Regulatory Systems (Economic Development) Amendment Bill (No 2)

Thank you, Mr Chairman. Let me just make some opening remarks to kick off this committee stage for this, the first of the three regulatory systems amendment No. 2 bills.

The bill that we’re debating now makes amendments to 14 different Acts. Among these are the Companies Act 1993, the Credit Contracts and Consumer Finance Act 2003, the Insolvency Act 2006, and the Trade Marks Act 2002. Of the 14 Acts in this bill, 13 fall within the commerce and consumer affairs portfolio, and the Continental Shelf Act 1964 falls within the energy and resources portfolio.

Let me just briefly mention two of the more significant amendments in this bill. The first is an extension to the offences listed in the Companies Act, which automatically prohibit a person from directing or managing a company for five years. The bill seeks to add two additional types of offence to this list—namely, evasions or similar offences under section 143A and 143B of the Tax Administration Act 1994 for evasion and similar actions, along with aiding, abetting, inciting, or conspiring with another person to commit such offences as set out in section 148 of that Act.

The second amendment is to the Insolvency Act. Currently that Act prohibits an undischarged bankrupt from either directly or indirectly managing or controlling a business, being employed by a relative, or being employed by an entity such as a company or a trust that is owned or controlled by a relative. Now, the purpose of this provision is to prevent a bankrupt from having significant control over the finances of a business during their bankruptcy. However, an undischarged bankrupt who works for a relative with no remuneration is not considered as employed under the existing law and can therefore avoid these restrictions. What this bill does is that it seeks to extend the restrictions on employment to include working for a relative without remuneration or for an entity owned or controlled by a relative.

Now, if I may, let me just speak to Supplementary Order Paper (SOP) 388 that is on the Table for this bill. The purpose of the SOP is to address two sets of issues that are identified in Part 8 of the bill, which contains amendments to the Insolvency Act. The issues are technical in nature and need to be addressed before the bill is enacted.

The first issue relates to clauses 55 and 56 of the bill, along with a related provision in Schedule 3. These clauses deal with any creditor of a bankrupt person that submits a claim form after the deadline imposed by the Official Assignee. Submitting a claim form allows creditors to receive a share of any distributions from the bankrupt’s assets made by the assignee. Currently, the Insolvency Act does not allow late claim forms to be admitted. Clause 56 in the SOP changes this by allowing late claim forms to be admitted and late creditors to benefit from distributions. Clause 55 and 12 in Schedule 3 make a related change. It’s important to provide for the flexibility to deal with late claims, because distributions from a bankrupt’s assets are often made much later than the deadline for submitting claim forms, and without this provision, late creditors would not be able to receive distributions that they are otherwise entitled to.

However, clause 56, as it currently stands, is potentially inconsistent with fundamental principles of insolvency law. There’s a lack of clarity about how distributions should be made to late creditors where distributions have already been made to other creditors. For example, it’s unclear from the current provisions in the bill whether the Official Assignee would be required to claw back money paid out to other creditors in order to pay a late creditor. It’s also unclear how two or more late claimants would be paid when there are insufficient funds to cover both of their claims, and where one late creditor submits a claim earlier than another late creditor.

These issues have implications for principles of insolvency law, such as pari passu, whereby all creditors of a same class are entitled to equal distributions in proportion to the debts they are owed. It’s important that any amendments to provisions affecting how creditors are treated are carefully considered to identify any unintended consequences and to avoid inconsistencies with these fundamental principles. For that reason, the SOP removes clauses 55 and 56, along with clause 12 in Schedule 3, and this is necessary so that further work can be carried out to address the inconsistencies that I’ve mentioned, and also to identify and mitigate any other unintended consequences. Once these issues have been resolved, I intend to introduce revised provisions into a future bill.

The second issue which the SOP seeks to address is in clause 78. This clause clarifies the consequences of a debtor being discharged at the end of a debt repayment order. It provides, among other things, that the debtor is not discharged from any debts that they incurred through fraud. The SOP introduces an additional provision into clause 78, clarifying that related parties are not released from their debts or liabilities when a debtor is discharged at the end of a debt repayment order. Examples of related parties are business partners, guarantors, or persons jointly holding debts with the debtor. There are equivalent existing provisions in the Insolvency Act for debtors who have been released from other insolvency processes such as bankruptcy. The new provisions provide greater clarity and also ensure greater consistency with other insolvency processes.

This SOP addresses technical issues in the bill and it provides some small but useful improvements to ensure that the Insolvency Act remains fit for purpose.

Thank you, Mr Chair, and thank you to the Minister Phil Twyford for explaining, in quite a lot of detail, Supplementary Order Paper (SOP) 388. But regarding that SOP—and he almost explained it in the way that it is the Minister’s intention to include some new updates in a future bill—my question is, obviously: when will that be and what other things might be in that bill that that we haven’t discussed today or that was not discussed in the Economic Development, Science and Innovation Committee? But otherwise, it seemed to me like a bit of a typo and it was caught at a late stage and, therefore, we are in this process of creating another bill at a future date. So there are a couple of questions there.

As the Minister said, this covers a lot of different bills. A lot of it has been described as repairs and maintenance of existing legislation—and, you know, we’ve got to do that from time to time. And, of course, the Acts evolve through a number of bills that come through this place. And as the Minister says, 14 bills are affected in this at this point.

I also note that the select committee did delete clause 7, which seemed to me sensible—or almost redundant, in a way.

The other thing that I was going to comment on was that this doesn’t seem to me to be a primary piece of legislation, doesn’t seem to be a piece of legislation that needs to be done. It doesn’t really create a lot of new policy, in a way. So my third question is: why is this in front of the House now? Is there not more important legislation for this Government to look at and to participate in? So those are my three questions. Thank you, Madam Chair.

Thank you, Madam Chair. I thought I’d take a call tonight. I was hoping that members opposite would jump up and contribute to the debate. But we’re here tonight discussing three bills, but I will keep my comments just to the one that we are discussing at the moment, which is the Regulatory Systems (Economic Development) Amendment Bill (No 2).

As my colleague Alastair Scott just mentioned, this is essentially a tidy-up bill. It amends 14 Acts. The one I particularly want to touch on is some amendments that are made to the Companies Act 1993. There are two changes in particular there which I think are very sensible, and it relates to clarifying what the rules are in terms of disqualification criteria for directors, where the court has prohibited a discharged bankrupt from becoming a director. And that makes entire sense. I mean, what we don’t want is a situation where people can, I guess, sneak in through the back door and become involved in companies, having been judged by the courts as perhaps not being entitled to do so. So it is a sensible change.

As I say, there are about 14 Acts that this bill amends, but I think the changes to the Companies Act in particular are very sensible. I commend the Minister for Economic Development for bringing it to the House.

The question was put that the amendments set out on Supplementary Order Paper 388 in the name of Hon Phil Twyford be agreed to.

Amendments agreed to.

Parts 1 to 14, Schedules 1 to 5, and clauses 1 and 2 as amended agreed to.

Bill to be reported with amendment presently.