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TGIF – Inquiry into Australian corporate insolvency regime commences – Insolvency/Bankruptcy



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The Parliamentary Joint Committee on Corporations and
Financial Services has commenced an inquiry into Australia’s
corporate insolvency regime. The inquiry, due to be completed by 30
May 2023, will examine the effectiveness of the current regime and
consider potential reform.

Key takeaways

  • The Inquiry follows a recent uptick in insolvencies due to
    challenging economic conditions and the upheaval brought about by
    the COVID-19 pandemic.

  • The Inquiry will consider a range of issues including: current
    pressures on Australian businesses; areas for reform including
    unfair preference claims, corporate trustees and safe harbour laws;
    and the roles of insolvency professionals and government
    agencies.

  • The Committee is currently accepting written submissions and
    will hold public hearings before tabling its report in Parliament
    by 30 May 2023.

The Inquiry into Corporate Insolvency in Australia
(Inquiry) will evaluate the insolvency system and
provide a series of recommendations for reform in what will be the
first major review of the Australian insolvency regime since the
1988 Harmer Inquiry.

Announced on 28 September 2022, the Inquiry has been prompted by
a series of factors including the COVID-19 pandemic, which brought
about a raft of temporary insolvency measures the impact of which
has yet to be fully examined.

Challenging domestic and international economic conditions have
also placed further pressure on Australian businesses leading to an
increase in insolvencies.

These events have put a spotlight on the effectiveness of
Australia’s insolvency laws, which some have criticised as
being overly complex for business owners, directors and insolvency
practitioners.

Terms of reference

The Inquiry has a comprehensive scope and will consider:

  • recent trends in corporate insolvency, including the temporary
    measures introduced during the COVID-19 pandemic and the impact of
    current economic conditions;

  • the existing legal framework including recent reforms to small
    business restructuring, simplified liquidation and unlawful
    phoenixing as well as the operation of the Personal Property
    Securities Act 2009
    (Cth)in the context of corporate
    insolvency;

  • areas for reform such as unfair preference claims, trusts with
    corporate trustees and safe harbour laws;

  • supporting business access to corporate turnarounds;

  • the role, remuneration, financial viability and conduct of
    corporate insolvency practitioners; and

  • the role of government agencies in the insolvency system
    including ASIC, the ATO, the Assetless Administration Fund and the
    Small Business Ombudsman.

Call for submissions

The Committee is currently accepting submissions addressing the
terms of reference by interested parties. Written submissions are
open until 30 November 2022 and public hearings will also be
held.

Comment

Despite significant reform in this space in recent years,
including the introduction of the safe harbour legislation and the
simplified small business restructuring and liquidation frameworks,
the complexity and costs associated with insolvency processes in
Australia remains an overarching issue.

The Inquiry provides a rare opportunity for a whole of industry
review and appears genuinely aimed at ensuring Australia’s
corporate insolvency regime is fit for purpose.

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.





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