Written by Michael Murray, writer for CCH’s Australian Insolvency Management Practice on behalf of Ferrier Hodgson.
Readers of the Australian Insolvency Management Practice and others following this area of law will be aware that various reform recommendations have been made to government over recent years.
Readers will also be aware that there has been no law reform in response to these reports, the last major reforms being pre-GFC, in 2007, with the Corporations Amendment (Insolvency) Bill 2007.
The fact that reports are issued and recommendations made in Australia does not cause the government to act on those, at least before establishing further inquiries, which often cross over prior or on-going inquiries.
In order to lessen confusion, and to offer transparency and clarity to our insolvency ‘law reform’ activities, the following table has been prepared. It will be amended if or as matters progress. Indeed, readers, or legislators, can advise of any changes that need be made to ensure it remains correct and up to date.
|FINANCIAL CRISIS MANAGEMENT – INSOLVENCY AND RELATED LAW REFORM ‘PROGRESS’ CHART COMPILED FOR THE|
AUSTRALIAN INSOLVENCY MANAGEMENT PRACTICE
|Issue||Report issued or date due||Government response or action, and our comment|
|Long tail liabilities – Corporations and Markets Advisory Committee (CAMAC) 2008||Report issued May 2008||No action. This issue goes back to the Report of the Special Commission of Inquiry into the Medical Research and Compensation Foundation (September 2004) (‘the James Hardie Inquiry’) established by the NSW government in relation to asbestos claims.|
|Issues in external administration – CAMAC 2008||Report issued November 2008||Largely to be addressed by the Insolvency Law Reform Bill 2014 (ILRB)|
|Shareholder claims against insolvent companies – CAMAC||Report issued December 2008||Corporations Amendment (Sons of Gwalia) Act 2010|
|Productivity Commission (PC) Report into regulatory burdens in insolvency||Report issued September 2010||Limited action, the ILRB 2014 being unresolved|
|Senate committee report on the regulation, registration and remuneration of insolvency practitioners||Report issued September 2010||This sources aspects of the ILRB, which remains unresolved. The major recommendation, for a single AFSA-ASIC regulator, remains rejected. The ILRB would however require ASIC and AFSA to ‘co-operate.|
|Managed investment schemes (MIS) – CAMAC 2012||Report issued 2012||No action|
|Managed investment schemes – CAMAC 2014||Discussion paper of March 2014||No action. Note that CAMAC is being abolished, with its role being assumed by Treasury|
|The performance of ASIC 26 June 2014, Senate Committee||Report issued 26 June 2014||A Capability Review of ASIC was announced on 24 July 2015. This is one response to the FSIR which recommended periodic reviews of the capabilities of financial regulators. The Review is to report by the end of 2015|
|Parliamentary Joint Committee on Law Enforcement – inquiry into financial related crime.|
|Last submissions taken were in May 2014. No report has issued.||ASIC refers to insolvency practitioners as the “front-line investigators of insolvent corporations” who “contribute to maintaining the integrity of the marketplace and promoting investor and consumer confidence”, but ASIC’s submission on its criminal law enforcement role makes no mention of them.|
In any event, see the Taxation Administration Amendment (Disclosure of Information) Regulation 2015 which adds the Fraud and Anti‑Corruption Centre as being an entity with which criminal information can be shared.
|Insolvency Law Reform Bill 2014 – Treasury||Bill released December 2014||No final response.|
|Boosting Commercial Returns from Research, government discussion paper, Department of Education/Department of Employment||Paper released December 2014||No response, although aspects being covered by the PC inquiry.|
|Australian Financial System Inquiry 2014, including insolvent trading, ipso facto clauses and bank crisis management, Treasury||Report issued 2014||No response, save as above, and as to a foreshadowed sale of the ASIC database.|
|Personal Property Securities Act 2009, Attorney-General||Report issued 31 March 2015||No response but with general relevance to streamlining of insolvency processes.|
|Productivity Commission inquiry into business set ups and closure||Report due by 30 September 2015.|
|Phoenix laws, director penalty notices etc. Various reports going back to 2009||Various law changes, including the Corporations Amendment (Phoenixing and other Measures) Act 2012; and the Tax Laws Amendment (2012 Measures No 2) Act 2012||The Corporations Amendment (Similar Names) Bill 2012 perhaps thankfully did not proceed.|
|Forestry managed investment schemes – Senate Committee||Report due 17 September 2015||CAMAC’s 2012 MIS report must be relevant to this.|
|Construction industry insolvencies – Senate Committee||Report due 11 November 2015||The 2012 NSW Collins Report on insolvencies in the NSW construction industry is relevant to this|
|ATO Debt recovery – Inspector-General of Taxation||Report issued July 2015||ATO is presently responding to the Report|
|Banking practices and ‘impaired loans’ – Joint Parliamentary Committee||Report due 31 March 2016; submissions by 21 August 2015||The PC inquiry is also examining bank sale processes|
|Civil Law and Justice Legislation Amendment Bill 2014|
|No input sought, including as to the many other technical reforms required in bankruptcy.||Amends the Bankruptcy Act in various respects, in relation to the power of the Official Trustee, statutory notices and other minor issues.|
|Oversight of ASIC, the Takeovers Panel and the Corporations Legislation No 2 of the 44th Parliament|
|This is conducted under s 243 of the ASIC Act 2001. The committee holds regular public hearings with ASIC and reports its findings to parliament. The next public hearing is on 14 August 2015||The may cross over with the ASIC Capability Review.|
It will be apparent from this table that many of these issues overlap. The 2010 PC report on regulatory burdens in insolvency impacts upon the 2015 PC inquiry into the economic efficiency of the regime, and on matters raised in the 2014 Senate report on the performance of ASIC, and in the 2014 FSI report. Forestry managed investments schemes will need to have regard to un-enacted reforms arising from the 2012 CAMAC report. The Senate inquiry into construction industry insolvencies may need to ask how anti-phoenix reforms are working, and why other recommendations were not considered. The ASIC Capability Review may need to consider the relevance and suitability of ASIC’s powers before it considers whether ASIC has the capability to exercise them.
All inquiries generally ask for statistics and information on the operation of the regime. They overlook the fact that the need for better statistics in corporate insolvency has been a constant topic of submissions, and of recommendations, going back to the 1988 Harmer Report.
Coming next – the contemplated sale of the ASIC data base
That leads into one law reform issue on which the government has acted quickly, although pre-emptively. That is to investigate the private operation of the ASIC data base, a major source of insolvency statistics. This is being considered despite the FSI Report recommending that the government have the Productivity Commission broadly inquire into the public use of corporate data to promote the quality and development of Australia’s financial system. The deadline for participation in the tender to operate ASIC’s data was 27 July 2015.
My comments on this will follow.
Any comments to date are welcome.
Australian Insolvency Management Practice