to the Official Receiver where the Court sets aside or terminates a personal insolvency agreement or where the Court makes a sequestration order following the debtor's failure to comply with obligations imposed under Part X (such as failure to attend a creditors' meeting or failure to execute the agreement). The applicant for the order must give a copy of the order to the Official Receiver within 2 days after the order is made. Failure to do so constitutes an offence of strict liability which incurs a penalty of one penalty unit. Section 4AA of the Crimes Act 1914 provides that one penalty unit is $110.

New regulation 10.12 provides that, where a personal insolvency agreement is terminated under section 222A of the Act (that is, following a proposal from the trustee that the agreement should be terminated), the trustee must immediately give written notice of the termination to the Official Receiver. Failure to do so constitutes an offence of strict liability which incurs a penalty of one penalty unit. Section 4AA of the Crimes Act 1914 provides that one penalty unit is $110.

Section 223A (1) of the Act provides that Division 5 of Part IV which deals with creditors meetings, apply with prescribed modifications, to a meeting called under section 223 of the Act. Section 223 provides for the controlling trustee or trustee to call such meetings as necessary or desirable for the purposes of Part X. New regulation 10.13 provides that modifications of Division 5 of Part IV are specified in new Part 5 of Schedule 6 (see item 20 below).

New subsections 231(1), (3) and (5) of the Act were inserted by the BLAA 2004. Those provisions apply certain general provisions of the Act in Parts V (control over person and property of debtors and bankrupts) and VI (administration of property) to the Part X process. New regulation 10.13 provides that modifications of Parts V and VI are specified in new Parts 5, 6 and 7 of Schedule 6 (see item 20 below).

New regulation 10.14 provides for a certificate to be issued by the trustee to the debtor where all the debtor's divisible property has been realised and no dividend is payable to creditors. The debtor can request a certificate to this effect which must be provided by the trustee within 7 days. The trustee must also provide a copy to the Official Receiver. Failure to do so is an offence of strict liability which incurs a penalty of one penalty unit. Section 4AA of the Crimes Act 1914 provides that one penalty unit is $110.

[12] Paragraph 13.03(1)(a)

Regulation 13.03 deals with information to be entered on the NPII. The amendment to paragraph (1)(a) is necessary only to reflect the change from the former three types of arrangement under Part X to the single personal insolvency agreement.

[13] Subparagraph 16.07A(1)(c)(ii)

Regulation 16.07A deals with fees payable to the Official Trustee. The amendment to subparagraph (1)(c)(ii) is necessary only to reflect the change from the former three types of arrangement under Part X to the single personal insolvency agreement.

[14] Paragraph 16.14(1A)(b)

Regulation 16.14 deals with fees payable to the Official Receiver on payment of dividends. The amendment to paragraph (1A)(b) is necessary only to reflect the change from the former three types of arrangement under Part X to the single personal insolvency agreement.

[15] Schedule 2, before item 1

Division 6 of Part IV of the Act deals with bankrupts who may propose compositions and schemes of arrangement with creditors to repay their debts. Section 76A provides that Division 5 of Part IV of the Act that deals with creditors meetings applies, so far as it is capable of applying and with such modifications as are prescribed by the Regulations, to meetings of creditors under Division 6. Schedule 2 of the Principal Regulations sets out modifications to the Act for the purposes of meetings of creditors under Division 6 of Part IV. The modifications are necessary to ensure that other provisions of the Act can work effectively in relation to these meetings.

Item 15 inserts new item 1A to modify section 64A of the Act which deals with persons to whom notice of meeting is to be given. New item 1A substitutes subsection 64A(2) which provides for methods to provide creditors with notices of meeting with new subsection 64A(2). The new subsection will provide that notice of a meeting must be given in a manner provided in the regulations and that the notice must be advertised in both a national daily and a regional daily newspaper. Advertising is intended to provide the widest notification of creditors meetings.

