Developments

International

UNCITRAL Practice Guide on Cross-Border Insolvency Cooperation

Adopted by UNCITRAL on 1 July 2009, the UNCITRAL Practice Guide on Cross-Border Insolvency Cooperation (Practice Guide) provides information for insolvency practitioners and judges on practical aspects of cooperation and communication in cross-border insolvency cases. The information is based upon a description of collected experience and practice, focusing on the use and negotiation of cross-border agreements. It provides an analysis of more than 39 agreements, ranging from written agreements approved by courts to oral arrangement between parties to the proceedings, that have been entered into over the last decade or so. The Practice Guide is not intended to be prescriptive, but rather to illustrate how the resolution of issues and conflicts that might arise in cross-border insolvency cases could be facilitated by cross-border cooperation, in particular the use of such agreements, tailored to meet the specific needs of each case and the particular requirements of applicable law. The Practice Guide includes a number of sample clauses to illustrate how different issues have been, or might be, addressed - they are not intended to serve as model provisions for direct incorporation into a cross-border agreement. It also includes summaries of the cases in which the cross-border agreements that form the basis of the analysis were used.

In adopting the interim final text, the Commission authorized the Secretariat to add further information with respect to recently adopted cross-border insolvency agreements and to edit and finalize the text of the Practice Guide in the light of the deliberations of the Commission. The final text will be posted on the UNCITRAL website as soon as it is available.

Australia

Australia and New Zealand to enhance cross-border cooperation on insolvency

On 18 March 2009, the New Zealand Minister of Commerce, the Hon Simon Power MP, and the then Australian Minister for Superannuation and Corporate Law, Senator the Hon Nick Sherry, jointly announced the commencement of work on enhancements to cross-border insolvency arrangements between Australia and New Zealand. Work on possible enhancements will focus on:

  • streamlining the recognition of cross-border insolvency proceedings;
  • addressing the possibility of forum-shopping;
  • facilitating information gathering by foreign insolvency practitioners;
  • facilitating the securing and realisation of property by foreign insolvency practitioners;
  • facilitating attempts at cross-border corporate reorganisation and rehabilitation;
  • improving coordination between concurrent administrations;
  • providing court and administrative assistance to practitioners;
  • improving dispute resolution in respect of concurrent administrations;
  • addressing any regulatory gaps; and
  • improving transparency and certainty under the Australia/New Zealand cross-border insolvency arrangements.

Cross-Border Insolvency Act 2008

The Australian Cross-Border Insolvency Act 2008 commenced on 1 July 2008. The Act implements the United Nations Commission on International Trade Law's Model Law on Cross-Border Insolvency.

The purpose of the Act is to provide effective mechanisms for dealing with cases of cross-border insolvency in order to promote:

  • Co-operation between local and foreign courts and local and foreign insolvency professionals involved in cases of cross-border insolvency;
  • Greater legal certainty for trade and investment;
  • Fair and efficient administration of cross-border insolvencies that protects the interests of all creditors and other interested persons, including the debtor;
  • Protection and maximisation of the value of the debtor's assets; and
  • Facilitation of the rescue of financially troubled businesses, thereby protecting investment and employment.

The Act adopts the Model Law in an unaltered form.

Consistent with UNCITRAL's recommendation, Australia's implementation of the Model Law is not based on the principle of reciprocity between States. There is no requirement for a foreign representative seeking to rely upon the Act to have been appointed under the law of a State which has itself adopted the Model Law.

The Act is available to all foreign creditors and in respect of all foreign insolvency proceedings. It does not contain any mechanisms for altering or excluding the operation of the Model Law on the basis of the country in which such a creditor or proceeding originates.

The Bill applies the Model law to both natural and corporate debtors.

There are no carve-outs for any particular classes of personal insolvencies, such as consumer bankruptcies. However, the Cross-border Insolvency Regulations 2008 excludes approved deposit-taking institutions, general insurers and life companies from the operation of the law. It is intended that the application of the Model Law to Australia should not disturb local special insolvency arrangements for such entities. Other foreign jurisdictions which have implemented the Model Law, such as the United Kingdom and the United States of America, have excluded these classes of entity from its operation.

The Act will operate in parallel to existing provisions in the Corporations Act 2001 and the Bankruptcy Act 1966 which facilitate trans-national insolvency administration; however the Model Law will prevail in the event of any conflict between the new and old regimes.

Corporations Amendment (Insolvency) Act 2007

The reforms included in the Corporations Amendment (Insolvency) Act 2007, most of which took effect on 31 December 2007, have been designed to improve the efficiency and the cost effectiveness of insolvency processes, strengthen the rights of employees, and enhance the capacity of creditors to maximise their returns.

These reforms were developed on the basis of recommendations from a number of public reviews into the Australian insolvency framework. The reforms were subject to extensive consultation, initially through the Insolvency Law Advisory Group, a small group of expert insolvency practitioners, and subsequently through the public release of draft legislation.

Key aims of the reforms are to:

  • improve the outcomes for creditors by strengthening the protection of employee entitlements, improving insolvency practitioner disclosures to creditors (including on independence and remuneration), removing unnecessary costs by streamlining procedures and facilitating the liquidation of corporate groups;
  • deter corporate misconduct by extending the corporate regulator's investigative powers in monitoring liquidators and improving court processes in relation to misconduct by company officers
  • improve the regulation of insolvency practitioners by introducing more regular reporting requirements, requiring adequate insurance to be held and providing greater flexibility to Australia's statutory disciplinary board for insolvency practitioners; and
  • fine tune the voluntary administration process, which is Australia's corporate rehabilitiation procedure, in light of stakeholder experiences since its introduction in 1993.

The Bill as introduced, including explanatory material may be found at comlaw.gov.au