In 2010, a Senate inquiry suggested that ASIC and AFSA should be combined into a new organisation in order to efficiently align corporate insolvency and bankruptcy processes and regulations. This movement toward a single regulatory body for both bankruptcy and corporate insolvency was rejected by the government. Despite this rejection the Senate inquiry led to other alignment-focused changes to insolvency law that were included in the Insolvency Law Reform Bill 2013. This Bill was revised and is now known as the Insolvency Law Reform Bill 2014. Most of the changes are similar or identical for each area of practice. In addition to aligning practice areas, the Bill has also bolstered the creditor-focused nature of Australian insolvency law by giving creditors additional rights during external administration.
The Bill proposes many changes to multiple pieces of legislation. If you would like to read the explanatory material, review the Bill, or make submissions or comments on the Bill to the Department of Treasury, click here: http://www.treasury.gov.au/ConsultationsandReviews/Consultations/2014/ILRB-2014.
The Bill is lengthy and detailed therefore this update will not go through every change but rather give an overview of two broad areas that are of interest to both insolvency practitioners and creditors:
- Registration and discipline of insolvency practitioners
- Strengthening of creditors’ positions
Registration and disciplinary framework
A large part of the Bill is devoted to aligning the registration and disciplinary process for both trustees and liquidators. The Bill provides that a committee will be convened to consider the registration of a practitioner. The committee will interview the practitioner and may require the practitioner to sit an exam. The Bill also allows for registration of that person subject to conditions. The practitioner may apply to vary those conditions. The registration lasts for 3 years, after which the practitioner must apply for a renewal. The practitioners must have evidence of proper indemnity and fidelity insurance in order to both register as a practitioner and to renew that registration. The Bill also provides for a committee to examine various disciplinary issues and allows for an industry body to give notice that there are reasonable grounds to take disciplinary action against a practitioner. The changes are designed to improve the competence and confidence in insolvency practitioners as well as streamline processes. The Bill generally enhances ASIC’s powers to investigate practitioners and also includes tougher powers over directors.
The Bill also reinforces creditors’ positions during external administration. Creditors will be able to request court orders to direct a practitioner to handle money in a certain way during external administration. Creditors may request auditing of books in an external administration. Creditors and members can request that the practitioner provide information to them. Liquidators have to provide information to creditors within 10 business days in the case of a voluntary liquidation. This would replace the creditors’ meeting held within 11 days of the resolution to wind up the company. Creditors (or ASIC or the court) can resolve to review the liquidator’s remuneration in external administration. The reviewer would also be a registered liquidator. Creditors also have the power to replace a liquidator. The changes support creditor involvement and communication during external administration.
The Department of Treasury will take comments and submissions in relation to the Bill until 19 December 2014. It is currently estimated that the final version of the changes will not take effect until early 2016.