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Businesses will see a fairer process during the liquidation claim process.
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Government to streamline insolvency law
01 April 2022
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7 minute read
The government is taking steps to simplify the rules governing “unfair preference” claims by liquidators.
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Assistant Treasurer Michael Sukkar said creditors who act honestly and at arm’s length should not be pursued for small payments when a company they dealt with enters liquidation.
Under the reforms, transactions that amount to less than $30,000 or were made more than three months prior to the company entering external administration will no longer be subject to clawback, provided those transactions involve unrelated creditors and are within the ordinary course of business.
“These changes are consistent with the unfair preference rules which apply under the simplified liquidation process which the Government implemented in 2021,” Mr Sukkar said.
To ensure that liquidations with insufficient assets can proceed, from 1 July 2023 the government is providing an additional $20 million in funding over two years to the Assetless Administration Fund, a grant administered by the ASIC.
Liquidators would be able to apply for a maximum grant of $5,000 per assetless liquidation, without needing to provide evidence of potential misconduct.
Mr Sukkar said the government was also clarifying the treatment of trusts with corporate trustees under Australia’s insolvency law by introducing a legislative framework for the external administration of trusts.
“The framework will allow for greater efficiency of the external administration of corporate trusts, ultimately supporting better outcomes for distressed companies and their creditors,” Mr Sukkar said.
“The reform reflects the outcomes of the government’s 2021 consultation, which demonstrated there is broad stakeholder support for reform.”
These measures will add to recent insolvency reforms that provide greater certainty for company directors seeking to save financially distressed but viable companies as part of the government response to the Review of the Insolvent Trading Safe Harbour.
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