The Insolvency Law Reform Act (2016) (“the Act”) consolidates the procedures, rules and principles that regulate corporate and personal insolvencies previously spread across the Bankruptcy Act (1966), the Corporations Act (2001) and the Australian Securities and Investments Commission Act (2001) all into one set of rules called the ‘Insolvency Practice Schedule’ or ‘Insolvency Practice Rules’.
The changes under the Act came into effect on 1 March 2017 and 1 September 2017.
1 March 2017
- Reduction of professional experience requirements in the registration system for bankruptcy trustees and corporate insolvency practitioner from 5 years to 3 years.
- Insolvency practitioners have a new disciplinary committee regime. ASIC has more regulatory control including powers to:-
- Issue show cause notices;
- Suspend registration;
- Require prior information to be updated and completed; and
- Request a more variety of documents.
- A new definition of relation-back day in Section 91 of the Corporations Act. It clarifies previous confusion as to whether the relation-back day was the date the Court wound up a company and appointed liquidators or the date an application to wind-up a company is filed. The new definition confirms that it is the latter.
- Exclusive power for insolvency practitioners to assign certain personal rights that are conferred on them by their statutes. For example, previously rights of action such as unfair preference claims and other voidable transactions could only be brought by a liquidator. Now liquidators have the right to assign this power to a third party (with certain reasonable limitations).
- The position of “official liquidator” for Court winding up orders is removed. Now liquidations involve just a “registered liquidator”.
1 September 2017
- Creditors can now request creditor meetings to be convened and information to be provided to them.
- By a resolution, creditors can take reasonable requests for information and records about an external administrator to be produced, call further meetings with them and give certain directions to the insolvency practitioner.
- New powers for creditors in corporate insolvency to remove liquidators and administrators.
- Powers for ASIC or the Court to appoint a reviewing liquidator and/or independent specialist in corporate insolvency in order to examine the insolvency practitioner. Creditors can seek Court orders for this appointment.