The recent release of the Federal Government’s Innovation Agenda has highlighted the ongoing push to reform the legislative framework surrounding insolvency.

The agenda sets out three key changes expected to have more traction this year in parliament:

• reducing the default personal bankruptcy period from three (3) years to one (1) year;
• introducing a ‘safe harbour’ for directors from personal liability for insolvent trading if those directors appoint a professional restructuring adviser to develop a plan to turnaround a company in financial difficulty; and
• banning ‘ipso facto’ contractual clauses that allow an agreement to be terminated solely due to an insolvency event, if a company is undertaking a restructure.

Of the above proposed changes, the reduction in the default personal bankruptcy period of a safe harbour for company directors would be expected to increase business for insolvency practitioners.  A ban on ipso facto contractual clauses may assist in improving the number of companies that survive voluntary administration (currently around 4%), but only time will tell.

For more information please contact ERA Legal.