Something new, or more of the same?
In September 2013 I published an article in the Worrells E-Update titled “Insolvency Law Reform Bill 2013” (click to read). On 7 November 2014 Treasury released the Insolvency Law Reform Bill 2014 which takes up where the previous Bill left off.
In my previous article I observed a shift towards a co-regulation model for the profession. This remains the case in the 2014 Bill.
A key issue of the proposed legislative reform has been harmonisation between the Corporations Act. In this respect, the 2014 Bill is very similar to the 2013 Bill. One could be forgiven for concluding that the 2014 Bill is merely a rewording and reformatting of the 2013 Bill. However, it should fairly be seen as re-imagining. The new Bill proposes a structural change to the regulatory framework as summarised below:
- Some existing legislation relating to practitioner registration, regulation, discipline and remuneration will be repealed from both the Corporations Act and Bankruptcy Act.
- “Insolvency Practice Schedules” are to be inserted in to the respective legislation and will broadly facilitate the harmonisation of the corporate and personal insolvency legislation.
- The Insolvency Practice Schedules will enable the minister to make the “Insolvency Practice Rules” (IPR). The IPR would be published by the Minister, and could be changed without public consultation, parliamentary approval, or Governor General approval.
The proposed IPR should enable some level of efficient regulatory reform. The argument for more efficient regulatory reform is self-advocating given that the current reform process began with a 2010 senate enquiry report, itself a reaction to events many years prior. It also makes sense, that corporate and personal insolvency legislation are codified in a single document.
However, there are some powers proposed to be delegated to the IPR that, in my opinion, are beyond the scope of basic regulatory issues and should remain within the main body of the legislation (Worrells might lodge a submission in this regard). The proposed rules seem reasonable otherwise.
One of the goals of the Bill is to “remove unnecessary costs and increase efficiency in insolvency administrations”. I caution that this Bill could have the opposite effect. Traditional wisdom is that greater regulation decreases efficiency. The IPR would be just one more regulatory instrument to the already long list of legislation, practice statements, professional standards and legal precedents that practitioners must comply with.
The 2014 Bill, like the 2013 Bill, indicates that we will soon see a shift towards to a collaborative approach to insolvency practitioner regulation where the Australian Restructuring Insolvency & Turnaround Association (ARITA) and other professional bodies will play a greater role. If the IPR is introduced it would mark a paradigm shift in the regulatory framework. However, after more than four years of senate enquiry recommendations, discussion papers, exposure drafts and Bills, who would be surprised if it too ends up on the scrapheap.
Submissions close on 19 December 2014. Watch this space.