Friday, January 27, 2017 - Posted by Michael McCulloch
On 29 February 2016 the Insolvency Law Reform Bill 2015 received Royal Assent. The result was the introduction of the Insolvency Law Reform Act 2016 (Cth) which represents one of the most significant reforms to our bankruptcy and corporate insolvency laws in over 2 decades and makes up, in part, a vital component of the Federal Governments agenda for improving economic incentives for innovation and entrepreneurialism.
The new Act, which amends the Corporations Act, the ASIC Act and the Bankruptcy Act, poses significant implications for both personal and corporate insolvency practitioners be seeking to impose common rules for the conduct of administrations which are intended to improve competition, efficiency and consumer confidence in the insolvency profession.
The key changes introduced by the Act include:
- Retaining the bankruptcy trustee’s ability to object to discharge and to extend the bankruptcy period to eight years
- Retaining the permanent record of bankruptcy in the National Personal Insolvency Index
- Consultation with relevant industry and licensing associations, to align licencing and industry restrictions with the reduced one year default bankruptcy period
- Reducing current restrictions on a bankrupt obtaining credit or undertaking overseas travel to one year, subject to any extension for misconduct
- Imposing a continuing obligation on the bankrupt to assist in the proper administration of their bankruptcy, even after discharge
- Retaining the bankrupt’s obligation to pay income contributions for three years, regardless of the one year discharge, with the possibility of income contributions to be extended to five or eight years.
Overall the changes will make very little different to the Australian insolvency regime with the ultimate objective to encourage entrepreneurship in Australia, protect creditors and generate business growth.
While some commentators are suggesting that the reforms will incentivise bankruptcy the reforms should encourage more businesses to take calculated risks which will in turn help stimulate economic growth.