According to the International Association of Insolvency Regulators website, in October 2005, Australia launched an "integrated package of reforms" aimed at improving the nation's insolvency regime. According to the website, the reforms sought to enhance protections for creditors, impede the ability of company officers to commit misconduct, improve regulation covering insolvency practitioners, and fine-tune the voluntary administration procedure. It was anticipated that draft legislation would be circulated for public comment in early 2006. All insolvency procedures applying to corporate entities are provided for in Chapter 5 of the Corporations Act of 2001 and the Corporations Regulations. The Australian Securities and Investment Commission (ASIC) regulates all corporations within Australia as well as financial system participants. Included as part of its broad role, ASIC regulates the corporate insolvency system. However, ASIC does not administer any insolvency cases directly. The courts have a general oversight role in the corporate insolvency system. However, there is insufficient publicly available information regarding Australia's compliance with the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems developed by the World Bank.

General Overview

According to the International Association of Insolvency Regulators website, in October 2005, Australia launched an "integrated package of reforms" aimed at improving the nation's insolvency regime. According to the website, the reforms sought to enhance protections for creditors, impede the ability of company officers to commit misconduct, improve regulation covering insolvency practitioners, and fine-tune the voluntary administration procedure. Employees, as a particular class of creditor, would be protected through the government funded "General Employee Entitlements and Redundancy Scheme," first introduced in January 2000, which covers employee entitlements lost through an employer's insolvency. A significant institutional player in Australia's insolvency system is the Australian Securities and Investment Commission (ASIC). It's responsibilities within the insolvency regime is, first, to regulate and maintain a registry of private-sector insolvency practitioners. It also oversees and investigates the conduct of registered liquidators upon receipt of complaints. Registration with the ASIC is based on criteria set forth in the Corporations Act, as are the roles and responsibilities that apply to a registered liquidator. Controllers, administrators, and liquidators must file reports with the ASIC. When appropriate, the ASIC will turn over the results of its investigations to the Companies Auditors and Liquidators Disciplinary Board for disciplinary action, including deregistration of a liquidator, but it cannot impose fines or insert its own judgment in place of the administrator's. However, the ASIC takes no direct administrative role in individual insolvency cases. The ASIC also administers a fund to compensate private-sector insolvency practitioners for costs incurred in investigating and reporting on wrongdoing. Enforcement activity called for as a result of such investigations is the responsibility of ASIC, and funds for such activity are also provided.

The key insolvency legislation in Australia, according to the IAIR website, comprises the Corporations Act, Corporations Regulations, and the Australian Securities and Investments Act, all enacted in 2001. Chapter 5 of the Corporations Act and Corporations Regulations covers a wide range of insolvency options, from reconstructions and corporate arrangements, receiverships, and controllerships, to winding-ups. Both solvent and insolvent companies may enter into the first of these options, whereby modifications are made to the legal rights of creditors and shareholders insofar as they relate to the troubled firm. The procedure requires participation of the courts as well as meetings with affected creditors, and must be approved by the courts to take effect. When receiverships are pursued, it is the secured creditors who appoint the receivers and managers, and these appointed individuals act in behalf of creditors. Any receiver or manager appointed in this way must be registered with the ASIC. On the other hand, controllers may act for secured creditors, but are not ASIC registered.

The IAIR website adds that, beginning in 1993, troubled firms were granted the option of "voluntary administration," which does not require court approval. In this approach, debtor firms and their creditors may reach an agreement that, optimally, "maximizes the chances of the company or as much as possible of its business continuing in existence. Should the business nonetheless fail, the secondary goal is to maximize the potential return to creditors. The administrator of such a voluntary arrangement is appointed by the directors of the troubled company and must be ASIC-registered. He or she conducts an investigation, holds meetings, and provides reports to the creditors. The administrator assumes control over the company during the procedure. According to the IAIR website, "the administrator must express an opinion as to whether the creditors should support the deed of company arrangement, hand the company back to the directors, or put the company into liquidation." The IAIR website notes that "voluntary administration is now the most commonly used type of insolvency procedure." Finally, when winding-up is the option of choice or necessity, there are three forms: a company can enter into a voluntary wind-up only occur prior to the actual onset of insolvency. As the name implies, "creditors' voluntary wind-ups" are creditor-controlled. Finally, the court controls a "court winding-up." A separate and distinct category of ASIC-registered liquidators are the "Official Liquidators." Only these individuals are allowed to participate in court windings-up.

Court participation in the insolvency regime is largely concerned with general oversight, but it also includes the authority to make certain appointments. For instance, the federal court and the state supreme courts both have the authority to appoint liquidators in the context of court winding-ups. However, such appointments require the consent of the appointee, as well. As part of its oversight, the court can require a practitioner to redress improper acts, omissions, or losses. It can also modify the fees available to practitioners or remove an administrator should circumstances dictate. A specialized court, the Administrative Appeals Tribunal, hears appeals filed against ASIC decisions to refuse registration or CALDB registration cancellations. Such appeals may ultimately be brought to the federal court.

Whereas the IAIR website makes it clear that ASIC registration of insolvency practitioners does not require membership in a professional organization, Australia does have a strong professional association, the Insolvency Practitioners Association Australia (IPAA), which maintains a publicly accessible website where interested parties may find detailed information regarding the Australian insolvency regime. The website discloses that, in July 2008, Australia's Cross-Border Insolvency Act took effect. This Act is modeled on the United Nations model law. The IPAA website also offers public access to its Code of Professional Practice, portions of which took effect on December 31, 2007. The remainder of the Code became effective on May 21, 2008, and contains detailed guidance regarding professional conduct, ethics, transparency, and accountability.

The World Bank's "Doing Business 2008" snapshot of closing a business in Australia looks at three dimensions of the business-closing process: time, cost, and return to creditors. The first dimension, time, is the average, in years, required to successfully complete the process. The second, cost, refers to the percentage of the estate that is consumed, on average, in the process of closing a business. The third dimension, return to creditors, in presented in terms of cents-on-the-dollar that is recovered, on average, by qualified creditors at the end of the business-closing process. The World Bank offers these data alongside regional averages and the averages enjoyed by member nations of the Organization for Economic Cooperation and Development. In the case of Australia, the time, on average, is one year. The cost averages 8% of the estate, and the return to creditors averages 79.2 cents on the dollar. These figures compare to OECD averages of 1.3 years, 7.5%, and 74.1 cents on the dollar.