Media Release: Inquiry into Corporate Insolvency report opens door for major improvements to save jobs and businesses
“This is a great example of our elected representatives working in a bipartisan way to review our laws and make recommendations that will have a profoundly positive impact on the efficient operation of our economy, save more jobs and businesses and deliver better outcomes for creditors. And we especially recognise the Chair of the Committee, Senator Deborah O’Neill for her strong leadership in this very complex area of law,” said ARITA CEO John Winter.
“We are delighted that the Committee has agreed with almost all of our key recommendations, especially around the need for a ‘root and branch’ review of insolvency law to create a more simple, efficient and effective regime to foster better outcomes for companies in financial distress.
“Importantly, the committee has also seen the wisdom of bringing our personal and corporate insolvency regimes and oversight together which will significantly reduce costs and complexity and make a lot more sense for those in small and micro-businesses in particular.
“The report also identifies the need to understand the process that people go through in an insolvency situation and better build our laws to fit that. This has been something ARITA has been urging for many years and it should make dealing with financial distress much less difficult.
“Through its work, the Committee has seen evidence of how complex and unapproachable our insolvency law has become for directors and creditors. They’ve also recognised the unjustness of liquidators being required by law to doi extensive work that often don’t get paid for and isn’t delivering any public good outcomes and certainly not being used by regulators.
“We are particularly pleased to see a call for urgent action to address the costly impact of trusts in insolvency to enhance returns to creditors. This has been a recommendation sitting on the books from the Australian Law Reform Commission for over 30 years and is a vital reform,” said Winter.
Key recommendations of the report include:
- as soon as practicable the government commission a comprehensive and independent review of Australia’s insolvency law, encompassing both corporate and personal insolvency. The committee is also recommending that the government progress several other near-term actions as identified in the executive summary
- the government implement recommendations from the Safe Harbour Review, independent and likely in advance of the further review, and consider referring the remainder of safe harbour reform issues identified in this report to a comprehensive review
- the government consider and consult on potential reforms to the:
- small business restructuring pathway, and
- simplified liquidation pathway.
- reform the experience eligibility requirements for registered liquidators, to address the inequity of the requirements and the gender imbalance in the population of registered liquidators
- the comprehensive review include consideration of the remuneration of insolvency practitioners, including:
- the extent to which public interest work carried out by liquidators for no or limited pay is sustainable, and
- the impact of this on all stakeholders in external administrations
- the comprehensive review include consideration of the nature and extent of the harm posed by ‘untrustworthy pre-insolvency advisors’
- the government consider changes to the Assetless Administration Fund to ensure that it is achieving its intended policy objectives
- the Treasury consider assessing the potential benefit of the Public Interest Administration Fund proposed by the Productivity Commission in 2015
- the comprehensive review consider whether the current statutory reporting obligations for insolvency practitioners are best serving the integrity, efficiency and efficacy of the Australian corporate insolvency framework
- the Australian Taxation Office consult, act on and publish model creditor guidelines, consistent with its model litigant obligations
- the comprehensive review consider the relative priority of employees, liquidators and secured creditors, including the priority over circulating assets under section 561 of the Corporations Act 2001, and
- the government amends the Corporations Act 2001 to expressly clarify the treatment of trusts with corporate trustees during insolvency.
The Committee’s full report can be found here.
ARITA’s comprehensive submissions can be found at Submission 36 (page 2)