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About the Insolvency Law Reform Act (ILRA)

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The ILRA – what insolvency professionals need to know.

What is the Insolvency Law Reform Act?

On 14 December 2011 the then Attorney-General and Parliamentary Secretary to the Treasurer released A Modernisation and Harmonisation of the Regulatory Framework Applying to Insolvency Practitioners in Australia - a proposals paper setting out a pathway to significant regulatory reform of Australia's insolvency industry. Key reform areas in the paper are reflected in the Insolvency Law Reform Act 2016. The Act comprises a package of proposals to amend and streamline the Bankruptcy Act 1966, the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001. The amendments aim to:

  • remove unnecessary costs and increase efficiency in insolvency administrations;
  • align the registration and disciplinary frameworks that apply to registered liquidators and registered trustees;
  • align a range of specific rules relating to the handling of personal bankruptcies and corporate external administrations;
  • enhance communication and transparency between stakeholders;
  • promote market competition on price and quality;
  • improve the powers available to the corporate regulator to regulate the corporate insolvency market and the ability for both regulators to communicate in relation to insolvency practitioners operating in both the personal and corporate insolvency markets; and
  • improve overall confidence in the professionalism and competence of insolvency practitioners.

The reforms will be implemented in two stages. Parts 1 and 2 of the new Insolvency Practice Schedules (for Corporations and Bankruptcy), largely concerned with registration and discipline of insolvency practitioners, will commence on 1 March 2017. Part 3 of the Schedules which relates to insolvency administration processes (including such matters as funds handling, creditors’ meetings and remuneration of practitioners) will commence on 1 September 2017.

Commencement of the Insolvency Law Reform Act (ILRA) provisions

The ILRA makes a number of amendments to the Bankruptcy Act 1966 (the Act), including the insertion of a new Schedule 2 to the Act, known as the Insolvency Practice Schedule (Bankruptcy).  The ILRA also makes consequential amendments to other provisions of the Act, including repeal of some provisions.  The amendments contained in the ILRA commence in two tranches:

Tranche 1

Tranche 1 commenced on 1 March 2017 and includes Parts 1, 2 and 4 of the Insolvency Practice Schedule (Bankruptcy), comprising:

Division 10 – Introduction
Division 15 – Register of trustees
Division 20 – Registering trustees
Division 25 – Insurance
Division 30 – Annual trustee returns
Division 35 – Notice requirements
Division 40 – Disciplinary and other action
Division 45 – Court oversight of registered trustees
Division 50 – Committees (registration and disciplinary)
Division 95 – Introduction (to Part 4)
Division 96 – Administrative review
Division 100 – Other matters
Division 105 – The Insolvency Practice Rules

Tranche 2

Tranche 2 commences on 1 September 2017 and includes Part 3 of the Insolvency Practice Schedule (Bankruptcy), comprising:

Division 55 – Introduction (to Part 3)
Division 60 – Remuneration and other benefits received by the trustee
Division 65 – Funds handling
Division 70 – Information
Division 75 – Meetings of creditors
Division 80 – Committees of inspection
Division 85 – Directions by creditors
Division 90 - Review of the administration of a regulated debtor’s estate

The Insolvency Law Reform (Transitional Provisions) Regulation 2016 is the legislative instrument that delays until 1 September 2017 the commencement of the provisions of the Insolvency Practice Schedule (Bankruptcy) in tranche 2.  It also delays the commencement of a number of consequential amendments to the Bankruptcy Act.

The consolidated versions of the Bankruptcy Act available on websites such as the Federal Register of Legislation and the Australasian Legal Information Institute (AustLII) are presented as if all of the amendments made by the ILRA took effect on 1 March 2017.  This is because the delayed commencement was effected by way of Regulation, rather than an amendment to the ILRA itself.  Despite the consolidated versions of the Bankruptcy Act, the commencement of the ILRA amendments is as set out above. 

The Insolvency Practice Rules (Bankruptcy) 2016 (the Rules) underpin the provisions of the Insolvency Practice Schedule (Bankruptcy).  Those Rules which relate to Divisions of the Insolvency Practice Schedule (Bankruptcy) in tranche 2 do not commence until 1 September 2017.

Comparative table for tranche 1 & 2

ILRA comparative table tranche 1 & 2

ILRA comparative table tranche 1 & 2

 

Transition to the Insolvency Practice Schedule (Bankruptcy): 

Transition to the Insolvency Practice Schedule (Bankruptcy)

Transition to the Insolvency Practice Schedule (Bankruptcy)

New and updated forms from March 2017

New and updated forms from September 2017

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