The evolution of bankruptcy and insolvency laws and the case of the deed of company arrangement

This is a thoughtful and instructive article on the process of the historical development of the bankruptcy and insolvency laws in the United Kingdom, the United States and Australia.

Its central point, as the abstract explains:

“is to demonstrate that the process has been one of progressive liberalisation of consequences accompanied either by increased regulation or new and innovate flexible techniques of creditor involvement. We conclude the article with an examination of the operation of the deed of company arrangement, or DOCA, in Australia and a recent liberalisation involving a practitioner-led innovation colloquially described as a “holding DOCA”, an innovation which the judiciary declined to invalidate, thus allowing the effect of potentially extending periods of administration”.

The reference is to a DOCA under Part 5.3A of the Australia Corporations Act 2001 (Cth) and to the High Court’s decision in Mighty River International Ltd v Hughes,[1] a decision which may, according to the authors,

“represent, in Australia, a high water mark of the modem, liberal approach to corporate insolvency.

However, this liberalising innovation was again accompanied, as so often occurred in the history of development of insolvency law, by tighter regulation of debtors or innovative forms of creditor involvement in the company. Only months after the Mighty River decision, the High Court of Australia delivered its decision in an appeal concluding that the standard of conduct of directors that had been required, including by amendments made by Parliament to the Corporations Act 2001 (Cth), was stricter than many had previously appreciated”.[2]

The article is written by Justice James Edelman of the High Court of Australia, who was a judge in both High Court matters footnoted, and Mr Henry Meehant and Mr Garry Cheung.

[1] [2018] HCA 38

[2] Australian Securities and Investments Commission v Lewski [2018] HCA 63

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