Dr Andrew Leigh is probably the first minister to oversee both personal and corporate insolvency, following the transfer of personal from Attorney-General’s to Treasury in May 2025. This provides a real opportunity to review the insolvency system as a whole, based upon the broader legal, economics, and systems recommendations of the 2023 PJC Report.
At the AFSA Summit on personal insolvency on 18 November 2025, Dr Leigh [1] gave an insightful analysis of the relevance and importance of the personal insolvency system in Australia, although with some perhaps debatable comments about the qualities of the regime: Address to the Australian Financial Security Authority Summit, Sydney | Treasury Ministers
The personal insolvency system is based on trust, allowing people to take business risks
Dr Leigh opened with the claim that every successful market economy rests on trust based on confidence that agreements will be honoured, that disputes will be resolved fairly, and that rules will be applied consistently. The personal insolvency system is “one of the quiet foundations of that trust”, allowing people to take business risks, knowing that they can re‑enter the economy and contribute again.
“When the system functions well, its impact is almost invisible. … a system that handles financial distress with clarity and humanity is one that better supports business formation, innovation and dynamism”.
As I discuss below, aspects of this positive slant might be debated.
Business dynamism
But as Dr Leigh acknowledged, Australia has seen a plateauing of productivity, and a slowing in firm entries and exits, these being the “churn” necessary for a healthy economy.
This was well explained by the Productivity Commission to the 2023 Parliamentary Joint Committee on Corporate Insolvency, how insolvencies and business exits play an important part in maintaining the dynamism of the economy, ensuring that it is innovative and constantly changing.
While “there’s an element of pain associated with financial distress, sometimes business exit is an important way for us [to] get economic growth through innovation and different business models, and in some industries in particular that is a mechanism by which innovation and productivity growth occur”.[2]
More so in corporate insolvency, that prompts the question the PJC raised, citing the OECD, that a
‘well-functioning exit margin, which sorts successful market activities from unsuccessful ones, is vital to aggregate productivity growth.’[3]
Whether that margin in restructuring is set right or has gone too far[4] is a matter for any comprehensive review of the insolvency system.
Derisory and outrageous, but if that’s what creditors want
Fairness, or its perception, is an important element of any insolvency regime. Dr Leigh takes up AFSA’s concerns in relation to Part X agreements. He refers to what was the proposed Adgemis Part X that offered creditors 0.15 cents in the dollar,
“1/50th of the 8 cents in the dollar return in a typical personal insolvency agreement”.
That was not good and the Court did make a sequestration order: DCT v Adgemis [2025] FCA 1218. (But then it is not good that the tax laws somehow allowed Mr Adgemis to incur liabilities totaling about $162 million to the Australian Taxation Office).
But insolvency law, for better or worse, allows self-interested creditors to accept or otherwise such an offer.
In Re Agushi[5], the court agreed that the dividend return of “0.019c in the dollar” was “comparatively modest” or even “derisory” but noted “it is but one consideration to be taken into account”, and that there will be circumstances
“where informed creditors may consider it in their best interests to approve a personal insolvency agreement and accept comparatively little in return”.
Creditors’ motivations are not relevant and, as citizens, they may conceivably not wish to subject the debtor to Australia’s severe and unreformed bankruptcy laws, or to be asked to fund investigations and recoveries.
But any hint of abuse of process will change things, such as suggestions of tax evasion and sham transactions causing the Court to find that an otherwise generous 3 cents in the dollar to be “manifestly unreasonable and derisory”: Stedman v Deputy Commissioner of Taxation [2000] FCA 336. See also Ward v Zozi [2012] FMCA 898.
An “outrageous” offer of “less than one ten thousandth of a cent in the dollar”
Some cases are very clear, a judge quickly setting aside a section 73 composition after finding that the terms and the circumstances of what was a “derisory” offer were “outrageous”, offering “less than one ten thousandth of a cent in the dollar”: Loane v Gold Ribbon (Accountants) Pty Ltd [2004] FCA 537.
The composition was voted against by all of the arm’s length creditors and voted for by creditors who “had no prospect of receiving even a cent in the dollar by way of a dividend” and it was against the trustee’s recommendations.
Then there was the Judge who was stirred to exclaim that, in relation to a composition,
“there is something which, if not shocking, is at least something which takes one aback about a suggestion that somebody who owes almost 5.5 million dollars can offer $15,000 and walk away without there being any appropriate investigation of his affairs”: see DOCAs – should ‘not much of a return to creditors but better than the liquidation alternative’ be enough? – Murrays Legal
Delayed conviction and imprisonment
As to the matter involving John Voitin, yes, it involved false creditors being created using fabricated documents as a deliberate attempt to manipulate core processes. And the result was conviction and imprisonment, but this took 14 years or so: Jailing for criminal bankruptcy conduct – in 2011 – Murrays Legal
Contemporary expectations of fairness and economic participation?
