Good things take time: Parliamentary Joint Committee delivers report on Australia’s corporate insolvency framework

The Parliamentary Joint Committee on Corporations and Financial Services (the Committee) has delivered its report following an inquiry into the “effectiveness of Australia’s corporate insolvency laws in protecting and maximising value for the benefit of all interested parties and the economy”.[1]

The Committee has recommended that, as soon as practicable, the Australian government should commission a comprehensive and independent review of Australia’s insolvency law, encompassing both corporate and personal insolvency law.

The Committee considered Australia’s corporate insolvency system to be “overly complex, difficult to access, and creates unnecessary cost and confusion for both debtors and creditors”.[2]

It made a number of recommendations to guide the structure, scope and process of a comprehensive review.

In addition, the Committee has also suggested a number of areas for reform ahead of the comprehensive review, to address “clear and broadly recognised failings in the current law.”[3]

As discussed in our earlier note on the launch of the inquiry, previous restructuring and insolvency law reform efforts over the last decade have been restrained by a ‘piecemeal’ approach, with a focus on specific issues or ‘cherry picked’ features, rather than considering the system as a whole. The recognition by the Committee that fulsome review is needed aligns with broad consensus across the restructuring and insolvency market that Australia’s insolvency framework requires in-depth and principled review.

A full list of twenty-eight recommendations made by the Committee can be found in the Appendix.

The government is yet to publicly respond to the recommendations of the Committee.

Continue reading

Clearing up the cloud? Perhaps partly, as the Court of Final Appeal affirms the approach to dismissing bankruptcy proceedings in favour of the parties’ agreed forum

If a debt arises from a contract that contains an exclusive jurisdiction clause (EJC) in favour of a foreign court, how will the Hong Kong court deal with a bankruptcy petition based on that debt? A highly anticipated judgment from Hong Kong’s highest court suggests that the bankruptcy petition will likely be dismissed, and that the foreign EJC will be given effect. But, as we will discuss below, the Court seems to leave other possibilities open, depending on the facts in a particular case.

Continue reading

First decision on Australia’s ipso facto stay in voluntary administration

The Federal Court of Australia (Court) has handed down the first reported decision on the ipso facto stay provisions contained in the Corporations Act 2001 (Cth) (Act). In Rathner, in the matter of Citius Property Pty Ltd (Administrator Appointed) [2023] FCA 26 the Court examined the operation of the voluntary administration ipso facto stay contained in s 451E(1) of the Act, and the extent to which that stay would continue during any liquidation that followed the administration.

Continue reading

TMA submissions on corporate insolvency in Australia

Herbert Smith Freehills’ restructuring, turnaround and insolvency team has supported the Turnaround Management Association of Australia (the TMA) in preparing the TMA’s submissions (TMA Submissions) to the Parliamentary Joint Committee on Corporations and Financial Services (the Committee) for the purposes of its inquiry into corporate insolvency in Australia.

Continue reading

BTI v Sequana – Key UK Supreme Court insolvency ruling clarifies stance on creditor duties

The Supreme Court of the United Kingdom (the Supreme Court)(UK) has delivered the much anticipated decision in BTI 2014 LLC v Sequana SA [2022] UKSC 25 confirming the existence, content and timing of the duty of directors to have regard to creditors where a company is insolvent. Whilst a UK decision, it is likely to be influential in other common law jurisdictions, such as Australia, Hong Kong, Singapore and New Zealand where similar duties apply.

Continue reading

Sending disclaimer to the sawmill: A liquidator’s power to disclaim land subject to environmental liabilities following the Australian Sawmilling case

In The Australian Sawmilling Company Pty Ltd (in liq) v Environment Protection Authority [2021] VSCA 294 (Australian Sawmilling), the Victorian Supreme Court of Appeal (VSCA) dismissed an appeal by the liquidators of The Australian Sawmilling Company Pty Ltd (TASCO) against a decision of Garde J of the Victorian Supreme Court (VSC) setting aside the liquidators’ disclaimer of land subject to significant environmental ‘clean up’ costs (Primary Judgment).[1]

Continue reading