The Senate Economics Legislation Committee has strongly recommended that the Australian Parliament pass the reforms to Australia's safe harbour and ipso facto regime currently before the Senate. As the reforms have already passed through the House of Representatives, this means that as early as the end of August 2017, in prescribed circumstances, directors could be entitled to a safe harbour from personal liability for insolvent trading claims.

Safe harbour

The use of pre-packs or pre-positioned asset sales in Australia has traditionally been limited. This is a result of impediments to such transactions under the Australian legislative insolvency regime.

The interplay of these impeding factors means that there are few true pre-pack transactions in Australia. However, significant reform to the Australian insolvency regime is expected to be implemented in 2017. We wrote about the main aspects of that reform in our last article, `Australian insolvency law reforms aim to increase business restructuring opportunities'

The Australian government is working to significantly reform Australia’s current insolvency laws by mid-2017.

The reforms are intended to achieve greater likelihood of business preservation by introducing the flexibility to achieve real turnaround of businesses in crisis.

The proposed changes include:

Treasurer Josh Frydenberg announced on 24 September 2020 (view announcement here) the introduction from 1 January 2021 of an innovative new restructuring process for Australian small incorporated businesses with liabilities less than AUD1 million, which adopts key aspects of the US Chapter 11 bankruptcy process.

On 22 May 2020, Justice Black of the Supreme Court of NSW issued judgment In the matter of Wollongong Coal Limited and In the matter of Jindal Steel & Power (Australia) Pty Ltd [2020] NSWSC 614. The judgment sets out his Honour’s reasoning for granting the orders sought in a largely unprecedented application to effectively ‘re-enliven’ two schemes of arrangement which automatically terminated prior to being completed.