29 April 2016
Media Release - #2016049, 2016

In the role of: Minister for Small Business and Assistant Treasurer [21 September 2015 - 18 July 2016]

Consultation on improving bankruptcy and insolvency law

Joint media release with
Senator the Hon George Brandis QC

The Minister for Small Business and Assistant Treasurer, the Hon Kelly O'Dwyer MP, and the Attorney General, Senator the Hon George Brandis QC, today released a discussion paper titled 'Improving Bankruptcy and Insolvency Laws' for public consultation as part of the Government's National Innovation and Science Agenda (NISA).

The Government agreed as part of the NISA to three measures which are aimed at reducing the stigma associated with business failure and striking a better balance between encouraging entrepreneurship and protecting creditors by:

  • reducing the current default bankruptcy period from three years to one year;
  • introducing a 'safe harbour' for directors from personal liability for insolvent trading if they appoint a restructuring adviser to develop a turnaround plan for the company; and
  • making 'ipso facto' clauses, which allow contracts to be terminated solely due to an insolvency event, unenforceable if a company is undertaking a restructure.

"We're encouraging Australians to be more innovative and ambitious and having a go at starting a small business.  These measures will help promote an entrepreneurial culture in Australia, which over time will reduce the stigma associated with business failure," Minister O'Dwyer said.

"Reducing bankruptcy to one year acknowledges that bankruptcy can be a result of misfortune rather than misdeed. Preserving the ability to extend bankruptcy where there is misconduct ensures bankruptcy does not become an easy option for debtors," Senator Brandis said.

Stakeholders are invited to comment on the discussion paper by lodging a submission online via the Treasury website.

Submissions will close on 27 May 2016.