Attorney-General Robert McClelland and Parliamentary Secretary to the Treasurer David Bradbury today released A Modernisation and Harmonisation of the Regulatory Framework Applying to Insolvency Practitioners in Australia - an options paper setting out a pathway to significant regulatory reform of Australia's insolvency industry.
The options paper looks at reforms to address concerns about misconduct in the insolvency profession and to improve the value for money for recipients of insolvency services.
Key reform areas in the paper include promoting a high level of professionalism and competence by practitioners, enhancing transparency and communication and promoting increased efficiency in insolvency administration.
"The Gillard Government wants to ensure that Australia's insolvency industry is underpinned by professionalism, efficiency and improved outcomes for creditors," said Mr Bradbury.
"Last year, the Senate Economics References Committee examined the extent of insolvency practitioner misconduct and the adequacy of efforts to oversee and regulate the corporate insolvency regime.
"The Government acknowledges the findings of the Senate Committee and I would like to thank the Senate Committee for the work that it undertook in its inquiry. The Committee's evidence raised significant questions about the adequacy of the registration, remuneration and regulation of the insolvency profession.
The options paper explores reform areas that go beyond the recommendations of the Senate Committee, including disbursements, the role of creditors in the setting of practitioner remuneration, the power of creditors to remove and replace insolvency practitioners and harmonisation of funds handling regulations.
"There have clearly been problems with individual practitioners and elements of the system that should have detected problems earlier, and the Government has used the Senate Committee's recommendations as a basis to look at wide-ranging reforms," Mr Bradbury said.
The Government has decided not to accept the Committee's recommendations to establish a new insolvency regulator, or refer the issue of harmonisation to the Australian Law Reform Commission. The Committee's other recommendations have been noted and canvassed in the reform options contained within the paper.
Mr McClelland said that the options paper examines ways to make the corporate and personal insolvency frameworks more consistent.
"The options paper seeks comments on areas of the two insolvency regimes which would benefit from harmonisation," he said.
"The Government considers that the closer alignment of personal and corporate insolvency laws would reduce the regulatory burden on practitioners operating in both markets, and make it simpler for creditors."
"We believe that we can build a better, more efficient system that is more consistent across the corporate and personal insolvency frameworks, and this options paper sets out our pathway to those reforms," Mr Bradbury said.
The options paper will be available for public comment for eight weeks and can be found at www.treasury.gov.au.
2 June 2011