The Parliamentary Secretary to the Treasurer, Chris Pearce, today released the draft Corporations Amendment (Insolvency) Bill 2007 for public comment. The draft Bill details an integrated package of reforms to improve the operation of Australia's laws and is the first comprehensive package of insolvency law reform since the Harmer Review in 1988.
‘Insolvency law underpins the system of financial and contractual relationships that enable trade and commerce to take place. A modern credit‑based economy requires predictable, transparent and affordable means for enforcing unsecured and secured credit claims. A well‑designed insolvency system helps business obtain financing more easily and at a lower cost. The proposed reforms will continue our leadership role in this area, delivering important economic benefits to Australia.
‘In developing this draft Bill, the Government has taken a system-wide approach to improving outcomes for creditors and deterring misconduct. The Bill proposes the introduction of important disclosure requirements, an improved registration regime, reforms to support the $23 million assetless administration fund that I announced last year, and enhancements to the insolvency processes themselves,' Mr Pearce said.
The Bill aims to reduce the cost of insolvency proceedings for the benefit of creditors generally, for example by rationalising advertising and meeting requirements and by allowing for greater use of modern technology throughout proceedings. A key new innovation is a proposed statutory pooling process, which will allow for savings and improved returns to creditors through the consolidation of multiple insolvency proceedings for related companies.
‘These measures are consistent with the new approach to regulation that I outlined in the Corporations and Financial Services Review. I am continuing to work to achieve A Simpler Regulatory System that not only tackles complexity by reducing and simplifying our laws, but also tries to make sense of complex systems.
‘Australia's insolvency regime has long been regarded as world-best, with jurisdictions such as the United Kingdom and New Zealand adopting the voluntary administration procedure that has been developed in Australia. The Bill will make a number of minor adjustments to develop this procedure further, in light of experience since its introduction,' Mr Pearce said.
The Bill includes measures to improve protections for employee entitlements by according the Superannuation Guarantee charge the same priority as other employee entitlements, and by preventing administrators reducing the priority of employee entitlements without the agreement of employees.
‘These measures demonstrate the Government's commitment to ensure that employee entitlements are appropriately protected. They supplement the $62 million extension to the General Employee Entitlements and Redundancy Scheme announced last year as part of this package,' Mr Pearce said.
The Bill also includes measures to inform creditors better about key issues that arise in insolvency processes. There will be a new requirement for information to be provided to creditors to allow them to make an informed judgment about remuneration proposals. Administrators will also be required to make a statement of independence to creditors prior to their appointment.
‘The development of this draft Bill has been greatly assisted by the efforts of the Insolvency Law Advisory Group,' Mr Pearce said. ‘I would like to recognise the members of the Advisory Group publicly for their significant contribution to the law design process,' Mr Pearce said.
A list of the members of the Insolvency Law Advisory Group is attached to this press release.
‘I invite all those with an interest in corporate insolvency to examine the draft Bill and provide their comments by 23 February 2007,' Mr Pearce said.
Amendments to implement the Government's decision to adopt the UNCITRAL Model Law on Cross-Border Insolvency will be enacted as a separate Bill. The Model Law has been exposed for comments previously and received broad support. Any further comments on this aspect of the reform package would also be welcome.
The draft Bill and explanatory material are available on the Treasury website at http://www.treasury.gov.au/contentitem.asp?NavId=037&ContentID=1186.
13 November 2006
MELBOURNE
Contact: Andrew Conway 03 9887 3890
Insolvency Advisory Group
Greg Hall, Partner, PricewaterhouseCoopers, Sydney
Ian Gilbert, Director of Retail Policy, Australian Bankers Association, Sydney
Associate Professor Rosalind Mason, University of Southern Queensland, Toowoomba
Paul Meredith, Institute of Chartered Accountants Australia, Sydney
Garry Hamilton, Partner, Minter Ellison, Brisbane
John Purcell, Technical Adviser – Management and Business, CPA Australia, Melbourne
James Marshall, Partner, Blake Dawson Waldron, Sydney
Alex Wilson, National Institute of Accountants, Melbourne
Kim Arnold, Technical Director, Insolvency Practitioners Association of Australia, Sydney
David Proudman, Partner, Johnson Winter & Slattery, Law Council of Australia, Adelaide
David Cowling, Partner, Clayton Utz, Sydney