The report recommends substantial changes to the present voidable transaction regime, and a raft of improvements to current legislation to achieve a fairer allocation of resources when a corporate insolvency event occurs.
Submissions on the report are due by Friday, 23 June. The report is detailed and makes over 30 recommendations. The key recommendations are:
Other proposed corporate insolvency reforms
Please click here to access a copy of the IWG’s second report as well as other relevant documents.
We are encouraged by the IWG’s recommendations. The proposed reform of the voidable transactions regime will appropriately re-set the balance between the collective interests of creditors affected by a liquidation and the interests of individual creditors who have received a payment in good faith. As the report notes, balancing these competing interests is difficult and voidable transactions will remain controversial and “sometimes emotive”. However, the proposed amendments (provided they are enacted together, as suggested by the IWG) will simplify the regime and address concerns about some liquidators who take too long to bring voidable transaction claims or use them exclusively to pay their fees.
We agree that it would be premature of the IWG to recommend changes to insolvency legislation to account for Ponzi schemes prior to the Supreme Court’s ruling in McIntosh v Fisk, which is expected sometime this year.
The changes proposed to achieve a fairer allocation of resources are all sensible. Priority for gift cards and vouchers will be popular with consumers, who were hard hit by retail collapses such as Sounds and Dick Smith. The reform that will make the most impact, if it is enacted, will be the proposal to limit the existing preferential claims for taxes and customs and excise duties to six months from the date that these debts fall due. As the report observes, “[t]his change will better protect the interests of other ordinary unsecured creditors because it will incentivise IRD and Customs to intervene earlier where it is evident that a company cannot be rehabilitated.” Where the IRD or Customs fail to take action, ordinary unsecured creditors won't be penalised for that inaction.
The Minister is also seeking feedback on an issue addressed in the IWG’s first report – whether to introduce a Director Identification Number. For our previous commentary on that point, please click here.
Kensington Swan will be making a submission on the IWG’s second report. If you would like assistance with making a submission, or would like to know more about the proposals in the report, please contact us.