One Year Bankruptcy and Debt Agreement Amendments Recommended to the Senate
The Senate Legal and Constitutional Affairs Committee has issued its report into provisions of the Bankruptcy Amendment (Enterprise Incentives) Bill 2017 (BAEI) and the Bankruptcy Amendment (Debt Agreement Reform) Bill 2018 (BADAR) and, subject to consideration of ASIC’s suggestions, it has recommended that the Senate pass the Bill to reduce the default bankruptcy period to one year.
The Senate Committee’s Report makes various references to ARITA’s submissions on both bills (accessible below). ARITA also gave evidence to the committee at the public hearing on 5 March 2018.
ASIC has suggested that subsection 201A(a) of the Corporations Act 2001 be amended “to require that a person made bankrupt within the last three years cannot be included for the purpose of satisfying the minimum director requirement, which currently provides that a proprietary company have at least one director. ASIC stated that if a proprietary company has as its sole director a person made bankrupt in the past twelve months, 'risks such as inadequate skills and excessive risk-taking within the company are exacerbated'. According to ASIC, the suggested amendment would be consistent with the bill's objectives and enable bankrupt persons to act as directors, but would also require that management of a company be shared with at least a third party who would also be responsible for the company's actions and be subject to the care and diligence obligations under the Corporations Act.”
Three additional recommendations were made in relation to the proposed amendments to Debt Agreements:
- that the government consider amending the BADAR bill to allow for debt agreements implemented under a three year cap to be capable of being extended by up to an additional two years by agreement of the debtor, creditors, and debt agreement administrator.
- that the government consider including provision in the BADAR bill to require the minister to have regard to the cost of living for low-income households, the average cost of housing, and potential CPR increases, when setting the payment to income ratio, and whether differential payment to income ratios based on a debtor's ability to cover costs of living at a reasonable standard could be appropriate.
- Subject to the above recommendations, that the BADAR bill be passed.
Senate Legal and Constitutional Affairs Committee Report