We are pleased to have published the 11th edition of our textbook, Keay’s Insolvency – Personal and Corporate Law and Practice, some four years after the 10th edition in 2018. This edition involved some substantial revision given what has been and remains a rather tumultuous four year period both socially and economically. For all that, despite one purpose of insolvency law being to deal with disruption and failure, the law and practice of insolvency has been less called upon than expected, or at least not yet.
On a brief review of those four years, in personal insolvency, the 2019 debt agreement reforms are now fully covered in the text, and the increased monetary thresholds for notices and petitions prompted by the onset of COVID-19 in early 2020 are explained, as well as the new 2021 Bankruptcy Regulations. The one-year bankruptcy, foreshadowed as early as the 9th edition in 2016, has not eventuated.
In corporate insolvency, the text covers the rather severe anti-phoenixing laws, and the new restrictions on the ipso facto termination rights. As with personal insolvency, we cover the laws limiting the rights of creditors to pursue debtor companies, often supported by state law, for example in relation to leases. Some of these interim changes prompted permanent reform, including the increased monetary thresholds for bankruptcy – $10,000 – and winding up – $4,000.
The effect of those changes in 2020 was to prompt a dramatic fall in the number of insolvencies, continuing throughout 2021 although it is interesting to observe now that there were the beginnings of a slow-down in insolvency numbers generally even in 2018, the subject of comment in the 10th edition.
Concerns about an expected “tsunami” of corporate insolvency proceedings remained leading to Part 5.3B being introduced with some haste on 1 January 2021. We comment on its provisions and the limited case law thus far is explained, as well as the perceived limitations. Beyond some online creditor meeting process law being expanded, and a desultory consideration of small business and personal insolvency reform, COVID-19 prompted no other changes.
Developments occurred more from the on-going application of the substantive law and practice changes introduced by the ILRA, and as often decided upon by the courts – as to notice and meeting requirements, remuneration determinations and reviews, rights of creditors, powers of the court and the regulators, and practitioner registration and regulation committees.
We have had the review of the safe harbour reforms under s 588GA of the Corporations Act – which would seem to confirm its retention, and initial inquiries into schemes of arrangement and corporate trusts, with outcomes yet to be announced. Personal trusts remain untouched in law reform, though featuring heavily in bankruptcy law, as does family law, which we explain in some detail.
We have maintained our separate focus on corporate restructuring law and practice and arrangements outside the context of formal insolvency, including in the context of the latest innovative approaches to Pt 5.3A deeds of company arrangement and Pt 5.1 schemes.
Cross-border insolvency has been incorporated into each relevant chapter throughout, and international developments from UNCITRAL, INSOL International and the World Bank are mentioned.
The increased presence of the ATO and of FEG has been a feature of the corporate insolvency scene, perhaps more so than ASIC.
Likewise, the High Court has taken on a number of cases involving some well-established insolvency law principles – preferences and the peak indebtedness rule, and set-off, and examinations and aircraft securities law – some decided, some pending, and each explained. Also explained is the outcome of legal uncertainty insolvent trading trusts, pending a High Court decision at the time of the 10th edition, and since resolved, to an extent.
The book explains the roles of the various state and federal courts in insolvency, as well as the players involved – the trustees and liquidators, the lawyers and accountants and other pre-insolvency advisers; the industry bodies; and the various government agencies involved in insolvency and its administration and reform – Attorney-General’s, Treasury, ASBFEO, FEG, ASIC and AFSA, and the ATO.
The text necessarily covers the detail of bankruptcy notices and winding up demands, voidable transactions and examinations, duties of directors, and enforcement remedies, terminations of windings up and setting aside of sequestration orders, in the latter case, in light of the important Full Federal Court decision in Robson, as to the constitutional limitations on orders made by Federal Court registrars. The history of bankruptcy and insolvency law is described in more detail, as being necessary to understand the law in its current form.
In our opening chapter, we give an explanation of the fundamental purposes and aims of insolvency with a robust commentary on what we see as significant gaps and deficiencies in the insolvency process requiring structural reform. Based upon available data, there appear to be many insolvent small businesses both personal and corporate whose needs are not met, and the costs and inefficiencies of the government weigh heavily and unfairly on the system. Those problems suggest to us that there is a need for a structural review of the insolvency system in advance of or parallel with a review of insolvency law, which we continue to support.
Any law reform changes must be informed by data, and while we have extracted what is available, more is needed, including from industry itself. That data may in fact prompt a revisiting of some of the fundamental purposes of insolvency, for example in what we see as an undue focus on the rights of creditors, given their limited financial returns from insolvency. While it is too early yet to say, the continued low numbers of insolvencies may indicate a reset in the use of insolvency by creditors, perhaps prompted by the hiatus imposed by COVID-19. The 12th edition may reveal more.
Much of the text is informed by each of our constant interactions with those working in insolvency – through informal and formal discussions, reading and responding to articles and other comments – for which we are grateful and which we readily acknowledge.
Consistent with that, any comments on the 11th edition are very welcome.
Michael Murray and Jason Harris