[16] Schedule 2, after item 1

The modification introduced by this item 1B is to insert an additional requirement to paragraph 64D which deals with the statement as to the amount of debt that must be provided by a creditor to the trustee at or before meetings. New paragraph 64D(ab) will require the creditor's statement to identify whether the creditor, in relation to the debtor, is a related entity. The term 'related entity' is defined in subsection 5(1) of the Act.

[17] Schedule 2, after item 10

Section 64Y deals with adjournment of meetings. New item 10A will allow a trustee, on his or her own motion, to adjourn a creditors' meeting to allow for further investigation in relation to the bankrupt's proposed composition or scheme of arrangement. The creditors may, by special resolution, revoke the trustee's decision to adjourn the meeting.

[18] Schedule 2, after item 11

Section 64ZC deals with appointment of proxies. New item 11A inserts subsection 64ZC(5A) for the purposes of creditors' meeting under Division 6 of Part IV. This requires the instrument appointing a proxy to disclose whether the proxy has received a financial incentive to vote in a particular way. This is to ensure that 'proxy purchase' arrangements are disclosed to all creditors attending the meeting. The instrument must also include information to the effect that it is an offence to give the trustee a voting document knowing or reckless that it is false or misleading in a material particular.

[19] After Schedule 4

This item inserts Schedule 4A which sets out performance standards for trustees including controlling trustees. The BLAA introduced subsection 155H(5) into the Act as a regulation making power for prescribing standards applicable to the exercise of powers, or the carrying out of the duties, of registered trustees. In considering whether to continue the registration of a trustee, a committee must have regard to the trustee's failure to comply with a prescribed standard.

Schedule 4A Performance standards for trustees (including controlling trustees)

Part 1 - Preliminary

Purpose

Clause 1.1 sets out the purpose of prescribing performance standards for trustees and controlling trustees performing personal insolvency administrations under the Act. Subclause 1.1(1) provides that Schedule 4A sets out standards for the minimum level of acceptable conduct and performance of a registered trustee when he or she is exercising the powers, or carrying out the duties, of a registered trustee under the Act; and a solicitor who is a controlling trustee when he or she is exercising the powers, or carrying out the duties, of a controlling trustee under the Act.

A note refers readers to subsection 155H(1) of the Act which provides that the Inspector-General may ask a registered trustee to give the Inspector-General a written explanation why the trustee should continue to be registered, if the Inspector-General believes that the trustee has failed to comply with a standard prescribed in Schedule 4A. Under subsection 155H (2) of the Act, if the Inspector-General does not receive an explanation within a reasonable time, or is not satisfied by the explanation, the Inspector-General must convene a committee to consider whether the trustee should continue to be registered. Section 155I of the Act sets out the committee's powers when considering whether a trustee should continue to be registered.

The committee convened by the Inspector-General to consider whether the trustee should continue to be registered must consist of the Inspector-General (or his delegate), an Australian Public Service employee and a registered trustee chosen by the Insolvency Practitioners Association of Australia. The committee makes its decisions on the basis of peer review.

Matters that the Inspector-General or a committee might consider include:

(a) the importance of a standard that has not been complied with; and

(b) the seriousness of the effect of a failure to comply with a standard, including the impact the failure to comply has on a particular estate; and

Subclause 1.1(2) provides that the purpose in prescribing these performance standards is to ensure that:

(a) a person to whom these standards apply acts at all times in accordance with the person's powers and duties under the Act and these Regulations, and in relation to the practice of bankruptcy law generally; and

(b) administrations are carried out consistently at a high level.

The standards are based on the existing Personal Insolvency National Standards (PINS) which have been in use for some time as a set of best practice principles agreed between the Insolvency Practitioners Association of Australia and the Insolvency and Trustee Service Australia.

Clause 1.2 provides definitions of some terms that are used in this Schedule. Each of the terms refers to the meaning provided by the relevant provisions in the Act.

Part 2 General Standards

Part 2 deals with the general standards expected of controlling trustees and trustees in dealing with the management and administration of the estate of a bankrupt or debtor. Division 2.1 provides for the application of the general standards. Clause 2.1 provides that the general standards apply to:

(a) the trustee of the estate of a bankrupt; and

(b) the trustee of a composition or scheme of arrangement under Division 6 of Part IV of the Act; and

(d) a controlling trustee; and

(e) the trustee of a deceased estate administered under Part XI of the Act.

