Those that have been following the developments in the Insolvency and Restructure world will have been aware that the senate has recently passed the treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019.
As is the usual case with most legislation that impacts Insolvency, there was again debate around the role of Liquidators. A specific senator used the debate on the bill to attack the liquidator, however, as most who work in the profession would be aware, it is the Directors, and pre-insolvency advisors who undertake strategies to ensure there are limited funds available upon the appointment of a liquidator. This is done so as to ensure the liquidator is unable to do the work that is required to undo what has been done.
The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 brings in the idea of a “creditor defeating disposition”. This creates a new class of voidable transaction which may be recovered by an external administrator. The key element of this new section would appear to be the inclusion of a void transaction that has the effect of “preventing, hindering or significantly delaying the property becoming available in a winding-up”. The Legislation also creates ability for ASIC to issue notices to relevant parties to recover these void dispositions.
We believe that there are some areas of the new legislation which will significantly increase the ability for an external administrator to recover funds for the benefit of creditors. The introduction of the ability for ASIC to issue orders for repayment of monies is a step in the right direction. However, careful consideration need to be given to how this is implemented to ensure it is of benefit.
We will keep you updated on the bill and when it is likely to be brought into effect.