Although the provisions of the Corporations Act (CA) relating to arrangements and reconstructions are found in Ch 5 dealing with external administration, they are not limited to corporations which are, or may be, insolvent. A scheme covered by the provisions (in these notes all referred to as “schemes”) may be between the corporation and its creditors, or some of them, between the corporation and its members, or some of them, or between all three (see, for example, Pr 235.500 and Pr 235.509, as well as the creditors’ moratorium scheme in Pr 235.515). It may, especially in the case of amalgamations, apply to a number of corporations. By reason of the definition of “Pt 5.1 body” in s 9 CA, it can also apply to foreign corporations registered here. See Scope of provisions.

An application for an order to convene a meeting or meetings is made ex parte. It may be made by the corporation, by any creditor or member or by the liquidator if the company is in liquidation. See First court application — to convene meeting.

Documents to convene a meeting include:

• a covering letter;

• a notice of meeting;

• a copy of the proposed scheme;

• the explanatory statement; and

• a form of proxy.

They will be sent to all known creditors. See Convening meeting.

Although a scheme need not provide for the appointment of a person to administer its provisions, a scheme with creditors invariably will. See Appointment of administrator of scheme.

A scheme with creditors becomes binding on the creditors and on the corporation only when:

• it is agreed to by the required majority; and

• it is approved by the court.

In addition, it will not take effect until a copy of the order approving the scheme is lodged with ASIC. A scheme may bind creditors in their rights against a third party. See Effect of scheme.

Once the scheme has been passed by the required majority, it must be approved by the court, and has no effect until it is. The applicant must publish a notice of the proposed application in the prescribed form on the ASIC insolvency notices website. See Second court application — to approve scheme.

There is no objection to a scheme providing that it is to terminate in certain events, such as the making of a final payment or the expiration of a moratorium period and provision for termination should generally be made in clear terms. A scheme may also provide that it is to terminate if specified events do not occur. But a provision for termination by the court will not be approved. See Termination.

This schedule (in this subtopic called Insolvency Practice Schedule (IPS)) came into effect progressively, starting with provisions relating to the registration and disciplining of insolvency practitioners on 1 March 2017, with the remainder operational on 1 September 2017. See Insolvency Law Reform Act 2016.

A scheme administrator is not an “external administrator” for the purposes of the IPS. See Definitions. Accordingly, the provisions of the schedule do not apply directly, although the administrator will be subject to the requirements for registration and discipline by reason of being required to be a registered liquidator. See Registering and disciplining practitioners.