Right of indemnity has priority over other debts
456K Right of indemnity has priority over other debts
General rule
Subject to section 556, a right of indemnity under section 456J has priority over:
all the company’s unsecured debts; and
any debts of the company secured by a PPSA security interest in property of the company if, when the restructuring of the company begins, the security interest is vested in the company because of the operation of any of the following provisions:
section 267 or 267A of the Personal Property Securities Act 2009 (property subject to unperfected security interests);
section 588FL of this Act (collateral not registered within time); and
subject otherwise to this section—debts of the company secured by a circulating security interest in property of the company.
Debts secured by circulating security interests—receiver appointed before the beginning of restructuring etc.
A right of indemnity under section 456J does not have priority over debts of the company under restructuring that are secured by a circulating security interest in property of the company, except so far as the secured party agrees, if:
before the beginning of the restructuring, the secured party:
appointed a receiver of property of the company under a power contained in an instrument relating to the security interest; or
obtained an order for the appointment of a receiver of property of the company for the purpose of enforcing the security interest; or
entered into possession, or assumed control, of property of the company for that purpose; or
appointed a person so to enter into possession or assume control (whether as agent for the secured party or for the company); and
the receiver or person is still in office, or the secured party is still in possession or control of the property.
Debts secured by circulating security interests—receiver appointed during restructuring etc.
Subsection (4) applies if:
debts of a company under restructuring are secured by a circulating security interest in property of the company; and
during the restructuring, the secured party, consistently with this Part:
appoints a receiver of property of the company under a power contained in an instrument relating to the security interest; or
obtains an order for the appointment of a receiver of property of the company for the purpose of enforcing the security interest; or
enters into possession, or assumes control, of property of the company for that purpose; or
appoints a person so to enter into possession or assume control (whether as agent for the secured party or for the company).
A right of indemnity of the restructuring practitioner under section 456J has priority over those debts only in so far as it is a right of indemnity for debts incurred, or remuneration accruing, before written notice of the appointment, or of the entering into possession or assuming of control, as the case may be, was given to the restructuring practitioner.
Debts secured by circulating security interests—priority over right of indemnity in relation to repayment of money borrowed etc.
A right of indemnity under section 456J does not have priority over debts of the company under restructuring that are secured by a circulating security interest in property of the company, except so far as the secured party consents in writing, to the extent that the right of indemnity relates to debts incurred for:
the repayment of money borrowed; or
interest in respect of money borrowed; or
borrowing costs.
This Act’s bill:Explanatory memorandumSecond reading speech
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