BANKRUPTCY REGULATIONS 1996 - SCHEDULE 4A/Performance standards for trustees (including controlling trustees)
Performance standards for trustees (including controlling trustees)
(1) This Schedule sets out standards for the minimum level of
acceptable conduct and performance of:
(a) a registered trustee when exercising the powers, or carrying out the
duties, of a registered trustee under the Act; and
(b) a solicitor exercising the powers, or carrying out the duties, of a
controlling trustee under the Act.
Note
1: Subsection 155H(1) of the Act
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.
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
(c) a trustee's performance history
and whether the trustee has previously failed to comply with a standard.
Note
2: Under paragraph 8.35(2)(a), the
Inspector-General may determine that a person who is or has been a controlling
trustee is not eligible to act as a controlling trustee because the person has
failed to meet a standard in this Schedule that applies to a controlling
trustee.
(2) The purpose of these standards is to ensure:
(a) that 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) that an administration to which these standards apply is carried out
consistently at a high level.
In this Schedule:
"administration" means:
(a) the administration of the estate of a bankrupt; or
(b) the administration of a composition or scheme of arrangement under
Division 6 of Part IV of the Act; or
(c) the administration of a personal insolvency agreement; or
(d) the administration of a debtor's property that has become subject to
control under Division 2 of Part X of the Act; or
(e) the administration of the estate of a deceased person under
Part XI of the Act.
"contribution assessment period" , in relation to a
bankrupt, has the meaning given by section 139K of the Act.
"contributions liability" , in relation to a bankrupt, means the contribution
that a bankrupt is liable to pay in respect of a contribution assessment
period, calculated in accordance with section 139S of the Act.
"controlling trustee" means a registered trustee or a solicitor who is
controlling the property of a debtor under an authority given under
section 188 of the Act.
"deceased person" means a deceased person in
respect of whose estate an order for administration under Part XI of the
Act has been made.
"divisible property" :
(a) in relation to a bankrupt, means property divisible among his or her
creditors within the meaning of section 116 of the Act; and
(b) in relation to a debtor, means property divisible among his or her
creditors within the meaning of section 187 of the Act; and
(c) in relation to a deceased person, means the divisible property of
that person's estate as defined by subsection 249(6) of the Act.
2.1
Application of Part 2
This Part applies 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
(c) the trustee of a personal insolvency agreement; and
(d) a controlling trustee; and
(e) the trustee of the estate of a deceased person.
(1) The trustee must act honestly and impartially in relation to each
administration, including not signing, or associating himself or herself with,
a document that the trustee knows, or ought reasonably to know, is false or
misleading.
(2) 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.
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: Conflicts of interest
1. The appointer or, in the case
of a sequestration order, the bankrupt is or was a client of the trustee or
the trustee's firm in relation to a financial, trust or insolvency planning
matter.
2. The trustee or a member of the trustee's firm is a personal
friend, relative or business associate of the debtor.
The trustee must comply with section 16A of the Privacy Act 1988 when
dealing with information relating to an administration.
Note: Section 16A
of the Privacy Act 1988 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 .
The trustee must ensure that his or her employees comply with these standards.
The trustee must undertake preliminary inquiries and actions at the start of
each administration, including the following:
(a) informing the bankrupt, debtor or legal personal representative of
the deceased person of his or her obligations under the Act and the penalties
for failing to comply with those obligations;
(b) obtaining and reviewing the statement of affairs of the bankrupt,
debtor or deceased person;
(c) if necessary, interviewing the bankrupt, debtor or legal personal
representative of the deceased person to clarify any matters in the statement
of affairs;
(d) identifying and making an assessment of realisable assets that could
be expected to:
(i) provide, on a cost-benefit basis, a return to creditors; or
(ii) contribute to the payment of the costs and fees of the
administration;
(e) assessing a bankrupt's contributions liability;
(f) determining the likelihood of whether the estate of the bankrupt or
deceased person, or the property of the debtor, includes property that can be
realised to pay a dividend to creditors;
(g) if the trustee has a genuine reason for believing that a bankrupt,
debtor or legal personal representative of the deceased person may not have
disclosed an interest in real or other registered property--conducting
appropriate searches for such property;
(h) if information obtained from a search mentioned in
paragraph (g) shows that the bankrupt, debtor or legal representative of
the deceased person has not made full and true disclosure of his or her
interest in property:
(i) making inquiries of third parties about the information; or
(ii) if further inquiries are not made, explaining to the creditors why
further inquiries were considered unnecessary;
(i) if the trustee considers that there may have been antecedent
transactions--making inquiries of third parties to identify those
transactions;
(j) cooperating with the Inspector-General by, for example, responding
to reasonable requests for information.
