Law Council of Australia

Business Law Section

Corporate insolvency in Australia

This submission has been prepared by the Insolvency and Restructuring Committee of the Business Law Section with additional input from the SME Business Law Committee, Financial Services Committee, Taxation Committee, and the Corporations Committee.

It has been over 39 years since the Australian Law Reform Commission was tasked to conduct the Harmer Inquiry. That review led to major reforms of the corporate insolvency regime in Australia which remain useful and effective today.

However, changes to the economy in the intervening decades warrant a fresh look at the regime. For that reason, this PJC Inquiry is welcomed.

This submission first considers general and holistic questions about what Australia’s insolvency regime should achieve. By definition, in the insolvency system there are insufficient funds to satisfy all stakeholders, and somebody must always miss out. That has inevitably led to aggrieved stakeholder groups through the years, often successfully lobbying for narrowly focused legislative reform to improve their position as against other stakeholders. The result is an awkward blend of laws not properly aligned from any policy perspective, located in different, difficult-to-navigate places.

For that reason, this Submission’s primary, and key, recommendation is that the legislative scheme be redesigned. That is consistent with recent calls from the ALRC to do the same for other parts of the Corporations Act. Such a redesign does not need to break the system or require complete, substantive amendments to Australia’s regime, but the opportunity should be taken to review parts of the law that require examination along the way.

On the following pages the Section has listed our 33 recommendations. Some of those recommendations can be implemented quickly with little cost or pain, to the material gain of stakeholders generally (such as limiting or cutting altogether the need for court applications to achieve certain extensions or other results). Other recommendations require more thought, and a more detailed analysis of empirical data. It may be appropriate for some other body (such as the ALRC) to conduct a further review on some of those matters. If that takes some time, then so be it.

Ultimately, Australia’s corporate insolvency regime works well. However, there are real opportunities to fine-tune the system and provide better results for all stakeholders. 

Last Updated on 22/10/2024

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