The Parliamentary Joint Committee on Corporations and Financial Services inquiry into corporate insolvency in Australia tabled its final report to the Australian Parliament on 12 July 2023.
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A recent decision of the NSW Supreme Court examines whether a 'hopelessly insolvent' subcontractor that executes a holding DOCA to enforce payment claims served on head contractor under the NSW security of payment legislation.
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The Government has announced significant temporary measures to ensure that our insolvency laws and processes do not expose companies and individuals to undue risk. This will hopefully avoid a potentially unprecedented wave of insolvencies.
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The Government announced a six month suspension of insolvent trading laws.
The relevant debts will still be due and payable by the company in the normal way.
There is no doubt Australia has done well in its response to the COVID-19 pandemic. Many companies and individuals have been able to obtain some economic relief through a range of Government policies and initiatives, and some generous concessions in relation to financing arrangements, which may have otherwise crippled some businesses.
The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 was passed by both houses of Parliament on 5 February 2020, with an amendment made by the Senate to review the operation and effectiveness of the legislation after five years accepted by the House of Representatives.
Some of the most far-reaching Australian insolvency law changes are taking effect. These new laws will restrict the enforceability of a whole class of common clauses in contracts –so called 'ipso facto' clauses.
In this edition of FINSights, we explore what these changes mean for financiers, and outline key tips and issues they should consider as we move forward into the new regime.
What are ipso facto clauses?
On 28 March 2017, the Australian Government announced its proposals to reform the law relating to insolvent trading, and the right to terminate contracts based on insolvency ('ipso facto clauses'). MinterEllison made a detailed submission on the proposals which can be found here.
Australia's largest corporate insolvency reform in 30 years is set to be introduced at the beginning of 2021. Draft legislation, which applies to small businesses, was released last week. Organisations need to familiarise themselves with the information ahead of an anticipated wave of insolvencies in 2021, as COVID-19 related government incentives cease.
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What's next for Australian businesses after the temporary COVID-19 insolvency law relief expires at the end of 2020? The government's new announcement sheds light on the next steps.
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The Australian Government has announced proposed major reforms to corporate insolvency laws for incorporated businesses with liabilities of less than $1 million that are facing financial distress.
On 7 September 2020, the federal government announced that the temporary changes to the creditors' statutory demand and insolvent trading laws have been extended to 31 December 2020.
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In March 2020, the Commonwealth Government's early responses to the economic consequences of the COVID-19 included temporarily suspending and changing important elements of Australia's insolvency laws. These temporary changes were due to expire on 25 September 2020. The government has now announced that this period will be extended to 31 December 2020.