(1) The trustee must consider the views of creditors regarding the
extent to which investigations are undertaken in an administration.
(2) The trustee must inform creditors, as soon as practicable, of the
outcomes of inquiries undertaken in the administration.
The trustee must realise only those assets:
(a) that will give a cost-effective return to creditors; or
(b) that contribute to the payment of the costs of the administration;
or
(c) that may be realised in accordance with a personal insolvency
agreement.
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.
If the value of divisible property is likely to have a material impact on the
administration, the trustee must obtain advice from an independent expert in
assessing:
(a) the extent of the trustee's interest in any realisable asset; and
(b) the value of the property or offers for the property.
The trustee must act independently and impartially in undertaking transactions
and dealings relating to the disposal of the property of a bankrupt, debtor or
deceased person.
If, in an administration, the trustee makes a decision about the
identification, protection, realisation or write-off of a significant asset of
a bankrupt, debtor or deceased person that may have a material impact on the
administration, the trustee must:
(a) record the decision in writing; and
(b) keep the record on the trustee's file for the administration.
In conducting an administration, the trustee must:
(a) incur only those costs that are necessary and reasonable; and
(b) 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.
(1) If the trustee receives moneys from a debtor, bankrupt, legal
personal representative of a deceased person, creditor or third party that are
intended to cover the trustee's remuneration, the moneys must be:
(a) included in the trustee's remuneration fixed in accordance with
section 162 of the Act; and
(b) properly accounted for in accordance with sections 168 and 169
of the Act.
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.
The trustee must ensure that proper records are kept that:
(a) provide evidence of the time spent on work done in conducting an
administration; and
(b) adequately describe the nature of the work.
(1) The trustee must keep separate files for each administration.
(2) The trustee must 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.
(1) This clause applies to:
(a) the trustee of a composition or scheme of arrangement under
Division 6 of Part IV of the Act; and
(b) the trustee of a personal insolvency agreement; and
(c) the trustee of the estate of a deceased person.
(2) The trustee and the trustee's staff must give information about an
administration to a creditor who reasonably requests it.
The trustee must consider whether the matters sought to be addressed at a
meeting of creditors:
(a) require the holding of a meeting; or
(b) could be addressed more cost effectively by another form of
communication with creditors, for example, a creditors' resolution without a
meeting in accordance with section 64ZBA of the Act.
In deciding whether the proposed time and place for a meeting of creditors is
convenient for the creditors, the trustee must consider the following:
(a) the requirements for meetings set out in the Act and these
Regulations;
(b) the location of creditors;
(c) the ability of creditors to return proxies and statements of debt;
(d) the complexity of issues to be considered by creditors before the
meeting.
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.
(1) This clause applies to the following persons:
(a) a trustee who is elected to preside at a meeting of creditors;
(b) a person appointed under subsection 63B(1) of the Act to
represent the trustee at a meeting of creditors;
(c) a controlling trustee presiding at a meeting of creditors.
(2) The person must:
(a) ensure that proper meeting procedures are followed; and
(b) ensure that the requirements relating to meetings set out in the Act
and these Regulations are complied with; and
(c) ensure that all persons attending the meeting who are entitled to
ask questions of the trustee, the bankrupt, the debtor or the legal personal
representative of the deceased person are given an opportunity to do so; and
(d) ensure that the minutes secretary complies with the requirements of
section 64Z of the Act; and
(e) take reasonable steps to establish whether there is sufficient
evidence to support a creditor's statement under section 64D of the Act
in relation to the amount of liability of the bankrupt, the debtor or the
estate of the deceased person to the creditor.
The trustee must not prevent the Inspector-General from attending, or
participating in, a meeting of creditors.
(1) The trustee must maintain a separate record of receipts and payments
for each administration.
(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.
The trustee must verify all payments from an administration, and transfers
between estates, by reference to appropriate supporting vouchers and original
documents kept on the administration file.
The trustee must regularly 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.
3.1 Application of Part 3
This Part applies to:
(a) the trustee of the estate of a bankrupt; and
(b) the trustee of a personal insolvency agreement; and
(c) the trustee of the estate of a deceased person.
