The Manager
Corporate Governance and Reporting Unit
Corporations and Capital Markets Division
The Treasury
Langton Crescent
Parkes ACT 2600
Attention: Mr Aaron Jenkinson
Email: insolvency@treasury.gov.au
Dear Mr Jenkinson
Insolvency Law Reform Bill 2013- Exposure Draft McGrathNicol is a national practice of 31 partners, 19 of whom are registered liquidators; in addition, two of our senior employees are also registered liquidators. The majority of our registered liquidators are members of the Insolvency Practitioners Association of Australia (IPA). Our insolvency practice is confined to corporate engagements typically the larger, more complex matters; we do not practise in bankruptcy.
We welcome the government’s interest in improving the legislative framework for the important work undertaken by insolvency practitioners in contributing to the stability and effectiveness of Australia’s economy.
We also welcome the opportunity to make a submission in regard to the proposed amendments to the Corporations Act 2001 (the Act) detailed in the Insolvency Law Reform Bill 2013. Our detailed comments are set out in the attachment to this letter. Our comments address only those aspects of the proposals where we wish to point out practical implications, concerns regarding the effectiveness of the law reform proposals or the manner in which they may be implemented. We have confined our comments to the area of corporate insolvency as our firm does not practice in personal insolvency.
By way of highlighting the themes which underlie our detailed comments we make the following comments in regard to the overall direction and scope of the proposed amendments:
Harmonisation In general terms we have no objection to the harmonisation of the corporate and personal insolvency regimes and recognise that this may have potential advantages for regulators, creditors and practitioners who conduct both corporate and personal insolvency practices.
However, a number of our detailed submissions concern the results of the attempt to harmonise the regimes without due regard to the significant and substantive differences between corporate and personal insolvency.
Insolvent companies typically involve a far greater number and value of creditors than personal insolvencies and are far more likely to be trading enterprises and employers. The harmonisation approach appears to have taken the view that processes and requirements that work well in bankruptcy can be applied, without modification, to corporate insolvency. There are certainly aspects Page 2 in which this premise holds, but there are several where it does not and, in our view, harmonisation in these aspects will unnecessarily add cost and confusion.
In the absence of detail regarding any proposed consequential changes in the law in relation to receiverships, aspects of the proposed Uniform Insolvency Practice Rules will have the effect of undermining the harmonisation that presently exists between the different types of corporate insolvency. We submit that this outcome is potentially likely to cause greater confusion among creditors than the mischief that is sought to be remedied by the harmonisation of the corporate and personal insolvency regimes. Complexity Taken in isolation, most, if not all, of the changes proposed appear reasonable and well targeted on issues which have been identified, through the Senate Inquiry and subsequent consultations, as in need of reform. However, in our view, collectively the amendments risk excessive layering of controls and processes and result in undue complexity.
We submit that there is a need to consider the collective impact of the amendments and consider opportunities to simplify and rely on over-arching controls or common mechanisms to achieve the core objectives, and minimise the cost burden of compliance which is ultimately borne by creditors. Insolvency Practitioners Association ("IPA") In the course of reviewing the proposed amendments and developing our submission we have liaised with the IPA. We support the general comments raised by the IPA in its submission insofar as they concern corporate insolvency law and practice. Regulations and consequential amendments As you would know, the proposed Uniform Insolvency Practice Rules point towards a great deal of the detail being dealt with by regulations which have not been released for comment. This fetters our ability to fully understand the proposals and provide constructive input in regard to how the regulations are likely to play out in practice.
In addition, it would seem that consequential amendments will be required to the Act in order to implement the new Uniform Insolvency Practice Rules. Again in the absence of the detail in this regard we are unable to provide constructive feedback into the process to assist in ensuring there are no unintended consequence in practice.
We would welcome the opportunity for consultation on these aspects of the law reform in due course.
If you have any queries or comments in regard to our submission, please contact me or Rosemary Winser on 08 8468 3701.
| Yours faithfully Robyn McKern |
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