The Government is today releasing draft legislation to implement the first phase of reforms to strengthen and streamline Australia's personal bankruptcy and corporate insolvency regimes.
These reforms are designed to empower creditors to better protect their own interests by enhancing communication and transparency between insolvency practitioners and creditors.
Specifically, creditors will be empowered to protect their own interests by giving them the ability to determine when and what information they are provided by an insolvency practitioner.
The Government's reforms will also give creditors the power to remove poorly performing insolvency practitioners through a resolution of creditors instead of having to seek the Court's agreement.
New insolvency practitioners will be required to be interviewed by a three person committee with appropriate expertise prior to registration. Registration will need to be renewed every three years with the provision of new requirements for insolvency specific education as well.
Mechanisms to address losses from any negligence or misconduct will be improved by making appropriate insurance a condition of registration.
These reforms will increase confidence in the professionalism and competency of insolvency practitioners.
Some of the other proposed changes designed to improve returns to creditors include:
- Allowing the use of electronic provision of documents;
- Streamlining remuneration approval processes; and
- Aligning administrative rules across personal and corporate insolvency.
Increased transparency will make insolvency practitioners more accountable to creditors who will be able to obtain information on an administration at any time.
These reforms will also increase competition in the market for insolvency services. Creditors will be empowered to more easily remove a poorly performing insolvency practitioner and be able to appoint an independent specialist to review the performance of an insolvency practitioner.
The Australian Securities and Investments Commission will also have increased surveillance powers to proactively identify and investigate allegations of misconduct. The disciplinary mechanism will also be strengthened.
Over the first four years, this reform package is estimated to reduce compliance costs by around $215 million.
The draft Bill and a proposals paper on the proposed regulations and Insolvency Practice Rules is now available for comment on the Treasury and Attorney-General's Department websites (www.treasury.gov.au and www.ag.gov.au). Submissions close on 19 December 2014.
The second phase of reform to strengthen our insolvency laws will be announced after the Government has considered the findings and recommendations from the Financial System Inquiry.