Australia makes far-reaching changes in insolvency laws
On 6 April 2022, the Attorney-General’s Department in Australia announced changes to the Insolvency Practice Rules 2016. The changes are reflected in the Insolvency Practice (Bankruptcy) Amendment Rules 2022 and officially commenced on 5 July 2022.
Authorities in Australia made 22 amendments to the Rules which are designed to:
- make trustee registration requirements more flexible
- introduce more transparency and certainty to creditor meetings
- ensure the rules are consistent with similar provisions in the Insolvency Practice Rules (Corporations) 2016.
The table below outlines the changes made by authorities in Australia to assist registered trustees to make appropriate changes to their processes and practice documents.
| Section of the Rules and topic | What has changed in Insolvency laws (Australia) |
|---|---|
| 20-1(3)“relevant employment” | The definition of “relevant employment” for the purposes of the experience requirements for trustee applicants is broadened to include direct or indirect exposure to the following: the external administration of companies, receivership or receivership and management; or the restructuring of companies or the giving of advice in relation to the restructuring of companies in Australia. |
| 20-5(2) and (3)continuing professional education (CPE) | The continuing professional education (CPE) requirement for trustees is changed to 120 hours over a 3-year period with 30 hours requiring verification (previously 40 hours each year with 10 hours requiring verification). The new provision provides greater flexibility to trustees. |
| 50-47Committee’s power to terminate | This gives a committee convened under Part 2 of schedule 2 to the Bankruptcy Act 1966 (the Act) the power to terminate its consideration of a matter where there is no utility in the matter proceeding. |
| 60-10(2)(g)Application for remuneration determinations | Applications to the Inspector-General to determine remuneration must now be accompanied by remuneration notices issued by the trustee under Division 70 of the Rules. |
| 60-17remuneration determinations | The Inspector-General must provide a copy of any remuneration determination made under Division 60 to the trustee, creditors and the bankrupt. |
| 65-25review of third-party bill of costs. | This sets out review rights of the trustee or a third party where the Inspector-General has made a decision on an application for review of third-party bill of costs. |
| 70-30(2)(c)Trustee giving information to creditors | An objective standard is introduced such that the trustee must give information to creditors of any associated or related entities of the regulated debtor that the trustee is, or should reasonably be, aware of. |
| 70-30(2AA)Trustee giving information to creditors | A trustee is no longer required to give information to creditors under section 70-30(2)(a), (b), (c), (g) and (j) to (n) if the trustee is satisfied that the information has already been given to creditors by a former trustee. |
| 70-35(5)(aa)initial remuneration notice | This clarifies that, in relation to a bankruptcy by debtor’s petition, the initial remuneration notice must be given by the trustee to creditors and the regulated debtor 20 business days after the filed statement of affairs has been given to the trustee by the Official Receiver. This removes any ambiguity where the trustee may have received the debtor’s statement of affairs prior to it being filed with, and accepted by, the Official Receiver. |
| 75-27(2AA)Section 188 meetings | In relation to meetings of creditors under section 188 of the Act, the trustee must give to the debtor a copy of the notice of meeting and documents given by the trustee to creditors. |
| 75-60(2)(aa)Part X meetings | The documents to be tabled at a meeting under Part X of the Act must include a copy of the debtor’s proposal. |
| 75-60(2B) and (2C)Part X meetings | For the purposes of a meeting under Part X of the Act, written statements must be tabled identifying any material changes since the statement of affairs and declaration of relationships were prepared by the debtor and the trustee respectively. |
| 75-105(1)Quorum | This consolidates the quorum and constitution requirements for meetings. The effect is that for a meeting to proceed, there must be at least the trustee and a creditor in person (and where there are two or more creditors in the estate, at least two creditors attending to constitute a quorum). |
| 75-110(4) and (4A); and 75-132 (3) and (4)Valuations for assigned debts | Where a debt has been assigned to a creditor and that creditor is a ‘related entity’ of the debtor as defined in section 5 of the Act, the voting entitlement of that creditor is to be worked out by taking the value of the assigned debt to be the value of the consideration assignment of the debt. And unrelated assignees of debt may now vote in the full amount of their debt. |
| 75-140(2A)Meeting adjournments | The requirement that meetings must not be adjourned to a day that is more than 15 business days from the original meeting will no longer apply to meetings under Part X. This amendment recognises that trustees often require more than 15 days to conduct adequate investigations of the affairs of the debtor. It is noted, however, that the meeting may not be adjourned indefinitely as the period of control under Part X ceases after 4 months. |
| 90-65(4)(e)Notification of review rights | A written decision by the Inspector-General on a review of trustee remuneration or third-party bill of costs must set out the review rights of the parties given under the Rules. |
Also Read: Australian authorities release Personal Insolvency Compliance Report 2020–21
