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Proposed Changes to Insolvency Laws

Friday, January 01, 2010 - Posted by Philip Harvey

The Federal Government has proposed a number of changes to Insolvency laws. This proposals include;

- An option for a more relaxed / eased business judgment rule. This would allow for greater protection to Directors when determining if they have breached their directors duties of trading whilst insolvent if a restructure attempt was made based on a true and fair view of the companies accounts.

- An option for a "moratorium" / "safe harbour" period where directors would be allowed to advise the market they were insolvent but they were attempting to resolve the solvency outside of the formal adminstration process.

These changes would bring Australia into line with other countries (eg the US). From a debt collection view, they would appear to favour Company Directors, lessening their liability / Directors duty of trading whilst insolvent. The underlying intent behind these changes is to reduce the cost of the insolvency process, allow businesses to restructure and recover thereby maximising potential returns to creditors.

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