As to what Dr Leigh described as being reforms “designed to bring the system into closer alignment with contemporary expectations of fairness and economic participation”, these include increasing the threshold for involuntary bankruptcy and allowing additional days for debtors to respond to bankruptcy notices.
While probably of assistance to some, these reforms are almost derisory in themselves in terms of the real needs for comprehensive bankruptcy reform. Some proposed personal insolvency reforms in Australia – Murrays Legal
One year bankruptcy – a “very long-term reform priority”
As to which, and the contemporary expectations of fairness and economic participation, the government has accepted that a one-year bankruptcy remains a “long-term reform priority”. Given it was announced for reform in 2015, it is more like a “very long-term reform priority”.
Sole traders – who are they?
And while small business corporate restructuring – Part 5.3B Corporations Act – was hurried through in January 2021, equivalent personal insolvency SME reforms have remained unattended, evidencing a continuing and long-term bias in favour of corporate insolvency: see Harmonising the responsibilities of directors of insolvent companies with those of bankrupts (2023) 22(5) INSLB 76, Murray and Mason.
2023 PJC Report
As to that, Dr Leigh refers to the 2023 PJC Report and its concern about the interface between corporate and personal insolvency, given that in many small businesses, the financial affairs of the individual and the company are closely intertwined. He suggests that reforms will need to account for how small business owners actually experience financial distress in practice rather than, as at present, in terms of the separated industry and the cumbersome ways it operates.
An academic research project is examining this: [6].
Changing nature of business assets
Dr Leigh noted the economic reality that Australia’s economy increasingly relies on services, intangibles and entrepreneurial activity, an issue internationally: see Re-examining Insolvency Law and Theory, Perspectives for the 21st Century;[7] Insolvency law’s elephants in the room – Murrays Legal
This raises the issue that assets in insolvencies are more difficult to realise for their operational value. That in itself goes to questioning insolvency’s goal of providing dividends for unsecured creditors and whether that should be tempered in light of minimal returns from insolvent businesses: Rebuilding the structure of the Australian insolvency system (2022) 22(1&2) INSLB 14, Murray & Harris.
It also affects the funds available for the remuneration of trustees, already under question: Remuneration in the personal insolvency system, 4 March 2020 www.afsa.gov.au.
Trust? Transparency?
Returning to Dr Leigh’s opening remarks, trust is based on transparency which our opaque business environment does not provide.
There is no public access to Director IDs, to free access to ASIC and other databases, and to beneficial ownership registers. While Dr Leigh has given a timetable for the latter,[8] they are a long time coming – Beneficial ownership of companies, and access to ASIC data – Murrays Legal; though not as long as the AML reforms, foreshadowed in 2007: Australia on a slope? [continued] – Murrays Legal.
There is also the extent to which the tax law allows businesses to trade with unpaid tax debts, and thereby to be allowed to unfairly compete in the market.
Business re-entry?
As to allowing the debtor a fresh start and re-enter the economy, Australia’s three-year period of bankruptcy restrictions is hardly a comfort to any person whose business has failed, unless of course they incur their debts through the legal fiction of a company, in which case they can start again the next day: Harmonising the responsibilities of directors of insolvent companies with those of bankrupts, Murray and Mason.
But that is another separate insolvency regime – separate laws, practitioners, courts, and regulators confirming that the productivity of the insolvency system should be a focus of any comprehensive review.
Dr Leigh
The transfer of personal insolvency to Treasury in May 2025, following a suggestion made in 2009,[9] probably means that Dr Leigh is the first minister with responsibility for the whole insolvency system, and probably the first economist. His speech most usefully offers that broader economics perspective on personal insolvency although with legal perspectives also necessary for insolvency law reform.
More broadly, we would look forward to a comprehensive overview of the insolvency system, and its intersections with other aspects of law and economics, and comments on the government’s own views as to the system’s aims and purposes in society.
The 2026 World Bank’s B-Ready review of Australia’s insolvency system, compared with other countries, will assist the government in that assessment: World Bank’s 2026 B-Ready review of Australian business insolvency and other laws – Murrays Legal
==========================================
[1] Assistant Minister for Productivity, Competition, Charities and Treasury
[2] [3.22].
[3] [3.24]
[4] Insolvency law – has corporate rescue gone too far? 30 April, Sydney Law School – Murrays Legal
[5] [1992] FCA 440, under the pre-2004 Part X law.
[6] ANU Law School/Sydney Law School 2025 Insolvency and Restructuring Colloquium, 5 November 2025, Ideas for a combined personal and corporate insolvency regime for small business, Dr Amanda Bull, QUT School of Law and Michael Murray, Sydney Law School
[7] Re-examining Insolvency Law and Theory, Perspectives for the 21st Century. , eds Ghio, Wood and Gant, Edward Elgar Publishing, 2023, Ch 7 A Rawlsian approach to preventive restructuring, Potamatis and Paparrigopoulos.
[8] Improving transparency of the true owners of companies | Treasury Ministers
[9] The alignment of the laws of personal and corporate insolvency (2009) 9(5) INSLB 102, M Murray
