Shake up of the Australian insolvency law regime – are you ready?

March 21, 2017

The case of Stuart Ariff is probably the most commonly cited example of an insolvency practitioner who has failed to carry out the duties of a liquidator adequately and properly. Mr Ariff was reported to ASIC in 2005. He accepted the misconduct allegations against him in 2009, and in 2011, he was charged for criminal fraud and sentenced to 6 years in jail.

As the news regarding Mr Ariff[1] continued to be publicised, the Government released its Senate Economic Reference Committee Report “The regulation, registration and remuneration of insolvency practitioners in Australia: the case for a new framework”[2] in September 2010. In June 2011, the Parliamentary Secretary to the Treasurer and Attorney-General jointly released an options paper “A Modernisation and Harmonisation of the Regulatory Framework Applying to Insolvency Practitioners in Australia”[3]. These reviews and proposals set out a pathway to significant regulatory reform of Australia's insolvency industry.

The Insolvency Law Reform Act 2016 (Cth) (ILRA) is the some-say long overdue response to these Government reviews and proposals.

Among other things, the ILRA amends and streamlines the Bankruptcy Act[4], the Corporations Act[5] and the ASIC Act[6].

There are 2 stages to the implementation of the reform. Stage 1 commenced on 1 March 2017. This relates mainly to the new Insolvency Practice Schedules (IPS) that will be included into the Bankruptcy Act and the Corporations Act. The IPS aims to promote harmony between personal and corporate insolvency, and concerns largely with registration and discipline of insolvency practitioners.

Stage 2 is scheduled to commence on 1 September 2017. This relates mainly to parts of the IPS that concerns insolvency administration processes, such as convening creditor's meetings, and remunerating insolvency practitioners.

In terms of the ILRA's regulatory impact, the Government stated that the reforms will result in a net reduction in compliance costs on corporate insolvency practitioners in the areas of registration, the maintaining of registration and discipline. Importantly, the Government indicated that reforms will result in net regulatory savings for insolvency practitioners, and by extension, business and personal creditors.[7]

Insolvency practitioners' response to the ILRA is varied. It is fair to say most consider that there is actually an increase in regulatory and reporting burdens.

 


 

[1] For example, see ASIC media release “11-308MR Stuart Ariff jailed on ASIC charges

 

[2] Available at Parliament of Australia's website - http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Completed_inquiries/2008-10/liquidators_09/report/index

 

[3] Available at the Treasury's website - http://www.treasury.gov.au/ConsultationsandReviews/Consultations/2011/A-Modernisation-and-Harmonisation-of-the-Regulatory-Framework

 

[4] Bankruptcy Act 1966 (Cth)

 

[5] Corporations Act 2001 (Cth)

 

[6] Australian Securities and Investments Commission Act 2001 (Cth)

 

[7] Insolvency Law Reform Bill 2015 Explanatory Memorandum (http://www.austlii.edu.au/au/legis/cth/bill_em/ilrb2015261/memo_0.html)