Division 2.2 - General

This Division provides general standards dealing with the controlling trustee's and trustee's conduct and duties as professionals who are trusted to deal with substantial property and moneys on behalf of persons who have suffered financial loss. The objective of these standards is to ensure that controlling trustees and trustees maintain their high standing as personal insolvency professionals who demonstrate high ethics, values and integrity.

Clause 2.2 deals with a controlling trustee's or trustee's duty to act honestly and impartially in relation to each administration. Subclause 2.2 (1) provides that that duty includes not signing, or associating himself or herself with, a document that the trustee knows, or ought reasonably to know, is false or misleading. Subclause 2.1 (2) provides that the trustee must not include in any document prepared by the trustee a clause that disclaims the trustee's responsibility for the document's authenticity.

Clause 2.3 deals with a controlling trustee's or trustee's duty to avoid situations of conflict of interest. If, during an administration, it becomes apparent that the trustee has an actual or potential conflict of interest in relation to the administration, the trustee must, as soon as practicable after becoming aware of the conflict of interest:

(a) notify the creditors, the person who appointed the trustee, a committee of inspection or the court, as appropriate, of the conflict of interest; and

(b) take appropriate steps to avoid the conflict of interest.

Examples of conflicts of interest are provided.

Clause 2.4 deals with the trustee's use of information relating to an administration. The trustee must comply with section 16A of the Privacy Act 1988 when dealing with information relating to an administration. A note refers readers to section 16A of the Privacy Act 1988 which provides that an organisation must not do an act, or engage in a practice:

(a) that breaches an approved privacy code binding the organisation; or

(b) to the extent (if any) that the organisation is not bound by an approved privacy code -- that breaches a National Privacy Principle.

The National Privacy Principles are set out in Schedule 3 to the Privacy Act 1988.

Clause 2.5 requires the trustee to ensure that his or her employees comply with these standards. In practice, much of the trustee's work is carried out by his or her employees. Therefore, it is important that trustees ensure those employees carry out that work at the required standard and that trustees are accountable if that does not happen.

Clause 2.6 provides for the standard preliminary inquiries and actions at the start of each administration that must be undertaken by a controlling trustee or trustee.

Clause 2.7 deals with the extent to which a controlling trustee or trustee should investigate matters affecting the administration of an estate. This includes considering the views of creditors regarding the extent to which investigations are undertaken in an administration and informing creditors, as soon as practicable, of the outcomes of inquiries undertaken in the administration.

Division 2.3 - Assets

The objective underlying these standards is to achieve cost effective and timely realisations in an administration. The decisions that will be made under these standards will be based on the information available to a controlling trustee or trustee at that time. The standards cover matters such as deciding whether or not to realise a particular asset, determining the ownership and value of assets.

Clause 2.8 provides guidance on what assets should be realised by the trustee. Matters to be considered include whether the asset:

(a) will provide a cost-effective return to creditors; or

(b) will contribute to the payment of the costs of the administration; or

Clause 2.9 deals with the trustee's determination of the question of ownership or interests in assets. In determining the ownership of, or an interest in, an asset that is part of divisible property, the trustee must act reasonably and claim only the amount that fairly represents the interest in, or value of, the asset.

Clause 2.10 provides particular guidance about when to obtain advice about an interest in or the value of an asset. Although an amount may not be significant by itself, in relation to the total value of assets in the estate, it may have a material impact on the administration. For eg, $3000 worth of shares in a private company may not be a significant amount. However, in relation to a total value of all assets in the estate of $10 000, the $3000 worth of shares may have a material impact on the administration. A trustee should, in these circumstances and on the information available, obtain independent expert advice on the matters set out in paragraphs 2.10(a) and (b).

