NO.032
PEARCE ANNOUNCES INSOLVENCY REFORM PACKAGE
The Parliamentary Secretary to the Treasurer, the Hon Chris Pearce MP, today
announced an integrated package of reforms to improve the operation of Australia’s
insolvency laws.
“While Australia’s insolvency regime is fundamentally sound, there
are some areas that have not been updated since the 1988 Harmer Review. The
Government is particularly concerned to ensure that vulnerable creditors, such
as employees and small business, are adequately protected,” said Mr Pearce.
The package proposes a number of reforms, including: improved access to the
General Employee Entitlements and Redundancy Scheme (GEERS); enhancing the prospect
of payment of employee entitlements and personal injury claims in insolvency;
and the establishment of a fund to finance preliminary investigations of ‘assetless’
companies to curb fraudulent phoenix activity.
The Government will allocate an additional $62 million over four years to enhance
the range of entitlements under GEERS. Since the Howard Government introduced
employee entitlements assistance in January 2000, over 54,000 Australian workers
have received more than $661 million in assistance for their entitlements lost
due to the insolvency of their employer.
As recommended by the PJC, the Government will retain the existing priority
of employee entitlements in insolvency. The Government will also move to prevent
this priority being downgraded in deeds of company arrangement without the agreement
of employees, and clarify the status and priority of the Superannuation Guarantee
Charge in external administrations.
The Government will allocate $23 million over four years to establish an ‘assetless
administration’ fund and complementary enforcement programme by the Australian
Securities and Investments Commission (ASIC). The fund will finance preliminary
investigations by expert liquidators of companies, selected by ASIC, that have
been left insolvent with little or no assets.
Reflecting the findings of the Report of the James Hardie Special Commission
of Inquiry, the Government considers there is a strong case for introducing
new protections for personal injury claimants, where a company expects a large
number of successful personal injury claims arising from its conduct or products.
However, the recognition of mass future claims in insolvency has risks that
must be carefully addressed.
As such, the Government will refer this issue to its expert advisory committee,
the Corporations and Markets Advisory Committee (CAMAC), for detailed consideration.
Additionally, the Government will introduce minor reforms to improve the registration
of insolvency practitioners, and to fine-tune the voluntary administration process.
“The corporate insolvency regime has the potential to affect the conduct
of every Australian business. It’s therefore vitally important that we
ensure that any reform in this area is well-considered,” stated Mr Pearce.
“The Government’s package of reforms provides an integrated and
comprehensive response that will improve protections and address regulatory
gaps, while avoiding additional costs to business.”
The package has been developed after taking into account the recommendations
of a number of recent reviews, including the Parliamentary Joint Committee on
Corporations and Financial Services Report titled Corporate Insolvency Laws:
a Stocktake, the Report of the James Hardie Special Commission of Inquiry, and
several reports by the Corporations and Markets Advisory Committee.
Exposure draft legislation will be prepared in consultation with industry groups.
It is anticipated that legislation will be circulated for public comment in
early 2006 and a bill introduced later that year.
Further details about the reform package are available from the Treasury
website and the reference to CAMAC can be found on the CAMAC
website.
12 October 2005
CANBERRA
Contact: Catherine Whitby (02) 6277 2088