Overview of corporate insolvency in Australia
On 28 September 2022, the Federal Government, through the Parliamentary Joint Committee on Corporations and Financial Services (the Committee) commenced an inquiry into the effectiveness of Australia’s corporate insolvency laws in protecting and maximising value for the benefit of all interested parties and the economy.
The Committee has undertaken the inquiry with a view to understand the reality of what is happening in the corporate insolvency space at present and to consider potential areas of reform.
Key focus areas
The Committee noted that it recognises the need for Australia’s corporate insolvency regime to be “fit for purpose” and to “effectively serve the Australian economy and all participants in it”.
To that end, the Committee has announced a fairly broad scope of review into recent and emerging trends in the use of corporate insolvency and related practices in Australia, including in regard to:
- temporary COVID-19 pandemic insolvency measures, and other policy measures introduced in response to the pandemic that may have influenced such trends and practices; and
- recent changes in domestic and international economic conditions, increases in material and input costs for businesses and inflationary pressures more broadly, and supply shortages in certain industries.
The review will also focus on the operation of the existing corporate insolvency framework under the legislation, common law and regulatory arrangements, as well as the role of government agencies such as ASIC and the ATO in this context.
Potential areas for reform flagged by the Committee include unfair preference claims, trusts with corporate trustees, insolvent trading, safe harbour, and international approaches and developments.
Whilst details of what these corporate insolvency reforms may look like in practice are yet to be released, the Australian Restructuring Insolvency & Turnaround Association (ARITA) has welcomed the announcement of the inquiry. ARITA has supported a redraft of Australia’s “ridiculously complex” insolvency laws to make them “simple, effective and efficient”.
ARITA’s key areas of concern mirror the potential areas for reform identified by the Committee; in particular, that the separate regimes for personal and corporate insolvency should come together under the guidance of a single, dedicated regulator. ARITA has also called for urgent reform to the small business restructuring and liquidation frameworks, which were the subject of reform in 2021 under the previous government.
Key dates for corporate insolvency law inquiry
The Committee is currently accepting submissions from interested persons and stakeholders up until 30 November 2022, with a view to table a report in both Houses of Parliament by 30 May 2023.
G+T will be monitoring the progress of the Committee and all stakeholders involved in the proposed reforms and will update our clients and contacts regularly as matters progress. We look forward to being involved in the inquiry and potential reform and will keenly find ways to utilise any new laws to best serve our clients going forward.
Look out for further updates from the Restructuring and Insolvency lawyers on corporate insolvency laws moving forward.