It is possible that by not obtaining independent expert advice in the example above, a trustee would not breach clause 2.10. This is because the trustee believes that they are able to make the valuation themselves and that the cost of expert advice is not justified under the terms of the standard provided by clause 2.13. That clause provides that a trustee must only incur those costs that are necessary and reasonable and before deciding to incur a cost, he or she must compare the amount of cost likely to be incurred with the value and complexity of the administration.

Clause 2.11 provides that the trustee must act independently and impartially in undertaking transactions and dealings relating to the disposal of the property of a bankrupt or debtor.

Clause 2.12 deals with recording decisions relating to significant assets that may have a material impact on the administration. If, in an administration, the trustee makes a decision about the identification, protection, realisation or write-off of a significant asset of a bankrupt or debtor that may have a material impact on the administration, the trustee must record the decision in writing and keep the record on the trustee's file for the administration.

Division 2.4 - Remuneration and costs

The objective of these standards is to ensure that the costs and remuneration charged by a trustee in conducting an administration are fair, reasonable and documented.

Clause 2.13 provides that in conducting an administration, the trustee must incur only those costs that are necessary and reasonable and, before deciding whether it is appropriate to incur a cost, compare the amount of the cost likely to be incurred with the value and complexity of the administration.

Clause 2.14 provides that if the trustee receives moneys from a debtor, creditor, bankrupt or third party that are intended to cover the trustee's remuneration, the moneys must be included in the trustee's remuneration fixed in accordance with section 162 of the Act and properly accounted for in accordance with sections 168 and 169 of the Act. Subclause (2) provides that this requirement does not apply to moneys recovered by the trustee under subsection 161B(2) of the Act.

Clause 2.15 provides that the trustee must ensure that time billed for a task undertaken in conducting an administration is charged at the appropriate rate for the level of staff who would be reasonably expected to undertake the task. This is irrespective of who actually undertakes the work.

Clause 2.16 requires the trustee to ensure that proper records are kept that provide evidence of the time spent on work done in conducting an administration and adequately describe the nature of the work.

Division 2.5 - Files and access to information

This division deals with standards relating to file maintenance and provision of information to creditors. The objective of these standards is to ensure that adequate records document the management of an administration.

Clause 2.17 requires the trustee to keep separate files for each administration and to keep a record of every material decision in an administration, and any supporting documentation relied on in relation to the decision, on the file for the administration.

Clause 2.18 provides for the trustee to provide information to creditors. The trustee and the trustee's staff must give information about an administration to a creditor who reasonably requests it. This clause applies to the trustee of a composition or scheme of arrangement under Division 6 of Part IV of the Act, the trustee of a personal insolvency agreement; and the trustee under Part XI. Similar requirements on a controlling trustee and a trustee of a bankrupt estate are provided in the Act.

Division 2.6 - Meetings of creditors

This Division deals with creditors meetings that are convened by a controlling trustee or trustee, whether the cost of holding a meeting is necessary, the trustee's mandatory attendance and the President's duties. The objective of these standards is to provide some matters that must be considered in order to fulfil the statutory obligations of holding and presiding at meetings.

Clause 2.19 provides guidance to a controlling trustee or trustee to determine whether holding a meeting is necessary or whether some other form of communication is appropriate.

Clause 2.20 deals with the matters to be considered by a controlling trustee or trustee in deciding whether the proposed time and place for a meeting of creditors is convenient for the creditors.

Clause 2.21 requires that the trustee, or a person appointed under subsection 63B(1) of the Act to represent the trustee at a meeting of creditors, must attend the meeting.

Clause 2.22 deals with the President's duties at creditors' meeting. Apart from a controlling trustee who must preside, creditors may nominate any person to preside. The standard will only apply to a controlling trustee or trustee, or their representative, who preside at the meetings.

Subclause 2.22 (2) provides minimum standards relating to the conduct of a meeting by the person presiding.

Clause 2.23 requires that the trustee not prevent the Inspector-General from attending, or participating in, a meeting of creditors. Attendance and participation in creditors meetings is an important part of the Inspector-General's regulatory functions.

Division 2.7 - Trustee's accounts

The objective of these standards is to assist a controlling trustee and trustee fulfil their statutory obligation to keep such accounts and records of the administration as are necessary to exhibit a full and correct account of the administration of the estate.