The notice given by the trustee to the creditors of a bankrupt, debtor or
deceased person must include the following information:
(a) the name, date of birth, address and occupation of the bankrupt,
debtor or legal personal representative of the deceased person;
(b) the business name or name of any associated entity or related entity
of the bankrupt, debtor or deceased person;
(c) the date and type of administration;
(d) an outline of matters investigated by the trustee up to the date of
the notification;
(e) advice about any possible contributions liability of the bankrupt;
(f) any matters the trustee has identified as needing further
investigation.
In conducting an administration in relation to joint bankrupts or debtors, the
trustee must ensure that a debt is proved in the appropriate estate.
The trustee must 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
(c) the amount for which the claim or proof of debt has been admitted.
(1) 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 the liability of a bankrupt, a debtor or the estate of
a deceased person for the debt; or
(b) to identify the estate or property against which the claim should be
admitted.
(2) 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.
(3) The trustee must 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.
The trustee must consider the views of creditors in relation to whether moneys
held by the trustee should be:
(a) applied to conduct further investigations in relation to the
administration; or
(b) distributed as a dividend.
(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
(c) the need to retain funds in the estate or property to meet existing
or expected commitments.
(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.
The trustee must, when distributing dividends to the creditors of a bankrupt,
a debtor or the estate of a deceased person, advise creditors about whether:
(a) further dividends are expected to be distributed; or
(b) the administration is finalised.
The trustee must keep a record of the following information for each
administration:
(a) the name of each creditor who received a dividend;
(b) the amount of each admitted claim;
(c) the amount of dividend paid to each creditor.
4.1 Application of Part 4
This Part applies to:
(a) the trustee of the estate of a bankrupt; and
(b) the trustee of the estate of a deceased person.
The trustee must take appropriate steps to identify the assets of the estate
of a bankrupt or deceased person that will vest in the trustee, including the
following:
(a) obtaining and reviewing the statement of affairs of the bankrupt or
deceased person;
(b) considering the size of the deficiency in the estate for the purpose
of finding possible assets or determining whether an issue needs to be
investigated;
(c) considering the activities and circumstances of the bankrupt or
deceased person to decide whether assets disclosed by the bankrupt or the
legal representative of the deceased person are consistent with what would be
expected of a bankrupt having a similar background or undertaking a similar
activity;
(d) if the bankrupt is or was, or the deceased person was, involved in
significant corporate or trust activity--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.
The trustee must take appropriate steps to protect assets with a commercial
value that have vested in him or her, including doing any or all of the
following:
(a) ensuring that the assets are adequately insured;
(b) taking possession of the assets;
(c) perfecting legal ownership of the assets.
4.4 Application of Division 4.3
This Division applies to the trustee of the estate of a bankrupt.
4.5
Income and contribution assessment
(1) The trustee must, as soon as possible after all necessary
information has been made available, make an assessment of:
(a) the income of a bankrupt in respect of a contribution assessment
period; and
(b) the contribution that the bankrupt is liable to pay.
(2) The trustee must:
(a) act fairly and reasonably in determining the time for payment of
contributions liability; and
(b) if full payment within the contribution assessment period or before
discharge would cause hardship to the bankrupt, consider giving the bankrupt
an extension of the time for payment of contributions liability.
(3) The trustee must 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.
The trustee must:
(a) monitor the payment of contributions by a bankrupt to ensure the
contributions liability is discharged; and
(b) if necessary, take appropriate steps to recover contributions that
remain unpaid after the time for payment has passed.
5.1 Application
of Part 5
This Part applies to a controlling trustee.
The notice given by the controlling trustee to the creditors of the debtor
must include the debtor's name, date of birth, address and occupation.
(1) 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.
(2) If the debtor's property includes significant real estate, company
structures or motor vehicles, the controlling trustee must:
(a) search the appropriate registries for information about the
property; and
(b) obtain advice from an independent expert about the value of the
property.
(3) If the debtor was or is involved in significant corporate or trust
activity, the controlling trustee must take appropriate steps to identify the
assets of the debtor that will be subject to the 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.
The controlling trustee's report under section 189A of the Act must also
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.
The controlling trustee must ensure that:
(a) bank accounts maintained in accordance with sections 168 and
169 of the Act; and
(b) records maintained in accordance with section 173 of the Act in
respect of all transactions relating to the debtor's property;
are kept
separate from records relating to any later administration that takes place in
relation to the debtor.
In deciding whether a creditor is entitled to vote at a meeting of creditors,
the controlling trustee must:
(a) have regard to the merits of the creditor's claim; and
(b) act impartially and independently, without regard to the debtor's
wishes.
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