Insolvency law changes

As part of the Government’s Innovation Agenda Report it has announced it will:

  • reduce the default bankruptcy period from three years to one year;
  • introduce a ‘safe harbour’ for directors from personal liability for insolvent trading if they appoint a professional restructuring adviser to develop a plan to turnaround a company in financial difficulty; and
  • make ‘ipso facto’ clauses, which have the purpose of allowing contracts to be terminated solely due to an insolvency event, unenforceable if a company is undertaking a restructure.

Separately the Insolvency Law Reform Bill 2015 has been introduced into the House of Representatives.

The Bill amends the Corporations Act 2001, the Australian Securities and Investments Commission Act 2001 and the Bankruptcy Act 1966 by inserting common rules in the Acts that would:

  • align the registration and disciplinary frameworks that apply to registered liquidators and registered trustees;
  • align a range of specific rules relating to the handling of personal bankruptcies and corporate external administrations;
  • improve the powers available to the corporate regulator to regulate the corporate insolvency market and the ability for regulators to communicate in relation to insolvency practitioners operating in both the personal and corporate insolvency markets.
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