The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP, has announced a package of reforms to Australia’s corporate insolvency laws consisting of:
- reform of insolvency administrations which will include the adoption of substantially all of the recommendations made by CAMAC in its Issues in external administration report;
- amendment of 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;
- a discussion paper on the operation of Australia’s insolvent trading laws in the context of attempts at business rescue outside of external administration (“safe harbour”). The paper discusses 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. Submissions close on 2 March 2010.
The Insolvency reform package will:
- facilitate the electronic provision to creditors of creditor lists and align the relevant provisions for most kinds of corporate insolvency administration;
- provide certain information to owners of property in the possession of a company in external administration;
- streamline creditor meeting procedures;
- introduce voting on certain proposals without the need to hold creditors’ meetings;
- mandate the requirement to notifying creditors of material breaches of Deeds of Company Arrangement;
- streamline the approval of provisional liquidator remuneration and the appointment of replacement external administrators in the event of a vacancy;
- empower the Australian Securities and Investment Commission (ASIC) to take and transfer possession of records in the event of a vacancy in external administrator;
- facilitate the future development of alternative methods of publication of certain insolvency related events;
- align the rules regarding disclosure of former names of a company between the different kinds of external administration; and
- reduce the regulatory burden upon insolvency administrations in relation to the provision of notices to creditors.
