Australia: Insolvency shake up - Draft Insolvency Law Reform Bill

HG Alert: 18 November 2014
Last Updated: 20 November 2014

On 7 November 2014, the Government released the draft Insolvency Law Reform Bill 2014, with key changes proposed to be put in place by 30 June 2015.

The main changes centre on replacing the current registration system with a user-pays licensing scheme requiring liquidators to pay a fee to obtain a practising license. This scheme recognises that those who benefit from the industry should contribute to the cost of regulation and is designed to allow the Australian Securities and Investments Commission (ASIC) to use the funds received from licensing fees to conduct its supervision of the industry in a more proactive manner.

Following on from the proposed licensing scheme is the consideration of placing the responsibility on insurance companies to notify ASIC when a liquidator's professional indemnity insurance has expired. In these circumstances, ASIC may automatically suspend the liquidator's license.

The changes also focus on giving creditors more power to remove liquidators through a special resolution. Under the present system, creditors may remove a liquidator at the first meeting of the voluntary administration or liquidation; however, in a court-appointed liquidation creditors must commence legal action to remove a liquidator.

In this Alert, Senior Associate Stephanie Tan and Law Graduate Isabel Vidot discuss the key reforms for the insolvency industry and the reasons for their introduction.

The proposal

The draft legislation contemplates extensive changes to the Corporations Act 2001 (Cth) (Act) and the Bankruptcy Act 1966 (Cth) including:

  • giving creditors the power to determine when and what information will be provided by an insolvency practitioner and the power to remove liquidators by a special resolution;
  • increasing ASIC's investigation powers to examine liquidators suspected of engaging in misconduct;
  • new insolvency practitioners being interviewed by a three-person panel, with one member of the panel being from the professional body, the Australian Restructuring Insolvency & Turnaround Association, and with accreditation requiring renewal every three years; and
  • requiring liquidators to be registered, with the proposed fee for lodgement of an application set at $2,000.
  • To become registered, applicants will be required to:
    • hold at least one degree representing three years' full-time study in commercial law and accounting, with no less than one year's equivalent full-time study in either;
    • have completed formal tertiary studies in insolvency administration of at least two course units or three months' study;
    • be employed on a full-time basis, for at least three of the preceding five years (if the applicant wishes to be registered without limitation, the relevant experience must encompass assisting an external administrator in the performance of their duties in relation to a broad range of external administrations, providing advice and having experience in insolvency administrations outside corporate insolvency); and
    • demonstrate a capacity to perform satisfactorily the duties of an insolvency practitioner.

Interested parties are invited to make submissions on the draft bill by 19 December 2014.

Why is change needed?

Under the current regime, discharge of liquidators' duties and standards is mainly regulated by ASIC, through reactive monitoring, reviewing liquidators' conduct and acting on complaints received. Where misconduct by a liquidator is identified, ASIC or the Australian Prudential Regulatory Authority may apply to the Companies Auditors and Liquidators Disciplinary Board to cancel or suspend a liquidator's registration.

While the clear process and criteria for registration of liquidators is currently regulated by the Act in conjunction with ASIC, the post-registration supervision of liquidators is not as stringent.

At present, the Act provides that to become a registered liquidator, you must be a natural person who has a certain base level of qualifications, has experience in winding up bodies corporate, is capable of performing the duties of, and is otherwise a fit and proper person to be, a registered liquidator, is not a person disqualified under Part 2D.6 from managing corporations, and is (generally) resident in Australia1.

In order to remain registered, a liquidator must, amongst other things, continue to perform adequately and properly the duties of a liquidator and remain a fit and proper person2. Further, in winding up a company, liquidators owe a fiduciary duty to the company, its creditors and its members to act honestly, avoid conflicts of interest and act impartially. A liquidator is also precluded from profiting from their position, except by way of remuneration and must carry out their role with care and diligence.

Ariff investigation and 2010 Senate Inquiry

The pitfalls of taking a reactive, as opposed to pro-active approach have been exemplified by a number of cases, with the most publicised example of a liquidator failing to carry out their duties adequately and properly being the case of Stuart Ariff.

Ariff was reported to ASIC in 2005 by a director of a company for which he was then a liquidator; however, no action was taken by ASIC. Although his behaviour was also raised in Parliament that year, ASIC still did not step in until October 2007.

In 2009, four years after the initial complaint, Ariff accepted all 83 allegations of misconduct against him in relation to 16 companies, with such misconduct including charges for international family holidays and hairdressing treatments for his wife and sisters. He was banned from acting as a liquidator or administrator for life and agreed to pay $4.9 million in compensation to his clients3. In September 2011, Ariff was jailed for six years after being found guilty on 19 charges of criminal fraud. This series of events highlighted the need for a prompt complaints system.

On the back of the Ariff investigation, Senator John Williams led a Senate inquiry in 2010 to investigate the regulation, registration and remuneration of insolvency practitioners in Australia. The inquiry looked at ASIC's role in the regulation of liquidators and identified ASIC's reliance on complaints, the delay in responding to complaints, whether ASIC provided adequate information to stakeholders in the insolvency process and whether ASIC was adequately resourced as the main areas for concern.

Key takeaway points

  • The draft Insolvency Law Reform Bill 2014 aims to reform the insolvency industry by replacing the current registration system with a user-pays licensing scheme.
  • The scheme is designed to allow ASIC to use the funds from licensing fees to conduct supervision of the industry in a more proactive manner.
  • The changes also provide more stringent requirements for liquidators to obtain and retain their registration as a registered liquidator.
  • Key changes are proposed to be put in place by 30 June 2015.
  • Interested parties are invited to make submissions on the draft bill by 19 December 2014.


1Section 1282(2) of the Act.

2Section 1292(2) of the Act.

3ASIC v Stuart Karim Ariff [2009] NSWSC 829.

© HopgoodGanim Lawyers

Award-winning law firm HopgoodGanim offers commercially-focused advice, coupled with reliable and responsive service, to clients throughout Australia and across international borders.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.