Explanatory Memorandum(Circulated by the authority of the Minister for Small Business, Assistant Treasurer, the Hon Kelly O'Dwyer MP and the Attorney-General, the Hon Senator George Brandis)
General outline and financial impact
The Insolvency Law Reform Bill 2015 (Bill) amends the Corporations Act 2001 (Corporations Act), the Australian Securities and Investments Commission Act 2001 (ASIC Act) and the Bankruptcy Act 1966 (Bankruptcy Act) to create common rules that would:
- remove unnecessary costs and increase efficiency in insolvency administrations;
- align the registration and disciplinary frameworks that apply to registered liquidators and registered trustees;
- align a range of specific rules relating to the handling of personal bankruptcies and corporate external administrations;
- enhance communication and transparency between stakeholders;
- promote market competition on price and quality;
- improve the powers available to the corporate regulator to regulate the corporate insolvency market and the ability for both regulators to communicate in relation to insolvency practitioners operating in both the personal and corporate insolvency markets; and
- improve overall confidence in the professionalism and competence of insolvency practitioners.
Date of effect: This Bill commences on proclamation.
Proposal announced: The reform package was announced by the Government on 7 November 2014.
Financial impact: $2.8 million will be reappropriated from 2012-13 and 2013-14 into 2016-17 to implement the Bill, past revenue collected has already offset this expenditure. The Bill will result in revenue of $1 million per annum from commencement. '
Human rights implications: This Bill does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 8, paragraphs 8.1 to 8.15.
Compliance cost impact: This Bill and accompanying regulations and ministerial rules are forecast to result in $50.1 million reduction in compliance costs for the insolvency industry.
Summary of regulation impact statement
Regulation impact on business
Impact: The reforms will result in a net reduction in compliance costs on corporate insolvency practitioners in the areas of registration, the maintaining of registration and discipline. There will also be compliance cost savings by reducing mandatory information provision and meeting obligations in favour of ad hoc requirements to provide information to creditors.
The reforms will result in net regulatory savings for insolvency practitioners (and by extension business and personal creditors).
- The reforms relating to the registration as a liquidator for corporate insolvency practitioners are expected to result in net regulatory savings. The new requirements applying to the registration as a trustee in personal insolvency are expected to result in a small increase in regulatory compliance costs. The new obligations applying to a registered liquidator and a registered trustee to notify the regulator of certain significant events relating to their registration will result in a small increase in compliance costs.
- The introduction of the new disciplinary regime for registered liquidators based on the existing model for personal insolvency practitioners, which will involve the removal of the liquidator function from CALDB, is expected to result in net regulatory savings. There may be a small increase in regulatory compliance costs for registered trustees to comply with notices from the regulator to lodge documents or correct information.
- The introduction of a statutory minimum default remuneration amount in corporate insolvency, which will remove the existing need for creditors meetings in assetless and low asset windings up, will result in substantial regulatory compliance cost savings. There is no increase in compliance costs or savings in personal insolvency because a statutory default remuneration amount already exists under the Bankruptcy Act.
- The reduced retention period in relation to the books of a personal insolvency administration will result in compliance cost savings for registered trustees.
- There will be substantial net regulatory cost savings for corporate insolvency practitioners as a result of the reforms relating to the provision of information to creditors and the convening of creditor meetings, including the removal of the mandatory initial meeting in a creditors' voluntary winding up, the removal of the existing requirement for annual meetings/reports in a creditors' voluntary winding up, the removal of the need for a final meeting in a creditors' voluntary winding up, permitting practitioners to provide information to creditors using a website and allowing creditor resolutions to be passed without the holding of a physical meeting.