The 2 year review of Australia’s safe harbour protection for directors, due from the government over a year ago, never took place.
Q: The Treasurer is presently breaking the law in relation to the obligations in the Corporations Act? … A: That’s probably not how I’d express it.
On 26 October 2020 the Economics Legislation Committee inquired of various Treasury officers about insolvency law, including about the required review under s 588HA of the safe harbour section, s 588GA, which has since been supplemented by the COVID-19 safe harbour section, 588GAAA.
This is an extract of the Committee transcript, edited:
Senator McALLISTER: I want to ask about the amendments to the Corporations Act that introduced a safe harbour in September 2017. I understand that section 588HA of the Corporations Act requires the minister to cause an independent review into the safe harbour insolvency reforms within two years. Can you confirm when that review was initiated by the minister?
Ms Barron: It hasn’t yet been initiated.
Senator McALLISTER: The act requires it to take place. The amendments to the act went through in September 2017 but it hasn’t yet been initiated?
Ms Barron: That’s correct, but, as you would be aware, the government has been making a large number of changes in the insolvency provisions of the Corporations Act.
Senator McALLISTER: Who is the relevant minister?
Ms Barron: The Treasurer is the responsible minister.
Senator McALLISTER: Is it Minister Frydenberg or Minister Sukkar that’s responsible for this matter?
Ms Barron: They share of the responsibility for these provisions.
Senator McALLISTER: For the purposes of the act, which requires the minister to do a certain thing by a certain time, who is the responsible minister?
Ms Barron: The Treasurer is the senior minister but can and does delegate some responsibilities to the Assistant Treasurer.
Senator McALLISTER: The Treasurer is presently breaking the law in relation to the obligations in the Corporations Act?
Ms Barron: That’s probably not how I’d express it. The review is yet to be undertaken but, as I said, the government is making a lot of changes to those particular provisions of the law at the moment and so is engaging in wide-ranging consultation on the insolvency provisions as part of that.
Senator McALLISTER: Do you think the parliament meant it when they put that requirement into the act that required the minister to do this? Or were they just fooling around?
Ms Barron: I couldn’t comment.
… Senator McALLISTER: Plainly the minister is not in compliance with the law. Mostly that’s described as breaking the law. I’m just trying to understand why it’s not a priority. Are they too busy doing other things? Minister Sukkar is too busy?
ACTING CHAIR: I think that’s for the courts to decide, not us as senators.
Senator McALLISTER: The parliament is entitled to understand why the executive isn’t following the law, particularly when those laws have only recently passed through both chambers.
The safe harbour protection for directors came after years of deliberation and debate and with some fanfare. Section 588HA required the Minister to cause an independent review of listed matters concerning the operation of s 588GA as soon as practicable after the 2 years.
In The end of safe harbour? in December 2017, I suggested that the processes for monitoring the impact of the new section 588GA be put in place then, at the time of its commencement, but in retrospect that was never going to happen, including from the industry bodies. Two years later, in September 2019 there was nothing from whichever Minister to indicate any review was being considered.
The events of COVID-19 then came upon us 6 months later. Without any review, the government then added s 588GAAA, but without the benefit of any review of 588GA, and making no 588HA equivalent for its review, or for any of the COVID-19 changes.