Clause 2.24 deals with records of accounts. Subclause 2.24(1) requires the trustee to maintain a separate record of receipts and payments for each administration. Under subclause 2.24 (2), if a single bank account is kept for 2 or more administrations, the trustee must collectively reconcile the records for the individual administrations with the bank records each month.

Clause 2.25 requires the trustee to verify all payments from an administration, and transfers between estates, by reference to appropriate supporting vouchers and original documents kept on the administration file.

Clause 2.26 requires the trustee, on a regular basis, to reconcile the cash book for an administration with the bank records for the administration, in accordance with the amount of activity in relation to the administration.

Part 3 Standards for trustees other than controlling trustees

Division 3.1 provides for the application of the standards set out in this Part.

Clause 3.1 provides that Part 3 applies to:

(a) the trustee of the estate of a bankrupt; and

(b) the trustee of a personal insolvency agreement; and

Division 3.2 deals with reporting to creditors on certain matters. The objectives of this standard are to ensure timely and accurate information is provided to creditors and to provide appropriate information to creditors to enable them to make informed decisions.

Clause 3.2 provides for the matters to be included in the notice given by the trustee to the creditors of a bankrupt or debtor.

Division 3.3 sets out the standards for a trustee in dealing with debts in joint estates and for the trustee's documentation of a creditor's claim or proof of debt. The objective of the standards is to enable a trustee to examine and process creditor's claims and proofs of debts accurately and efficiently.

Clause 3.3 provides that in conducting an administration in relation to joint bankrupts or debtors, the trustee must ensure that a debt is proved in the appropriate estate.

Clause 3.4 requires the trustee to ensure that each creditor's claim or proof of debt in relation to an administration bears evidence of:

(a) its admission or rejection; and

(b) the reason for its admission or rejection; and

Clause 3.5 sets out how a trustee must deal with evidence of the debtor's liability. Subclause 3.5 (1) provides that if necessary, the trustee must ask a creditor to give evidence in writing in relation to a debt claimed by the creditor:

(a) to establish a bankrupt's or debtor's liability for the debt; or

(b) to identify the estate or property against which the claim should be admitted.

Subclause 3.5 (2) provides that if the trustee considers that evidence given under subclause (1) is insufficient for the purposes of paragraph (1) (a) or (b), the trustee, before asking for further information, must have regard to the expected dividend rate and the materiality of the issue requiring clarification.

Subclause 3.5 (3) requires the trustee to keep a copy of any evidence or information relied on in deciding, for the purposes of voting or distributing dividends, whether to accept or reject the creditor's claim.

Division 3.4 deals with performance standards relating to distribution of dividends. The objective of the standards is to ensure that dividends are distributed in a timely manner and that distributions are well documented. They also ensure that creditors' interests are taken into account in paying dividends and that creditors are kept fully informed.

Clause 3.6 requires the trustee to consider the views of creditors in relation to whether moneys held by the trustee should be applied to conduct further investigations in relation to the administration or distributed as a dividend.

Clause 3.7 provides the standard for a trustee's distribution of estate funds. Under subclause 3.7(1), the trustee must distribute estate funds in a timely manner, having regard to:

(a) the complexity of the administration and the claims of creditors; and

(b) the amount of funds available for distribution; and

Under subclause 3.7 (2), the trustee must make an interim distribution of dividends to creditors unless an existing or expected commitment is likely to account for a significant level of the available funds from the estate or property.

Clause 3.8 requires the trustee to provide to creditors advice relating to dividends and administration. The trustee must, when distributing dividends to the creditors of a bankrupt or debtor, advise creditors about whether further dividends are expected to be distributed or the administration is finalised.

Clause 3.9 provides the standard for keeping records of distributions.

Part 4 Standards for trustees of bankrupt estates

Division 4.1 provides for the application of this Part.

Clause 4.1 provides that the standards in this Part applies to the trustee of the estate of a bankrupt or the estate of a deceased person administered in bankruptcy. These standards relate to the fact that certain property vests in the trustee in those types of administrations.

