The Australian Government has committed to ongoing reform of Australia’s corporate insolvency regime. This paper is seeking feedback on a package of measures aimed at countering illegal phoenixing, and which are intended to form the Government’s third tranche of insolvency law reforms.
The first tranche, contained in the Insolvency Law Reform Act 2016, modernised the corporate reorganisation framework around the registration, remuneration and regulation of insolvency practitioners to improve confidence in the corporate insolvency regime and reduce associated costs.
The second tranche, introduced as part of the National Innovation and Science Agenda (NISA), focussed on supporting honest business restructuring. The Treasury Laws Amendment (2017 Enterprise Incentives No.2) 2017 Act introduced a safe harbour for directors from personal liability for insolvent trading if the company is undertaking a restructure outside formal insolvency. From 1 July 2018, it will also make ipso facto clauses (that allow contracting parties to immediately terminate agreements with a company when an insolvency event occurs) unenforceable if the company is undertaking a formal restructure.
The measures which are the subject of this Consultation Paper build on other action taken by the Government to combat crime and fraud occurring in the economy, including strengthening disciplinary rules for insolvency practitioners and legislating to enable information sharing between key regulatory agencies. The proposed measures also compliment the recently announced package of reforms that target employers who fail to meet their superannuation guarantee obligations.
Responses to this consultation are open until 27 October 2017.