On 28 September 2022, the Parliamentary Joint Committee on Corporations and Financial Services began another inquiry into corporate insolvency in Australia.
The inquiry's terms of reference are quite broad and are centred around the effectiveness of Australia's corporate insolvency laws in protecting and maximizing value for the benefit of all interested parties and the economy and include a review of:
- 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 had an effect on such trends and practices;
- recent changes in domestic and international economic conditions, increases in material and input costs for businesses and inflationary pressures more broadly, supply shortages in certain industries; and
- any other contributory factors or events that have impacted insolvency patterns;
- The operation of the existing legislation, common law, and regulatory arrangements, including:
- the small business restructuring reforms (2021);
- the simplified liquidation reforms (2021);
- the unlawful phoenixing reforms (2019); and
- the operation of the Personal Property Securities Act 2009 in the context of corporate insolvency;
- Other potential areas for reform, such as:
- unfair preference claims;
- trusts with corporate trustees;
- insolvent trading safe harbours; and
- international approaches and developments;
- Supporting business access to corporate turnaround capabilities to manage financial distress;
- The role, remuneration, financial viability, and conduct of corporate insolvency practitioners (including receivers, liquidators, administrators, and small business restructuring practitioners);
- The role of government agencies in the corporate insolvency system includes:
- the role and effectiveness of ASIC as the corporate insolvency regulator;
- the ATO's role and enforcement approaches to corporate insolvency, and relevant changes to its approach over the course of the COVID-19 pandemic;
- the role, funding and operation of relevant bodies, including the Assetless Administration Fund and the Small Business Ombudsman; and
- Any related corporate insolvency matters.
Whilst there is some overlap in relation to more recent reviews/consultations such as clarifying the treatment of trusts under insolvency law announced by treasury on 15 October 2021, The Australian Restructuring, Insolvency and Turnaround Association ('ARITA'), the largest association representing professionals who specialise in this area, has publicly welcomed the inquiry.
Whilst in my view, the profession overall understands the need for a deep dive into the operation of the regime so as to remove some of the complexity and administrative burden that is currently a part of it, in the past, there have been a number of reviews/inquiries commenced that have, whilst positive to begin with, fallen flat due to the changing political winds and the enormity of the task at hand.
It will be interesting to see how the submissions (due by 30 November 2022) and the government's overall appetite for reform play out over the months ahead and whether this results in a full root and branch review of insolvency within Australia or something less so.
The committee currently intends to table a report in both Houses of Parliament by 30 May 2023. Further details can be found here:
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.
