Insolvency and Reconstruction is an elective segment offered in the CPA Program.

The primary objective of this segment is to develop the candidate's ability to apply legal concepts from the Corporations Act 2001 (Cwlth), Bankruptcy Act 1966 (Cwlth) and the common law to practical business situations. Knowledge of business law and a general familiarity with corporate law at an undergraduate level is assumed, along with a general awareness of the business environment. Candidates will be required to develop, through their study of the material, knowledge of specific sections of the Corporations Act 2001 (Cwlth) and the Bankruptcy Act 1966 (Cwlth) as they relate to termination of businesses, administration of businesses in financial distress and personal bankruptcy. Candidates are required to have access to the most recent editions of the Corporations Act 2001 (Cwlth), Regulations and Rules, and the Bankruptcy Act 1966 (Cwlth) Regulations and Rules. A link to relevant legislation is provided to candidates on CD-ROM.

The course structure is not cumulative. Candidates can begin studying at any module in the segment as each module covers a discrete part of the law of insolvency and reconstruction.

The content of Insolvency and Reconstruction is as follows:

Module 1: Introduction to insolvency and reconstruction

• a brief history
• meaning of insolvency
• aims of modern insolvency law
• general objectives and principles of corporate insolvency law
• the legal framework and institutions of insolvency in Australia
• core functions of an insolvency administration
• what types of insolvency administrations are there, and how do they differ?

Module 2: Diagnosing financial failure

• diagnosing financial failure
  • conventional ratio analysis
  • early warning signs
• investigating viability
  • assessment problems
  • economic factors affecting viability
  • non-economic factors affecting viability
• remedial action
  • diagnosis
  • treatment and rehabilitation
  • the adviser's role

Module 3: Corporate receivership and other forms of controllership

• terms, definitions and institutions
  • appointment of a controller
• effects of appointment
  • possession-control of property
  • requirements for publicity
  • directors and auditors
  • cooperation of company officers
  • powers, duties and liabilities of a controller
  • remuneration of the controller
  • priorities of repayment and probable priorities of distribution
  • retention of title
  • employee and other trading contracts
  • administrative records and debenture-holder reports
  • terminating a controllership

Module 4: Voluntary administration and other formal and informal arrangements with creditors

• voluntary administration under Part 5.3A of the Corporations Act 2001 (Cwlth)
  • commencement of the administration
  • overview of the administration
  • immediate effects of the administration
  • the administrator's role and personal liabilities
  • powers and duties of the administrator
  • ending an administration
  • deed of company arrangement (DCA)
  • duties and powers of a deed administrator
  • priorities of distribution in a deed
  • the court's role in Part 5.3A
• court-approved schemes of arrangements for corporations
  • Corporations Act 2001 (Cth) Chapter 5, Part 5.1
  • advantages and disadvantages of court-approved schemes
  • procedure to initiate a scheme
  • final court sanction
  • the scheme administrator
  • duties of scheme administrator
  • termination of a scheme
• informal arrangements with creditors
  • types of informal arrangements
  • review of debtor's position
  • conditions of informal arrangements
  • ddvantages of informal arrangements
  • pitfalls of informal arrangements

Module 5: Liquidation

• purposes of liquidation
• who is involved in a winding-up?
• the liquidator
• types of liquidation
• initiation of winding-up
• effects of winding-up
• provisional liquidation
• administration of the liquidation
• liquidation versus receivership
• liquidation versus Part 5.3A administration
• dissolution

Module 6: Bankruptcy

• bankruptcy administration: terms, definitions and institutions
• operation of bankruptcy
• how does a debtor become bankrupt
• effects of bankruptcy
• powers of the trustee
• duties of the trustee
• personal liability of the trustee in bankruptcy
• remuneration of the trustee
• investigation, inquiry and examination
• property: availability and realisation
• the claims of creditors
• distribution of the estate
• terminating bankruptcy
• second bankruptcies, deceased estates, offences

Module 7: Parts IX and X of the Bankruptcy Act 1966 (Cwlth)

• why enter a Part IX or Part X arrangement
• part IX debt agreements
• part X arrangements
• who can be a debtor under a Part X arrangement
• entering a Part X arrangement
• administration of Part X arrangements
• advantages of Part X
• termination of a Part X arrangement