Pending insolvency law and practice changes

Some of us are waiting for Santa, others are waiting on anticipated updates in insolvency law so we can send various items of copy off to press. It is a feature of hard copy publishing that a book or article referring to a judge’s trial decision, can be immediately out of date and wrong if an appeal court reverses that decision after publication.

Although various prompts have been given, to little avail, with only a few days to go, this is a list of what we are still waiting for at the end of 2017.

Bankruptcy

The proposed one year bankruptcy and reform of debt agreements laws are now the subject of Senate committee inquiries, due to report in March 2018. Assuming some changes are made, the six-month lead time means that we may wait until the end of 2018 before these reforms start.

Other pending bankruptcy Bills involve the jurisdiction of the Family Court and protection of sexual abuse compensation from divisible property.

Corporate

Reforms in relation to unlawful phoenix activity are being considered by the government. These extend to consideration of a government liquidator, like the regimes of UK and New Zealand. As it happens, NZ is also looking at phoenix reforms (and gift cards).

The law regulating ipso facto termination rights commences on 1 July 2018. But the important regulations showing the details of exclusions are yet to be released.

We also have pending reforms in relation to: 

• ·         the crisis management of banks, following Treasury’s 2012 discussion paper;
• ·         collective investments, following the collapse of a number of managed investment schemes, and CAMAC’s 2014 report;
• ·         the resolution of financial disputes, which are to be dealt with by the new Australian Financial Complaints Authority, commencing 1 July 2018. Its Bill just scraped in with its third reading speech on the last day of parliament.

Funding

We await the impact of the new industry funding arrangements on the corporate insolvency profession. Personal insolvency’s model – a 7% levy on bankruptcy assets realised, produced $36,860m in 2016-2017. NZ’s proposed industry levy is $2, levied on company registrations. 

International

UNCITRAL’s Working Group V is meeting in Vienna this week – 18-22 December – to continue its consideration of the recognition and enforcement of insolvency related judgments, the cross-border insolvency of multinational enterprise groups, and directors’ obligations in the period approaching insolvency, relevant to our section 588GA law. It also has MSME insolvency on its agenda.

Regulation

In a major year for insolvency law reform, in particular the safe harbour reforms, some of the codes of conduct remain pending. 

• ·         APES 330 Insolvency Services – was to have been reviewed but appears to be delayed 
• ·         a revision of ARITA’s Code is deferred to 2018 
• ·         RITANZ is soon to issue its revised Code 
• ·         The UK is yet to release the outcome of its reviewing its independence requirements and fee arrangements to take account of the changes in insolvency practice over the last decades. 

Perhaps aligned with the RITANZ Code, the NZ Insolvency Practitioners Bill is now reinstated in parliament, but needs to be redrafted to reflect Cabinet’s decision to adopt the insolvency working group’s recommendations.

The UK Insolvency Service has announced a review of pre-packs in 2018, to assess the impact of voluntary industry measures introduced in November 2015 to improve the transparency of connected party pre-pack sales in administration.

The professional accountants’ International Code of Ethics – APES 110 – imposes “NOCLAR” obligations to report serious breaches of the law of their clients or employers. This commences on 1 January 2018. The accounting bodies will need to be reviewing members’ client retainers to ensure the new requirements are understood; including for insolvency safe harbour advisers.

The Whistleblower Bill does not seem to offer the sort of protection that the accounting bodies sought and it remains pending in parliament. 

Case law

There is a general obligation on practitioners to administer insolvent estates promptly. A major delay can be litigation, and a major delay in that context can be the time taken for court decisions to be delivered.

We are awaiting appeal decisions in  

• ·         Linc Energy, from the Queensland Court of Appeal. A similar case – Orphan Wells v Grant Thornton (Redwater) – is before the Supreme Court of Canada, listed for hearing on 15 February 2018
• ·         Amerind, from the Victorian Court of Appeal
• ·         Killarnee, from the Full Federal Court of Australia
•        Rambaldi v Commissioner of Taxation, from the Full Federal Court of Australia (being handed down today 18 December 2017);
• ·         Macks, an appeal from a 2014 decision of the South Australian Supreme Court; and, only recently
• ·         Joubert, from the AAT.

 That’s all from me.