External administrators

Chapter 5 of Corporations Act 2001 (Cth) (CA), entitled “external administration”, deals with four types of administration, in order:

• • arrangements and reconstructions;
• • receivers and other controllers;
• • voluntary administration; and
• • winding up.

All have in common the appointment, by the company itself, by a secured creditor or by the court, of a person or persons who take control of the company or of some or all of its property in the place of the directors. These external administrators, usually specialised accountants, have for many years been subject to a statutory registration regime, but the rules about the way in which they carry out their functions have varied according to the type of administration in such areas as:

• • remuneration;
• • meetings of shareholders or creditors; and
• • committees of inspection.

Many of these rules are now standardised by the progressive introduction of the Insolvency Practice Schedule (IPS), see Introduction. It is important to understand that “external administration” for the purposes of IPS applies only to the second two of the four types of administration, see Definitions.

At the same time, the provisions of IPS relating to the registration and disciplining of insolvency practitioners also apply to persons appointed in the first two types of administration, because of the requirement in CA that persons appointed in these types be registered liquidators, Registering and disciplining practitioners.

Conduct of external administration

In addition to the provisions dealing with the registration and disciplining of external administrators, the IPS makes uniform provision for the following aspects of the administrations to which the Schedule applies; namely, voluntary administrations and deeds of company arrangement, and winding up:

• • Remuneration, Div 60. See Remuneration;
• • Funds handling, Div 65. See Funds handling;
• • Information, Div 70, covering returns to ASIC, record-keeping and giving information to creditors. See Information;
• • Meetings, Div 75. See Meetings;
• • Committees of inspection, Div 80. See Committees of inspection;
• • Directions by creditors, Div 85. See Directions by creditors;
• • Review of external administration, Div 90, including the new measures of review by another registered liquidator, and removal of an administrator by creditors. See Review of external administration; and
• • Sundry matters, Div 95, especially the right of an external administrator to assign a right to sue under the Act. See Assignment of claims.

The provisions of the IPS are supplemented by the Insolvency Practice (Corporations) Rules 2016 (Cth) (“IPR”), made under Div 105 of the IPS.