Insolvency Law Reform 101 - Manage the Regulatory Impact

June 20, 2018

 

 

It's no surprise our webinar, 'Insolvency Law Reform - The Essentials' had the highest attendance rates in the past year. It shows how relevant this topic is to those who practice in this demanding industry.   

Our webinar highlighted a little known fact - that insolvency law reform is an initiative under the Government's 'National Innovation and Science Agenda.' Among other things, such initiatives are aimed at aligning business laws with a culture of entrepreneurship and innovation.  

Two tranches of reform were implemented in March and September 2017 by the Insolvency Law Reform Act 2016. Tranche One was about the registration and discipline of practitioners, and tranche two was about the insolvency administration process.

While few webinar attendees believe Australia's insolvency profession is not over-regulated, the remainder were divided equally between 'yes, it is over-regulated' or are 'undecided.' It seems that there is no shortage of academics and commentators saying Australia is bucking the global trend led by jurisdictions such as the EU, the US, and Asia. In the spotlight is the trend to focus on improving insolvency regulation to promote efficiency and support restructuring, instead of focusing on regulating practitioners. Perhaps the reform introduced by the Treasury Laws Amendment (2017 Enterprise Incentives No 2) Act 2017 (that amends the Corporations Act 2001) would receive a better welcome.

During the webinar, we also looked at the new 'safe harbor' provisions which provide an exception to the prohibition on insolvent trading by directors (already commenced). In addition, we looked at a new stay on enforcement of 'ipso facto' clauses that previously allowed a party to terminate a contract when an insolvency event arose (due to commence in July 2018). The latter generated interest, as well as questions. 

Some experts queried how the ipso facto reform would impact parties exercising step-in rights or making set-off claims on banks calling on bank guarantees, if the action is triggered by an insolvency event. Such an action could be contrary to the reform, so it could be subject to the stay. As the reform only applies to contracts entered into post 1 July 2018, we will not see how the legislation works in real life for some time.

There is no doubt that this reform will impact insolvency practitioners. Luckily, innovation and science provide tools that give the profession a hand in running their practice. For example, when tackling a matter in restructuring, the ability to see the full picture fast is most valuable. No one can give us a crystal ball, but a tool that creates an interactive commercial picture, and helps build a crystal-clear understanding of the relationships between people, companies, property, assets and debt, is something all practitioners can utilise. Rest assured: we can navigate the increasingly regulated environment and the vast amounts of information with greater ease, and at the same time minimise the risk of overlooking something important. For Example, SAI Global's Encompass platform provides this and more.

We are pleased that the webinar has helped attendees better understand Australia's insolvency law reform. Contact us for a demo of Encompass, a fully customizable data visualization tool, that can dramatically improve the way you consolidate, review and manage commercial information to get better results, and to give your practice a competitive advantage.

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