The Commonwealth Government yesterday passed the Corporations Amendment (Corporate Insolvency Reforms) Bill 2020 amending the Corporations Act 2001 (Act). When it receives royal assent it will become law.
As we wrote about in our article published on 23 November 2020, on 17 November 2020 the Commonwealth Government released the Corporations Amendment (Corporate Insolvency Reforms) Regulation 2020 (Regulations) and the Corporations Amendment (Corporate Insolvency Reforms) Rules 2020 (Rules) as "exposure drafts" for consultation.
The Regulations and Rules have progressed past the "exposure drafts" stage.
As we have previously written, the amending law leaves numerous gaps to be filled by the Regulations and Rules, many of those gaps have not been adequately filled by "exposure drafts".
It remains to be seen if the Commonwealth Government will make changes to the Regulations or Rules in response to the "insolvency industry's" concerns.
There has been discussion around an element of the Bill relating to when a Liquidator can follow the "simplified liquidation process" introduced by section 500A to the Act.
There is an argument that a liquidator can never follow the "simplified liquidation process" because the time by which the liquidator must give notice that they are adopting the "simplified liquidation process" "expires" on the same day that a creditor can request (in writing) that a liquidator not adopt that process.
However, there is no requirement that a liquidator wait for the "creditors' period" to expire before adopting the "simplified liquidation process". Further, section 500AC of the Bill provides for a liquidator to transition out of the "simplified liquidation process" to another process under Chapter 5 of the Act if the "eligibility criteria" set by section 500AA are no longer met.
Unhelpfully the Bill allows for the Regulations to set other circumstances where the "simplified liquidation process" must cease.
Issues will almost certainly be created by the lack of clarity around the interaction of various sections. However, we do not agree that a liquidator is prevented from adopting the "simplified liquidation process" because of the timeframe issues.
Conclusion
One thing is clear, the reforms will leave more questions than answers and are unlikely to achieve the desired, if any, real reform.
The answer remains "writs' and Creditors Statutory Demands are currently the best process for recovering or focussing Creditors' minds on their liabilities.
At Kott Gunning we have an experienced, commercial and knowledgeable insolvency team ready to advise and assist you about the Insolvency Reforms, their impacts and how to manage them.
We can also assist you understand and use the legal and practical requirements of the Insolvency Reforms now and for your future benefit.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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