On 7 November 2014 the Government released the Insolvency Law Reform Bill.
The Bill comprises of a package of proposals aimed at amending and streamlining the Bankruptcy Act 1966 and the Corporations Act 2001. It also contains proposals to reform how liquidators are registered and regulated.
Requirements to become a liquidator
Of particular interest to practitioners are the changes to the way new liquidators will become registered.
New liquidators will need to pass an exam and must also satisfy minimum education requirements, namely a 3 year commerce related degree and completion of formal tertiary studies specific to insolvency administration.
If these requirements are met, an individual may apply to ASIC to be registered as a liquidator. ASIC will refer the application to a committee who will consider the applicant’s qualifications, conduct and fitness, and whether the applicant will take out appropriate insurance.
The committee comprises of a three person panel, one of which will be a member of the industry body ARITA.
Registration may be subject to conditions, is for 3 years and may be renewed.
A registered liquidator must:
- lodge an annual return with ASIC that includes proof that the liquidator has appropriate insurance; and
- give ASIC notice if the liquidator’s circumstances change or if certain other events happen (eg the liquidator becomes insolvent or is disqualified from managing a corporation).
Failure to take out professional indemnity insurance will exposure the practitioner to a fine.
The Bill also contains proposals for the streamlining of the corporate administration and recovery process for creditors.
- new 'special resolutions' enabling creditors to remove a poorly performing liquidator without court approval;
- obligations on administrators to notify the owner or lessor of the property’s location when electing not to exercise rights in relation to property;
- new obligation on administrators and directors to notify as many of the company’s creditors as soon as reasonably practicable after becoming aware of a breach or likely breach of a DOCA;
- new mechanism for putting 'proposals' (resolutions) to creditors without the need to convene creditor meetings.
Closing date for submissions on the proposed legislation is Friday, 19 December 2014.