ASIC steps in – regulation of creditors’ trust deeds

A deed of company arrangement (DOCA) enables a company to give its creditors a better return than they would receive in liquidation and allows the company to return to financial stability, free of any further claim by those or any other creditors arising prior to the execution of the DOCA. On 24 May 2005, the Australian Securities & Investments Commission published a guide for deed administrators in relation to their obligations concerning the use of creditors’ trusts. The Guide identifies key matters which ASIC considers must be properly considered by a deed administrator and a company’s creditors before there can be a transition from deed of company arrangement to creditors’ trust. The Guide is not simply instructive or informative, but rather is a general code of conduct (based on existing Corporations Act requirements) that ASIC intends to enforce through court process. The existence of potentially serious sanctions taken with the setting of pre-requisites for appropriate use of creditors trust deeds, will have a major impact on this area of law and practice. That influence is welcomed as it will, by imposing strict and enforceable requirements, ensure that well formulated, documented and implemented creditors’ trusts will continue to be an alternative means of exit from deed administration. For further information Tony Heaver-Wren Phillips Fox Senior Associate 9288 6920 Dean Hely Phillips Fox Partner – 9288 6772

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