Harmonisation and reform may be on the horizon for the personal and corporate insolvency sector thanks to the Federal Government’s proposed insolvency Law Reform Bill.
The draft Insolvency Law Reform Bill proposal was made public on 7th November, 2015 and our elected representatives intend to have it in place by 1st of February 2016 if it is greenlighted. Once it is in, over the first 4 years it’s expected to save $215 million in compliance costs.
This Bill is designed to simplify, strengthen, align and ultimately enhance the statutory frameworks of insolvency regulations and rules by amending the laws surrounding the disciplinary actions, registration, & deregistration of bankruptcy trustees & registered liquidators.
Key changes after public and business consultation will be made in the lead-up to June 30th, 2015.
So what exactly are the intended major changes?
1. The new bill seeks to better protect the interests of creditors by improving transparency and communication between insolvency practitioners and creditors. It aims to empower creditors by allowing them to tell insolvency practitioners what information they wish to see and when as opposed to vice-versa. If the bill is passed, practitioners will be expected to make available to creditors accurate, up to date records, reports and detailed paperwork as well as pass on any relevant, requested, information which does not breach the business’ confidentiality rules and other regulations.
2. The creditors extra powers don’t stop there. Through a resolution of creditors they will also be able to negate the need for the Court’s agreement to get rid of badly performing insolvency practitioners.
3. To be registered, new insolvency practitioners will need to have the proper expertise to make it through a 3 person committee-style interview. Registration must be renewed every 3 years plus upskilling undertaken if necessary.
4. To obtain registration a practitioner must also be covered by the correct insurance to cover any losses resulting from misconduct of negligence.
Other minor reforms include:
- Making the most of technology through the electronic provision of paperwork.
- Smoothing out and simplifying the remuneration approval process.
- Streamlining corporate and personal insolvency administration rules.
- An increase to ASIC’s powers to investigate suspect liquidators.
The Minister for Finance and Acting Assistant Treasurer, Senator Mathias Cormann is upbeat about the proposed changes. “These reforms will… increase competition in the market for insolvency services. Creditors will be empowered to more easily remove a poorly performing insolvency practitioner and be able to appoint an independent specialist to review the performance of an insolvency practitioner.”