Compositions involving joint and separate estates

One of AFSA’s functions is to monitor composition proposals for creditors, submitted by those who are bankrupt. Recent applications have failed to appropriately manage individual interests of joint and separate estates together with applicable remuneration in each estate.

Insolvency practitioners are reminded of the following key points:

  • while you can submit a joint composition, it is based on the provision that each group of creditors votes on the proposal, and it is passed by special resolution in each category. For details, please read Labocus Precious Metals Pty Ltd v Thomas [2007] FCA 1154 (2 August 2007)
  • expenses relating to the administration of estates must be fairly distributed by the trustee between the joint and separate estates including remuneration
  • failing to identify and appropriately account for joint and separate estates can have a material impact for stakeholders.

We also advise that section 6 of the Inspector-General Practice Direction Trustee remuneration notifications explains that the trustee’s obligation to send remuneration notifications is estate based. Section 6.2 states that it is acceptable for a trustee to send a joint report to creditors, with estate-based remuneration notices dealt with separately.