Insolvency, Restructuring and Dissolution Bill passed to unify personal and corporate insolvency laws into new omnibus Act
The Insolvency, Restructuring and Dissolution Act 2018 (“Act”) is a new omnibus Act that consolidates the personal and corporate insolvency laws, and the laws relating to debt restructuring by individuals and companies, currently found in the Bankruptcy Act and the Companies Act, into a single statute. When in force, the Act will repeal the Bankruptcy Act and delete the relevant provisions in the Companies Act. This article provides an overview of the key changes under the Act.
Key changes include:
- Restriction of ipso facto clauses: There is a new restriction on the operation of certain types of ipso facto clauses. Such clauses typically allow one party to terminate the contract upon the occurrence of a specified insolvency-related event affecting the other party.
- New procedure for early dissolution of company: The Official Receiver and private liquidators who have obtained the prior consent of the Official Receiver may utilise a new procedure for the early dissolution of a company in liquidation.
- New licensing and regulatory regime for insolvency practitioners: There will be a new licensing and regulatory regime applicable to all persons acting as “insolvency practitioners”.
- Judicial manager expressly empowered to seek third-party funding: In exchange for funding of a court action to unwind prejudicial transactions and avoid acts detrimental to creditors, judicial managers may assign proceeds from such an action to a third-party. This new avenue of funding may increase the likelihood of such an action being pursued, benefitting stakeholders by providing higher recoveries, if such actions are successful.
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