Late last year, the draft Insolvency Law Reform Bill 2013 was released by the government for comment and suggestions. The first changes made under this Bill are to commence from September this year. The Bill will amend the Corporations, Australian Securities and Investments Commission and Bankruptcy Acts. It aims to:
- Align and modernise the registration and disciplinary frameworks that apply to registered liquidators and registered trustees
- Align and modernise a range of specific rules relating to the handling of personal bankruptcies and corporate external administrations
- Improve the powers available to the corporate regulator to regulate the corporate insolvency market and the ability for both regulators to communicate in relation to insolvency practitioners operating in both the personal and corporate insolvency markets.
Those benefiting from the reforms will be businesses that become creditors of insolvency administrations.
Several provisions in the Bill will be of interest to creditors. They include:
- Information may be requested from the insolvency practitioner outside their existing obligations. Provided the request is reasonable (i.e. the practitioner has enough funds to comply with the request), the practitioner is obliged to comply. Creditors will also have the authority to change default reporting requirements (as set out by regulations) that a practitioner is subject to, provided the changes are also reasonable.
- Creditors will be able to appoint an assessor who would review the costs and remuneration incurred during an insolvency administration. This information may be used as the basis of a resolution to remove the insolvency practitioner and appoint a replacement, without having to firstly, apply to the Court.
- Creditors will gain the authority to request that a meeting of creditors is convened on three conditions, namely, when resolved by creditors or a Committee of Inspection, when requested by at least 25% of the creditors, or by 10% of creditors who have lodged security for the cost of holding the meeting.
- An insolvency practitioner would be required to gain the prior approval of creditors before deriving a profit or benefit from a transaction relating to an administration.
The amendments of the proposed bill have the potential to greatly benefit creditors. The proposed bill represents a new, transparent and more regulated stage in insolvency practice, and will strengthen the rights of creditors affected by insolvency administrations.