A trustee in bankruptcy or a liquidator may file a form (Form 525) with ASIC which discharges the trustee or liquidator from all personal liability in respect of the property disclaimed. Before lodging a disclaimer of assets, the trustee in bankruptcy or liquidator need to ensure that there would be no benefit in the property, and determine the potential consequences of the disclaimer.
The power to lodge a disclaimer of assets is derived from section 568 of the Corporations Act 2001 (Cth). A liquidator of a company may at any time, on the company’s behalf, disclaim property of the company that consists of:
- land burdened with onerous covenants; or
- shares; or
- property that is unsaleable or is not readily saleable; or
- property that may give rise to a liability to pay money or some other onerous obligation; or
- property where it is reasonable to expect that the costs, charges and expenses that would be incurred in realising the property would exceed the proceeds of realising the property; or
- a contract.
This protection is most commonly utilised where there is real property with onerous covenants or property that is not readily saleable in accordance with section 133 of the Bankruptcy Act 1966 (Cth).
Following the lodgement of the disclaimer with ASIC, objecting parties can apply to set the disclaimer aside within 14 days of the following:
- liquidator giving notice to the interested party; or
- the disclaimer being published (in accordance with subsection 568(2) of the Corporations Act 2001 (Cth)); or
- when the liquidator lodges notice of the disclaimer.
The use of disclaimer of assets in insolvency and liquidation is increasing in Australia.