Australia’s corporate insolvency laws to undergo a comprehensive review
A comprehensive review has begun into the effectiveness of Australia’s corporate insolvency laws in protecting and maximising value for the benefit of all interested parties and the economy. Undertaken by the Federal Government’s Parliamentary Joint Committee on Corporations and Financial Services, the review is seeking submissions by 30 November 2022.
Calls for a more comprehensive and coherent review of Australia’s insolvency regime have been made by various industry bodies and commentators. As in most developed markets, Australian insolvency laws are a hybrid of 19th century companies legislation as well as a hotch-potch of more recent additions and amendments. Reviews of and amendments to insolvency and restructuring laws have been undertaken in a number of jurisdictions (including Australia) in recent years, in particular in response to the COVID-19 pandemic.
While it remains to be seen what recommendations will flow (or whether any recommendations will ultimately be enacted), the review outlines seven key areas of interest:
- recent and emerging trends in the use of corporate insolvency and related practices in Australia, such as temporary COVID-19 pandemic insolvency measures (which included the suspension of directors’ personal liability for insolvent trading) and changes in economic conditions that have affected businesses more broadly;
- current legal and regulatory arrangements, such as the operation of the Personal Properties Securities Act and recent reforms to small business restructuring, liquidation, and unlawful phoenixing;
- potential areas for reform, including the unfair preference claims regime, the morass which is the insolvency of corporate trustees, safe harbour from insolvent trading claims, and international approaches and developments;
- supporting businesses in managing financial distress by improving access to corporate turnaround capabilities;
- insolvency practitioners and their role, remuneration, financial viability and overall conduct, including receivers, liquidators, administrators, and small business restructuring practitioners;
- government agencies and their role in the corporate insolvency system, including the corporate regulator ASIC, the Australian Taxation Office and other relevant bodies; and
- any other related corporate insolvency matters.
Interested persons and stakeholders have until 30 November 2022 to provide written submissions. The committee intends that a report be tabled in both Houses of Parliament by 30 May 2023.
If you would like to explore any of these issues more deeply, or would like help in writing a submission, please contact us.