In July, the Parliamentary Joint Committee on Corporations and Financial Services handed down its long-awaited report into the effectiveness of Australia’s corporate insolvency laws.

The inquiry has been ten months in the making, during which the committee heard from insolvency and legal practitioners, government agencies, unions, creditors (both large and small), financiers, small business advocates and academics.

Not fit for purpose

The resulting report concluded that Australia’s insolvency regime is “overly complex, difficult to access, and creates unnecessary cost and confusion for both debtors and creditors.”

“Unsecured creditors are understandably frustrated by stubbornly low returns in insolvency processes. Debtors, particularly smaller businesses, regard opportunities for restructure as lacking, and system costs as excessive,” the report stated.

“Insolvency practitioners and other observers consider the system is not appropriately resourced to achieve its purposes.”

A comprehensive and independent review

The committee recommended that the federal government commission a “comprehensive and independent review” to be conducted as soon as practicable, most likely by the Australian Law Reform Commission or the Productivity Commission.

As this review will take time, the committee suggested several “low-hanging fruit” which could address “clear and broadly recognised failings in the current law.”

These quick wins include:

  • Implementing the findings of the Safe Harbour Review released in March 2021
  • Reforming the small business restructuring pathway
  • Considering changes to the Assetless Administration Fund
  • Improving the insolvency process for trusts

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

For expert advice on commercial law in Victoria contact Sutton Laurence King Lawyers today on 03 9070 9810 or  for help.