Division 4.2 provides standards that relate to the trustee's administration of the assets in the estate.

Clause 4.2 requires the trustee to take appropriate steps to identify the assets of the estate of a bankrupt that will vest in the trustee and provides guidance about what are considered appropriate steps (which will depend upon the circumstances of a particular estate).

Clause 4.3 requires the trustee to take appropriate steps to protect assets with a commercial value that have vested in him or her and provides guidance about what are considered appropriate steps (which will depend upon the circumstances of a particular estate).

Division 4.3 provides standards for the minimum level of acceptable conduct and performance of an administration when a trustee is required to make an assessment of income and contributions.

Subclause 4.4 provides that the Division applies to the trustee of the estate of a bankrupt.

Subclause 4.5(1) requires the trustee, as soon as possible after all necessary information has been made available, to make an assessment of the income of a bankrupt in respect of a contribution assessment period and the contribution that the bankrupt is liable to pay.

Subclause 4.5(2) provides guidance to the trustee about the appropriate timing of payments of contributions including how to act where the bankrupt may suffer hardship as a result of paying a contribution.

Subclause 4.5(3) requires the trustee to give the bankrupt a copy of the assessment of income and contributions liability, setting out and explaining the basis on which the amount of any contributions liability has been calculated.

Subclause 4.6 specifies standards which relate to monitoring payment of contributions.

Part 5 Standards for controlling trustees

Clause 5.1 provides that this Part applies to a controlling trustee. The objective of these standards is ensure that timely and accurate information is provided to creditors to assist their informed decision making about whether or not to accept a debtor's proposal under Part X.

Clause 5.2 requires a controlling trustee who notifies creditors of an administration, to include in the notice: the debtor's name, date of birth, address and occupation.

Clause 5.3 provides for the matters that a controlling trustee must investigate regarding a debtor's property and income. Subclause 5.3(1) requires that as soon as practicable after an authority under section 188 of the Act becomes effective, the controlling trustee must conduct appropriate investigations of the debtor's property and income.

Subclause 5.3 (2) provides minimum standards for investigations in administrations where the debtor's property includes significant real estate, company structures or motor vehicles.

If the debtor was or is involved in significant corporate or trust activity, subclause 5.3(3) requires the controlling trustee to take appropriate steps to identify the assets of the debtor which are to be subject to the proposed personal insolvency agreement including making inquiries of third parties (for example, solicitors, accountants, creditors, associated entities and financial institutions) to establish whether there is any divisible property or antecedent transactions.

Clause 5.4 provides the standard required of a controlling trustee's report to creditors under section 189A of the Act. This report is a key document to assist creditors to make an informed decision on the debtor's proposal. The report must include the following:

(a) information about each matter mentioned in subsection 188A (2) of the Act;

(b) the basis on which the debtor's property has been valued;

(c) the kind of investigations the controlling trustee has carried out and whether any other matters need to be investigated;

(d) the reasons for the controlling trustee's opinion about whether creditors' interests would be better served by accepting the debtor's proposal for dealing with the debtor's affairs under Part X of the Act or by the bankruptcy of the debtor.

Clause 5.5 provides standards relating to record-keeping by controlling trustees (in relation to bank accounts and transactions in relation to the debtor's property).

Clause 5.6 provides the performance standard required of a controlling trustee when making decisions on who may vote at creditors' meeting. In deciding whether a creditor is entitled to vote at a meeting of creditors, the controlling trustee must have regard to the merits of the creditor's claim and act impartially and independently, without regard to the debtor's wishes.

[20] Schedule 6

This item substitutes new Schedule 6 in the Principal Regulations. Schedule 6 of the proposed Regulations sets out modifications to the Act for the purposes of Part X. The modifications are necessary to ensure that other provisions of the Act can work effectively in relation to personal insolvency agreements.

Schedule 6 Modifications in relation to Part X of the Act

Part 1

Part 1 of Schedule 6 sets out modifications to Part X in cases involving joint debtors. The amendments to Part 1 of Schedule 6 are necessary only as a consequence of amendments to Part X made by the BLAA 2004 and represent no change in the existing policy or operation of the Act.

