The Minister for Financial Services, Superannuation and Corporate Law has today announced a package of reforms to Australia's corporate insolvency laws.
The reform package contains a range of reforms directed at reducing the costs and complexity of insolvency administrations; improving communications with creditors; and reducing the potential for abuse of corporate insolvency law. The reforms will include the adoption of substantially all of the recommendations made by CAMAC in its Issues in external administration report.
The Government will also amend the Corporations Act to reverse the effect of the High Court's decision in Sons of Gwalia v Margaretic which determined that, in a corporate winding up, certain compensation claims by shareholders against the company were not subordinated below the claims of other creditors.
Minister Bowen also released a discussion paper on the operation of Australia's insolvent trading laws in the context of attempts at business rescue outside of external administration. The paper outlines possible options for reform.
Consultation process
The insolvent trading discussion paper contains an overview of the current insolvent trading laws; the options available to companies facing insolvency; and outlines the advantages and disadvantages of informal corporate work-outs.
The paper sets out three possible options: to maintain the status quo; to adopt a modified business judgement rule in respect of the director's duty to avoid insolvent trading; and to adopt a mechanism for invoking a moratorium from the insolvent trading prohibition while work-outs are attempted.
Interested parties are invited to make written submissions.
Submissions may be lodged electronically, by post or facsimile. Please direct submissions to:
Insolvent Trading Safe Harbour Options Paper
Corporations and Financial Services Division
The Treasury
Langton Crescent
PARKES ACT 2600
Fax: 02 6263 2770
Email: insolventtrading@treasury.gov.au
Telephone inquiries may be made by calling (02) 6263 3971.
The closing date for submissions is 2 March 2010. Further information on these reforms is available at www.treasury.gov.au.
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