TMA Member Update: Restructuring Law Reform Initiatives
Your TMA Australia (TMA) Board has established a diverse, expert team to work informally with Government and in particular with Federal Treasury on restructuring law reform initiatives. This work is needed to help the economy through the turbulent times ahead. We suggested reform where it is most needed irrespective of individual or industry interest. Whilst Government has not formally sought submissions, your TMA has been and continues to make unsolicited submissions on the basis that there is no time like the present to propose significant changes to the law.
We have discussed not just the safe harbor and ipso facto legislation generally and its review, but also the Government’s COVID-19 relief package changes to insolvent trading liability and statutory demand processes.
Treasury is looking for meaningful feedback from industry leaders as to the pressures that we, as members of the TMAA and experts in the restructuring and insolvency industry, are seeing on various market sectors due to COVID-19.
We have involved and will involve not only lawyers and accountants but also bankers, investment bankers and private equity funders. We are able to provide a broad spectrum of insights to Treasury. In addition, the TMA is in close consultation with the Business Council of Australia and the AICD on similar matters and the Board has a working group to garner a consensus position on priority changes as well.
A recent tactical focus has been whether any further temporary reforms should be implemented and in particular, protection for creditors from a liquidator’s voidable preference claw back claims for payments received during the COVID-19 period. Our position was promoted in a recent article in the AFR featuring one of our Board members, Jennifer Ball. Many of our members continue to be vocal contributors to the debate and I congratulate those members who have featured articles in the financial press on their contributions thus far.
Other topics of discussion with Treasury include the following:
- an update on the safe harbour review to be conducted by Government on the 2-year anniversary of the introduction of the new legislation i.e. September 2019;
- concerns as to whether safe harbour is being utilised by corporates during the COVID-19 period or whether Boards are doing more DIY so as to avoid costs of any professional safe harbour advisor;
- ASIC’s views that there will be a shortage of insolvency practitioners to manage the coming tsunami of insolvencies expected if the financial bridge is wound back in late September;
- ASICs statistics which disclosed a progressively large decrease in formal insolvencies with formal appointments having decreased up to 60%, since this time last year;
- the results of the KordaMentha Covid-19 Restructuring Survey;
- whether there needs to be any extension of the temporary relaxation of the insolvency measures for directors from insolvent trading beyond the 24 September 2020 cut off;
- the Australia Small Business & Family Enterprise Ombudsman (ASBFEO) “COVID-19 Recovery Plan” and the recommendations made by ASBFEO concerning the small business sector;
- whether now is the opportune time for Government to consider permanent long-term reform in relation to parts of the Corporations Act including;
- the unfair preference regime;
- the voluntary administration process so that it is more cost effective and streamlined for micro small medium enterprises (MSME) and dealt with as a part of a fast track restructuring model so as to achieve the underlying purpose of Part 5.3A being the promotion of corporate recovery.
- the success of the reforms in the UK for larger restructurings with the UK scheme of arrangement reforms and their court sanctioned “restructuring plan” whereby courts can approve schemes, even where there exists opposition by one or more classes of creditor;
- the ipso facto reforms and whether there are any issues that have caused concerns from the amended legislation.
If you would like to comment on the above, we would welcome your feedback.
The issues are hard. We know there are divergent views. But we think it is imperative to have a voice and do the right thing by engaging with positivity, experience and knowledge and putting self-interest aside in a truly utilitarian fashion. Kind regards,
TMA Australia Turnaround Management Association Australia