Part 2

Section 196 of the Act provides that Division 5 of Part IV which deals with meeting of creditors applies, as far as it is capable and with any modifications prescribed by the Regulations to meeting of creditors called under section 188 authorities.

The amendments made by items 1 and 2 of Part 2 are necessary only to reflect amendments to the Act made by the BLAA 2004.

Item 3 amends subsection 64A(2) for the purposes of meetings called under section 188 authorities. The new subsection requires that, in addition to giving notice of meetings in the manner specified in the Principal Regulations, meetings must be advertised in both a national and a regional daily newspaper. Advertising is intended to provide the widest notification of creditors meetings.

Item 4 inserts new subsection 64B(6) which provides that the notice of a first creditors' meeting called pursuant to a section 188 authority must notify creditors of the existence of an information sheet on Part X which is available from ITSA. This is intended to provide creditors with access to more information about how Part X works.

Item 5 inserts new subsection 64D(ab) to section 64D which deals with statements given by creditors as to the amount of their debts for voting purposes. This document is used by the trustee at the creditors' meeting to determine the value of a creditor's vote. The additional modification introduced by this amendment will require the creditor's statement to identify whether the creditor, in relation to the debtor, is a related entity. The term 'related entity' is defined in subsection 5(1) of the Act.

The amendment made by item 6 is to substitute new paragraph 64G(g). The paragraph requires tabling certain documents, in addition to the statement of affairs, at the first meeting of creditors called under s 188 of the Act. Items 11 and 12 are consequential amendments to ensure that those documents specified in paragraph 64G(g) are referred to in the requirement in section 64R to table documents at the first creditors meeting.

The amendments made by items 7 to 10 will require the controlling trustee to preside at a creditors' meeting called pursuant to a section 188 authority. These amendments modify section 64P to achieve this. This is designed to ensure that the controlling trustee is accountable for proper conduct of the meeting.

The amendment made by item 13 is to substitute a new subsection 64U(1) that deals with the remuneration of a registered trustee. That new paragraph will require the President of the meeting to ask the controlling trustee the basis on which he or she wishes to be remunerated.

Section 64Y deals with adjournment of meetings. Item 14 will allow a controlling trustee, of his or her own motion, to adjourn a creditors' meeting to allow for further investigation in relation to the controlling trusteeship. The creditors may, by special resolution, revoke the trustee's decision to adjourn the meeting. This modification is intended to provide a controlling trustee with more time to undertake further investigations unless creditors disagree by special resolution.

Section 64ZC deals with appointment of proxies. Item 15 inserts new subsection 64ZC(5A) for the purposes of creditors' meeting under Division 6 of Part IV. This requires the instrument appointing a proxy to disclose whether the proxy has received a financial incentive to vote in a particular way. This is to ensure that 'proxy purchase' arrangements are disclosed to all creditors attending the meeting. The instrument must also include information to the effect that it is an offence to give the trustee a voting document knowing or reckless that it is false or misleading in a material particular.

The amendment made by item 16 to insert new subsection 64ZE(3) preserves the existing modification to enable the subsection to apply to a personal insolvency agreement only if the joint estate forms part of the property to be dealt with under the agreement and the agreement does not specifically provide for distribution of the joint estate.

Part 3

Part 3 of Schedule 6 sets out modifications to Part VIII in relation to controlling trustees and trustees of personal insolvency agreements.

The amendment made by items 1 to 7 are necessary only because of amendments made to Part X by BLAA 2004 and represent no change in the policy or operation of the Act.

Item 8 confirms the application of subsection 173(1) which requires a trustee to keep proper accounts and records, to a controlling trustee. An additional modification at new paragraph 173(1)(b) provides that a controlling trustee must permit a creditor to take a copy of the accounts and receipts.

Item 9 preserves an existing modification to section 180 (dealing with resignation of trustees) so that it continues to apply to trustees of personal insolvency agreements.

