On 20 September 2022, the Australian Financial Security Authority (AFSA) released a report detailing the:
• impact which untrustworthy financial advisers can have on Australia’s personal insolvency system,
• common tactics which may be signs of untrustworthy adviser activity,
• risks which untrustworthy advisers present in an unpredictable economic environment,
• consequences of receiving bad advice, and
The process of bankruptcy or insolvency may involve a company selling business assets in order to pay creditors or simply to remain financially liable. In some cases, this may include selling distressed assets. This article explains what a distressed asset is, how to deal with such an asset, and what may be the ramifications of engaging in this process.
What is a distressed asset?
On 8 August 2022, the Australian Financial Security Authority (AFSA), Australian Securities and Investments Commission (ASIC) and Australian Restructuring Insolvency and Turnaround Association (ARITA) released a joint guide detailing how personal bankruptcy and the liquidation of a company can interact. The guide was first released in 2017 and has since been updated in July 2022.
On 31 May 2022, the Australian Financial and Security Authority (AFSA) announced a new proposed vulnerability framework to assist businesses who are the most vulnerable within the insolvency framework. This is even more important in the wake of the COVID-19 pandemic, with many businesses facing financial distress for the first time. Those businesses may be unsure how to navigate the system and what options are available to them. AFSA’s proposed vulnerability framework plans to address these concerns.
Background to the new framework
Introduction
The practice area of bankruptcy & insolvency is in a constant state of flux. 2020 and 2021 saw some of the biggest reforms to our insolvency framework in 30 years, as businesses struggled financially with the fallout from the COVID-19 pandemic.
Introduction
The practice area of bankruptcy & insolvency is in a constant state of flux. 2020 and 2021 saw some of the biggest reforms to our insolvency framework in 30 years, as businesses struggled financially with the fallout from the COVID-19 pandemic.
Australia’s current corporate insolvency regime does not expressly cover how companies which structure themselves through a trust, or businesses which have a corporate trustee (corporate trusts) are to be dealt with during insolvency.
On 15 October 2021, the government released a consultation paper seeking stakeholder views on whether the treatment of corporate trusts in Australia’s insolvency law needs to be clarified. Input was also sought on the benefits which this could deliver and how any new framework might operate.
This consultation process closed on 10 December 2021.
The following 6 cases have been reported in our Bankruptcy & Insolvency practice area:
Walton v ACN 004 410 833 Ltd (formerly Arrium Ltd) (in liq) — Insolvency | High Court upholds shareholders’ application for examination summons
The Insolvency Practice Rules (Corporations) Amendment (Virtual Meetings and Electronic Communications) Rules 2022 (the Rules) came into effect on 11 February 2022.
The Rules are made under the Corporations Act 2001 (Cth).
The initial consultation — January 2021
In January 2021, the Australian government undertook a public consultation process on possible reforms to the bankruptcy system. The purpose of this consultation was to ensure that Australia’s bankruptcy system was responding to, and addressing, the impacts of the COVID-19 pandemic.