In 2002, an eminent insolvency judge noted a drafting error in Ch 5 of the Corporation Act and recommended in her judgment the need for legislative reform, given the unjust consequences: see Scott v Commissioner of Taxation [2003] VSC 50. The very last item of the Insolvency Law Reform Act 2016 address the Judge’s concerns. The financial cost of this delayed reform could be quantified in the millions.
Reforms – one
That is but one instance of many reforms in the 2016 Act that should not be delayed. While the Act is unsatisfactorily replete with red tape, it does harmonise corporate and personal insolvency within the limits that the government is prepared to go. It also serves to further privatise and commercialise the Australian insolvency regime – so much so that ASIC may find it has to pay for liquidations, lawyers can contemplate a new funding market, and clients, and IT suppliers will find new opportunities.
Reforms – two
Then beyond these first tranche reforms, we have a second lot coming, with more flexibility for pre- or perhaps anti- insolvency advisers, seeking to restructure a struggling business without the strictures and costs of Ch 5. The market exists, and its practitioners, and codes of conduct and protocols are being developed.
Reforms – three
But the major changes are imminent, if not already here, the third tranche. Business and corporate transparency will increase, through open access to data, tax and regulator powers, and more. A business’s ‘solvency’ will be able to be algorithmically determined, transactions will be secure, and competition, and services, will be heightened. To the extent that insolvency will remain an issue, it will be conducted on-line, with creditors and regulators accessing the insolvency practitioner’s working ‘files’, and providing input along the way. Legal disputes may also be likewise determined, including proofs of debt.
No further delay
For the moment, we should deal with what we have and improve it.
If some need a bit more time to cope with the changes under the 2016 Act, those more routine changes can be further delayed; but perhaps on the condition that the important changes be brought forward, to October 2016?
Comment welcome, including from the government.
