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Parliamentary committee delivers dozens of recommendations addressing longstanding concerns in the insolvency industry.
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Insolvency report ticks all the boxes: ARITA
13 July 2023
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The insolvency industry has warmly welcomed a parliamentary report recommending sweeping changes to simplify corporate insolvency law and make it more efficient.
The Australian Restructuring, Insolvency & Turnaround Association (ARITA) said the report echoes most of its recommendations, especially on bringing personal and corporate regimes together and addressing unfairness in the system.
“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,” said ARITA CEO John Winter.
“Through its work, the committee has seen evidence of how complex and unapproachable our insolvency law has become for directors and creditors.
“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.”
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Mr Winter said the committee also recognises the “unjustness” of requiring liquidators to perform work that often went unpaid “and isn’t delivering any public good outcomes”.
“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.”
ARITA said key recommendations include:
- The government should commission a comprehensive and independent review of both corporate and personal insolvency law.
- The government should adopt recommendations from the Safe Harbour Review ahead of the further review.
- The government should consult on potential reforms to the small business restructuring pathway and simplified liquidation pathway.
- There should be reform to the experience eligibility requirements for registered liquidators and a review of remuneration for insolvency practitioners that included the extent to which public interest work was carried out for little or no pay.
- The comprehensive review should include consideration of the nature and extent of the harm posed by “untrustworthy pre-insolvency advisers”.
- The government should consider changes to the Assetless Administration Fund to ensure that it was achieving its intended policy objectives.
- The ATO should consult, act on and publish model creditor guidelines, consistent with its model litigant obligations.
- The comprehensive review should consider the relative priority of employees, liquidators and secured creditors.
- The government should amend the Corporations Act 2001 to expressly clarify the treatment of trusts with corporate trustees during insolvency.
Mr Winter said the work by the Parliamentary Joint Committee on Corporations and Financial Services is “a great example of our elected representatives working in a bipartisan way”.
“And we especially recognise the chair of the committee, Senator Deborah O’Neill, for her strong leadership in this very complex area of law,” he said.
The recommendations would have a profoundly positive impact on the efficient operation of the economy, save more jobs and businesses and deliver better outcomes for creditors.
ARITA has more than 2,200 members and subscribers including accountants, lawyers and other professionals with an interest in insolvency and restructuring.
Around eight out of 10 registered liquidators and registered trustees choose to be members.
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