On a quick review of my website, and with the annual AFSA summit coming up on 5 November, it is useful to assess where we are with bankruptcy law and its reform, and AFSA and Treasury.
We don’t yet have AFSA’s annual report nor its annual statistics but there is other information to go on, and I can speculate.
The AFSA Summit
A parliamentarian once (in)famously asked “where’s bankruptcy nowadays?” It was hard to find in the government directory.
That question might be asked again. The word “bankruptcy” does not appear at all in the AFSA Summit program. There have often been suggestions that it be replaced given its infamous history.
As I have explained, former NSW Chief Justice Tom Bathurst tells us that when “gentlemen” started losing money in company speculation
“it was simply unthinkable for the up-stairs likes of Lord Grantham to be mentioned in the same sentence as a word, previously used for lowly tradesman”.
And bankruptcy is listed in the Australian Constitution, alongside being ‘attainted of treason’, as a disqualification from being a member of parliament.
I’ll skip the legislative connections with sexual offences.
Bankruptcy as the poor cousin, or at least business debtors are
Maybe because of the word bankruptcy, personal insolvency is the poor cousin in insolvency. While persons don’t receive so much consideration, inanimate companies and their directors do.
Going back, the Productivity Commission recommended in 2015 that a one year period of bankruptcy be introduced in the context of productivity and entrepreneurial conduct. The government accepted that but nothing has ever occurred. The last record is that of the Attorney-General saying it would be looked at in the future. One concern expressed was that such a reform would assist organised crime:
But the government did act on a recommendation for a corporate safe harbour from insolvent trading liability for directors.
Again, the small business restructuring regime under Part 5.3B of the Corporations Act was introduced in 2021. Its title is a misnomer – small corporate business restructuring – in that personal liabilities of directors under guarantees were only deferred and then ignored. No further assistance to small business owners has been given.
Nor were many of the bankruptcy recommendations of the Harmer report in 1988 ever adopted; but worthwhile reform may still come from the 2023 PJC Report and now from the Productivity Commission, due to reprise its 2015 efforts.
In that respect, AFSA recently explained a law reform concern before the PC as to the ”Two systems. Two regulators. Two sets of processes” issue, leading “to confusion, delay and unnecessary cost” for small business.
An example of one set of processes is found in ASIC’s assistance to “small (corporate) business”. https://www.asic.gov.au/about-asic/news-centre/find-a-media-release/2026-releases/26-181mr-asic-launches-new-digital-resources-for-small-business-directors
Numbers
Numbers of trustees are fairly steady at well over 200 confined to the around 15% of estates with assets. In 2023-2024, dividend payments to creditors in bankruptcies averaged only 2.42c in the dollar, less in 2024-25.
Trustees took in more than $253 million in receipts with proceeds of asset sales at 54% being the main source; and they paid out more than $254 million, of which their remuneration was $74 million.
Dividends to creditors totaled $50 million and secured creditor payments $69.5m. https://murrayslegal.com.au/blog/2025/01/22/annual-2023-2024-personal-insolvency-statistics/
Remuneration
The last review of remuneration showed that trustees were generally unfunded in about 30% of estates.
Ethics
An ethicist will be speaking – Dr Simon Longstaff.
Ethics cuts both ways of course. In administering estates, there is enough guidance in legal words, but the application of the words needs focus, and recording of one’s decision making process.
As to the government and regulator, they cannot unfairly burden trustees with unremunerative tasks, either in the law or their ‘expectations’, as they know.
And as to trustees collectively, in the context of pending law reform, which they themselves have sought, and disruption by AI, they have to support what is best for the system, not themselves. That of course is a given, or should be.
Diversity
There is law reform proposed to manage the gender balance that would make the period of time for qualification as a trustee probably the longest in any industry – 7 years. In seeking to promote diversity of qualifications and experience, the 2021 reforms provide opportunities for those with no relevant hours.
In that respect, with the IAIR conference having recently been held, of which AFSA and ASIC are members, the IAIR provides useful survey forms for its members to assess diversity in their particular insolvency industry.
Thus far, it is not clear what impact the 2021 reforms have had on diversity, but AFSA refers to its work on that, with ASIC, in its submission to the Productivity Commission’s business dynamism inquiry.
Public interest tasks
The law recognises the public interest in bankruptcy through the longstanding role of the official receiver nevertheless trustees are called upon to conduct much public interest work, at the cost of creditors. That concern within the insolvency system is an aspect of the inquiry of the Productivity Commission in so far as it is looking at the recommendations of the Parliamentary Joint committee. That more economics-based review as to efficiency and effectiveness will be useful.
Comparative regulator data
As to that, even if having two separate regulators is itself inefficient, one benefit is the ability to relevantly compare the costs of ASIC and AFSA, for example their respective costs of regulating practitioners. Such financial analysis is of course routine in the conduct of any business. Dr Leigh has spoken of the merits of comparative data in directing law reform.
As well, given the need for practitioners to act commercially, the efficiency and effectiveness of the various recovery rights of practitioners might need be assessed; that is, the extent to which a litigation claim serves its purpose of giving a return to creditors: in effect, the question asked in Hall v Poolman years ago.
The figures show 5% or less of recoveries come from voidable transaction claims.
The firm processes by which trustees monitor that commercial focus could usefully be audited under a compliance review.
The figures obtained could then be compared with the figures released by ASIC in its Review of court and creditors’ voluntary liquidation process: 2021–2025 Report 843 | October 2026. There are only some points of connection between ASIC’s and AFSA’s data.
More
More may be added as my website may reveal.
