An opportunity missed.
The Insolvency Law Reform Bill (ILRB) 2015 was passed by the Senate on 22 February 2016. So what, many of you may ask!
The Bill’s explanatory memorandum says, the reforms will result in net regulatory savings for insolvency practitioners (and by extension corporate and personal creditors). If one was cynical, one could say of course it will, more regulation telling people what to do and imposing more onerous obligations always costs the business community less.
The above being said, the claimed two key objectives of the Bill were to align and modernise:
- The registration and disciplinary framework for liquidators and bankruptcy trustees.
- Provide a range of specific rules relating to the handling of corporate and bankruptcy administrations to greater align these areas of law.
One of the major concerns with the new Bill is that much of its content refers to its Insolvency Practice Rules (IPRs). The problem is, while we have seen the Bill, no one has seen the IPRs, which is very disappointing.
We fully support a strong open and accountable registration and disciplinary framework for all liquidators and trustees (future and current), but we speculate that this new piece of legislation is a missed opportunity.
I say this, because this whole review process has been in the pipeline for some three years and much has been said over that time.
As for the alignment of the Bankruptcy and Corporations Acts, yes there have been some good practical changes, but they could have gone much further—unless the IPRs contain much more detail than we are expecting.
To give a simple example, under the Bankruptcy Act 1966, trustees are able to use and operate one single compound account for all their administrations, much like solicitors operating a single trust account. Compound accounts provide great savings in banking costs. Whereas under the Corporations Act 2001, liquidators are required to open separate bank accounts for each administration which means added cost.
However one major issue, which has been the subject of much discussion over this review period, is phoenixing and the Bill is silent on this issue. Why?
It will be very interesting when the IPRs are released, however so far it seems the new Bill is a missed opportunity.