Commonwealth Numbered Acts

CORPORATIONS ACT 1989 No. 109 of 1989 - SECT 1056

1056. (1) A trustee for the holders of debentures of a corporation:

   (a)  shall exercise reasonable diligence to ascertain whether or not the
        property of the borrowing corporation and of each of its guarantor
        bodies that is or may be available, whether by way of security or
        otherwise, is sufficient, or is likely to be or become sufficient, to
        discharge the principal debt as and when it becomes due;

   (b)  shall satisfy itself that each prospectus relating to the debentures
        does not contain any matter that is inconsistent with the terms of the
        debentures or with the relevant trust deed;

   (c)  shall ensure that the borrowing corporation and each of its guarantor
        bodies comply with the provisions of Part 3.5 so far as they relate to
        the debentures and are applicable;

   (d)  shall exercise reasonable diligence to ascertain whether or not the
        borrowing corporation and each of its guarantor bodies have committed
        any breach of the covenants, terms and provisions of the debentures or
        the trust deed;

   (e)  except where it is satisfied that the breach will not materially
        prejudice the security (if any) for the debentures or the interests of
        the holders of the debentures-shall take all steps and do all such
        things as it is empowered to do to cause the borrowing corporation and
        any of its guarantor bodies to remedy any breach of those covenants,
        terms and provisions;

   (f)  where the borrowing corporation or any of its guarantor bodies fails,
        when so required by the trustee, to remedy a breach of the covenants,
        terms and provisions of the debentures or the trust deed-may place the
        matter of the failure to remedy the breach before a meeting of holders
        of the debentures, submit such proposals for the protection of their
        investment as the trustee considers necessary or appropriate and
        obtain the directions of the holders in relation to the matter; and

   (g)  where the borrowing corporation submits to those holders a compromise
        or arrangement-shall give to them a statement explaining the effect of
        the compromise or arrangement and, if it thinks fit, recommend to them
        an appropriate course of action to be taken by them in relation to the
        compromise or arrangement.

(2) Where, after due inquiry, the trustee for the holders of the debentures is
at any time of the opinion that the property of the borrowing corporation and
of any of its guarantor bodies that is or should be available, whether by way
of security or otherwise, is insufficient, or likely to become insufficient,
to discharge the principal debt as and when it becomes due, the trustee may
apply to the Commission for an order under subsection (3).

(3) Where such an application is made, the Commission, after giving to the
borrowing corporation an opportunity of making representations in relation to
the application:

   (a)  may, by written order served on the borrowing corporation at its
        registered office in Australia, impose such restrictions on the
        activities of the corporation, including restrictions on advertising
        for deposits or loans and on borrowing, as the Commission considers
        necessary for the protection of the interests of the holders of the
        debentures; or

   (b)  may, and, if the borrowing corporation so requires, shall, direct the
        trustee to apply to the Court for an order under subsection (6).

(4) The trustee shall, when directed under paragraph (3) (b), apply to the
Court for an order under subsection (6).

(5) Where:

   (a)  after due inquiry, the trustee is at any time of the opinion that the
        property of the borrowing corporation and of any of its guarantor
        bodies that is or should be available, whether by way of security or
        otherwise, is insufficient or likely to become insufficient, to
        discharge the principal debt as and when it becomes due; or

   (b)  the borrowing corporation has contravened an order made by the
        Commission under subsection (3); the trustee may, and where the
        borrowing corporation has requested the trustee to do so, the trustee
        shall, apply to the Court for an order under subsection (6).

(6) Where an application is made to the Court under subsection (4) or (5), the
Court may, after giving the borrowing corporation an opportunity of being
heard, by order, do all or any of the following:

   (a)  direct the trustee to convene a meeting of the holders of the
        debentures for the purpose of placing before them such information
        relating to their interests and such proposals for the protection of
        their interests as the trustee considers necessary or appropriate and
        of obtaining their directions in relation to the protection of their
        interests and give such directions in relation to the conduct of the
        meeting as the Court thinks fit;

   (b)  stay all or any actions or other civil proceedings before any court by
        or against the borrowing corporation;

   (c)  restrain the payment of any money by the borrowing corporation to the
        holders of debentures of that corporation or to any class of such
        holders;

   (d)  appoint a receiver of such of the property as constitutes the security
        (if any) for the debentures;

   (e)  give such further directions from time to time as may be necessary to
        protect the interests of the holders of the debentures, the members of
        the borrowing corporation or any of its guarantor bodies or the
        public; but in making any such order the Court shall have regard to
        the rights of all creditors of the borrowing corporation.

(7) The Court may vary or rescind any order made under subsection (6) as the
Court thinks fit.

(8) In making an application to the Commission or to the Court, a trustee
shall have regard to the nature and kind of the security given when the
debentures were offered and, if no security was given, shall have regard to
the position of the holders of the debentures as unsecured creditors of the
borrowing corporation.