The amendments made by items 10 to 12 are necessary only because of amendments made to Part X by BLAA 2004 and represent no change in the policy or operation of the Act. They reflect the new terminology of personal insolvency agreements.

Part 4

Part 4 of Schedule 6 sets out modifications to Division 1 of Part V (control over person and property of debtors and bankrupts) as those provisions apply to debtors whose property is subject to control under Division 2 of Part X. Subsection 211(1) of the Act provides that some of the information gathering and related powers in Division 1 of Part V are available to controlling trustees who wish to investigate the affairs of a debtor who has given a section 188 authority.

The amendments made by items 1 and 2 simply enable section 77F and subsection 81(1) to apply in the context of a controlling trusteeship. The amendment made to section 77F by new item 1 will enable the advances paid under sections 77D and 77E to be paid out of property subject to a personal insolvency agreement. The modification made to subsection 81(1) by item 2 will enable the debtor whose property is subject to control to be summoned for examination before the Court or Registrar.

Part 5

Part 5 of Schedule 6 sets out modifications under subsection 231(1) which provides that some of the information gathering and related powers in Division 1 of Part V are available to trustees of personal insolvency agreements. The amendment made by new item 1 simply enables section 77F to apply in the context of a Part X administration. It will operate to enable the advances paid under sections 77D and 77E to be paid out of property subject to a personal insolvency agreement.

Part 6

Part 6 of Schedule 6 sets out modifications under subsection 231(3) in relation to personal insolvency agreements. These amendments replace existing modifications which are made in relation to each type of arrangement under Part X. The new modifications made by items 1 to 22 are necessary to enable other provisions of the Act to operate effectively in relation to personal insolvency agreements.

Part 7

Part 7 of Schedule 6 sets out modifications under subsection 231(5) in relation to trustees of personal insolvency agreements.

Item 1 confirms the application of subsection 173(1) which requires a trustee to keep proper accounts and records, to the trustee of a personal insolvency agreement. An additional modification at new paragraph 173(1)(b) provides that a trustee must permit a creditor to take a copy of the accounts and receipts.

[21] Schedule 8, after item 7

Schedule 8 sets out the details of what information is recorded on the NPII. The amendments made by these regulations are generally required only as a result of amendments to the Act made by BLAA 2004 or because of changes to the Federal Court Rules.

Item 22 inserts new item 7A which will include on the NPII details of the termination or setting aside of a composition or scheme of arrangement under Division 6 of Part IV (post-bankruptcy arrangements with creditors). This is important information which should form part of the public record of personal insolvency activity.

[22] Schedule 8, item 15, column 5

This amendment reflects a change in the Federal Court Rules and brings the NPII into line with the requirements under those Rules.

[23] Schedule 8, item 16, column 3

This amendment removes a redundant reference to a provision of the Act.

[24] Schedule 8, item 17, column 2

This amendment replaces an incorrect reference to a provision of the Act with the correct reference.

[25] Schedule 8, item 17, column 3

This amendment replaces an incorrect reference to a provision of the Act with the correct reference.

[26] Schedule 8, item 23, column 5

This amendment reflects a change in the Federal Court Rules and brings the NPII into line with the requirements under those Rules.

[27] Schedule 8, item 24

These amendments are necessary only because of amendments to Part X made by the BLAA 2004 (in particular, the introduction of personal insolvency agreements) and represent no change to the existing policy or operation of the Act.

[28] Schedule 8, item 25

[29] Schedule 8, item 26, column 5

This amendment reflects a change in the Federal Court Rules and brings the NPII into line with the requirements under those Rules.

[30] Schedule 8, items 27, 27A and 28

[31] Schedule 8, items 30 and 32, column 5

These amendments reflect a change in the Federal Court Rules and bring the NPII into line with the requirements under those Rules.

[32] Schedule 9, item 1

Schedule 9 sets out fees payable to the Official Receiver. This amendment is necessary only because of amendments to Part X made by the BLAA 2004 (in particular, the introduction of personal insolvency agreements) and represent no change to the existing fee that applied for filing each of the former three types of Part X administrations.