Insolvency Law Reform Bill 2013

After the release of the draft of the Insolvency Law Reform Bill 2013 by the government late last year, the first changes are due to be effective from September 2013. These amendments will affect the Corporations, Australian Securities and Investments Commission and Bankruptcy Acts, with the objectives of:

• Applicable regulatory frameworks affecting registered insolvency practitioners and registered trustees would be aligned and modernised.
• Rules pertaining to the management of individual bankruptcies and corporate insolvencies would be harmonised and further enhanced.
• More power would be given to regulators in dealing with corporate insolvency, as well as providing a better channel of communication between them and insolvency practitioners

These reforms are definitely beneficial for businesses who are creditors of insolvency administrations.

As creditors, do take note of some of these provisions in the Bill:

• The right to request non-obligatory information from the insolvency practitioners as long as it is reasonable (i.e. the practitioner can afford to comply with the request). Creditors can also request changes to the reporting requirements (instead of just accepting the default version), and these changes are also subject to its reasonableness.
• A creditor-appointed assessor is now allowed to review the expenses incurred during an insolvency administration. Information gathered can be used to support the dismissal of the insolvency practitioner and to allow the appointment of a replacement without having to apply to the Court.
• Creditors are now allowed to request a meeting of creditors based on the following conditions:

1. when trustees are directed by creditors (by resolution) to meet or when the Committee of Inspection requested it
2. when requested by at least 25% (in value) of the creditors,
3. when requested by 10% (in value) of creditors who have lodged security for the cost of holding the meeting.

• Should an insolvency practitioner intend to make a profit or benefit from any transactions relating to an administration, he/she must request for approval from creditors before doing so.

Basically, the proposed bill would help build more confidence on insolvency practices as more transparency is practised. It also brings in a regulatory-efficiency that will bolster the rights of creditors affected by insolvency administrations.