The announcement this week about reforms to Australia’s insolvency laws is a major win for the economy and directors; the proposals announced are a positive first step in achieving a much needed overhaul of Australia’s outdated director liability framework.
It begins a transformation of the Australian economy by allowing companies and directors to take necessary risks to innovate. The Australian Institute of Company Directors (AICD) have recognised that Australian companies need to embrace the risk of failure in order to allow innovation to succeed, and therefore recognising that in pursuing new ideas and opportunities some businesses will fail.
The reforms will help change our business culture.
As part of this week’s Innovation Statement, proposals announced by the Federal Government included:
- 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
- making ‘ipso facto’ clauses, which have the purpose of allowing contracts to be terminated solely due to an insolvency event, unenforceable if a company is undertaking a restructure
- reducing the current default bankruptcy period from three years to one year
The AICD hope that Monday’s statement will be a game changer; the changes will allow large numbers of viable Australian companies to trade through difficult times. They will save rather than destroy billions in wealth and tens of thousands of jobs.
While the Innovation Statement included 28 initiatives, the following are of particular interest:
- tax concessions for ‘angel’ investors
- changes to disclosure requirements for employee share schemes
- additional investment in cyber security through the creation of a Cyber Security Growth Centre
- increased funding for education and skills particularly in the areas of science, technology, engineering and mathematics (STEM)
- new laws that make it easier for companies to access crowd-sourced equity funding
- changes to the tax treatment of Early Stage Venture Capital Limited Partnerships (ESVCLPs) to attract more investment into start-ups
Full details of the Government’s Innovation Statement can be viewed here.
Edited from an announcement from the Australian Institute of Company Directors.