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Improving Australian bankruptcy + insolvency laws: responses to government proposals

by on May 31, 2016

This article was written by Scott Atkins, Partner & Board Chair at Henry Davis York. It first appeared posted on LinkedIn on May 29, 2016.

As part of the National Innovation and Science Agenda, the Government committed to releasing a proposals paper on measures to improve Australia’s bankruptcy and insolvency laws by making changes to the default bankruptcy period, introducing a safe harbour for directors, and changing the operation of ‘ipso facto’ clauses.

The proposals paper was released on 29 April 2016.  The proposals papersought views from the public on how best to implement these measures in order to encourage Australians to embrace risk, learn from mistakes, be ambitious and experiment to find solutions.

Henry Davis York has one of Australia’s leading insolvency and restructuring practices and has expressed the firm’s views on the matters set out in the proposals paper. In many respects, HDY is supportive of the submission of the peak Australian insolvency and restructuring association, ARITA on the issues raised in the proposals paper.

There are three key measures identified in the proposals paper aimed at improving bankruptcy and insolvency laws:

1. reducing the current default bankruptcy period from three years to one year

2. introducing a ‘safe harbour’ for directors from personal liability for insolvent trading if they appoint a restructuring adviser to develop a turnaround plan for the company, and

3. making ‘ipso facto’ clauses, which have the purpose of allowing contracts to be terminated solely due to an insolvency event, unenforceable if a company is undertaking a restructure.

For a copy of the submission lodged by Henry Davis York, please click here.

To read more, here are some other links:

ARITA’s “A Platform for Recovery” can be found at:http://www.arita.com.au/about-us/public-policy-advocacy

The Innovation Statement on insolvency law reform: http://www.innovation.gov.au/page/insolvency-laws-reform

The Productivity Commission Report: http://www.pc.gov.au/inquiries/completed/business/report

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