Parliament starts important review into insolvency regime

The federal Parliamentary Joint Committee on Corporations and Financial Services has launched a new enquiry into corporate insolvency in Australia.

This enquiry will look at:

• Recent trends in corporate insolvency, including Covid-19 insolvency measures
• Recent changes in domestic and international economic conditions, including inflationary pressures and supply shortages
• The operation of the current insolvency legislation including:
  • Small business restructuring reforms (2021)
  • Simplified liquidation reforms (2021)
  • Unlawful phoenixing reforms (2019). Phoenixing is when company directors transfer the assets out of a company into a new company, leaving the old company with the debt. This bill was introduced to declare new phoenixing offences, prohibit directors from backdating their resignations if they were the only directors, and to allow the Australian Taxation Office (ATO) to hold directors personally responsible for their company’s GST liabilities under certain circumstances
  • The impact of the Personal Property Securities Act 2009 on corporate insolvency – this act covers loans that are secured by assets other than land
• Areas where potential reforms are needed:
  • Unfair preference claims
  • Trusts with corporate trustees
  • Insolvent trading safe harbours
  • International approaches and developments
• Improved access to corporate turnaround capabilities
• Corporate insolvency practitioners’ roles, remuneration and financial viability
• The role of government agencies in corporate insolvency, including ASIC and the ATO

Public hearings will be held in Canberra on 13 December and in Sydney on 14 December. Written submissions may be made up to 30 November 2022.

Blaine Hattie is a business lawyer and principal at Sutton Laurence King Lawyers.

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