Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

by leave—I move government amendments (1) to (20) on sheet GZ221 together.

(1) Schedule 1, item 7, page 10 (lines 8 to 31), omit subsection 415D(1), substitute:

Stay on enforcing rights

(1) A right cannot be enforced against a body for:

(a) the reason that the body, if it is a disclosing entity, has publicly announced that it will be making an application under section 411 for the purpose of avoiding being wound up in insolvency; or

(b) the reason that the body is the subject of an application under section 411; or

(c) the reason that the body is the subject of a compromise or arrangement approved under this Part as a result of an application under section 411; or

(d) the body's financial position, if the body is the subject of such an announcement, application, compromise or arrangement; or

(e) a reason, prescribed by the regulations for the purposes of this paragraph, that relates to:

  (i) the making, or possible making, of such an announcement, application, compromise or arrangement about the body; or

  (ii) the body's financial position;

if such an announcement, application, compromise or arrangement is later made about the body; or

(f) a reason that, in substance, is contrary to this subsection;

if the right arises for that reason by express provision (however described) of a contract, agreement or arrangement.

Note: This result is subject to subsections (5), (6) and (8), and to any order under section 415E.

Example: A right to terminate a contract will not be enforceable to the extent that those rights are triggered by the body becoming the subject of such an announcement, application, compromise or arrangement.

(2) Schedule 1, item 7, page 12 (line 6), at the end of subsection 415D(4), add:

; or (d) is a reason referred to in paragraph (1)(e) or (f).

(3) Schedule 1, item 7, page 13 (lines 1 to 5), omit subsection 415D(8), substitute:

(8) If the application under section 411 results in the approval under this Part of a compromise or arrangement, subsection (1) does not apply to the right to the extent that:

(a) the person appointed to administer the compromise or arrangement; or

(b) if a liquidator of the body is appointed after the start of the stay period—the liquidator;

has consented in writing to the enforcement of the right.

(4) Schedule 1, item 7, page 14 (lines 19 and 20), omit "a reason referred to in paragraphs 415D(1)(a) to (d)", substitute "one or more reasons referred to in paragraphs 415D(1)(a) to (f)".

(5) Schedule 1, item 7, page 15 (after line 15), after section 415F, insert:

415FA Self -executing provisions

(1) The object of subsection (2) is to ensure that a self-executing provision:

(a) cannot start to apply against a body for certain reasons; and

(b) can be the subject of a Court order providing that the provision can only start to apply against a body with the leave of the Court, and in accordance with such terms (if any) as the Court imposes.

(2) Sections 415D to 415F also apply in relation to a self-executing provision in a corresponding way to the way they apply in relation to a right. For this purpose, assume those sections apply with such modifications as are necessary, including any prescribed by the regulations for the purposes of this subsection.

Note 1: This subsection achieves the object in subsection (1) by extending the application of all of the outcomes, exceptions and powers in sections 415D to 415F.

Note 2: These modifications include, for example, treating:

(a) a reference that a right cannot be enforced (however described) as including a reference that a self-executing provision cannot start to apply; and

(b) the words "if the right arises for that reason by express provision (however described) of a contract, agreement or arrangement" as being omitted from subsection 415D(1); and

(c) a reference that one or more rights are enforceable as including a reference that one or more self-executing provisions can start to apply; and

(d) paragraph 415F(2)(b) as alternatively providing that the Court is satisfied that one or more reasons referred to in paragraphs 415D(1)(a) to (f) can cause the self-executing provisions to start to apply.

(3) In this section:

self -executing provision means a provision of a contract, agreement or arrangement that can start to apply automatically:

(a) for one or more reasons; and

(b) without any party to the contract, agreement or arrangement making a decision that the provision should start to apply.

(6) Schedule 1, item 7, page 15 (line 17), omit "415F", substitute "415FA".

(7) Schedule 1, item 8, page 15 (line 27) to page 16 (line 17), omit subsection 434J(1), substitute:

Stay on enforcing rights

(1) A right cannot be enforced against a corporation for:

(a) the reason of the appointment or existence of a managing controller of the whole or substantially the whole of the corporation's property; or

(b) the corporation's financial position, if there is a managing controller of the whole or substantially the whole of the corporation's property; or

(c) a reason, prescribed by the regulations for the purposes of this paragraph, that relates to:

  (i) the appointing, or possible appointing, of a managing controller of the whole or substantially the whole of the corporation's property; or

  (ii) the corporation's financial position;

if such an appointment is later made for the whole or substantially the whole of the corporation's property; or

(d) a reason that, in substance, is contrary to this subsection;

if the right arises for that reason by express provision (however described) of a contract, agreement or arrangement.

Note: This result is subject to subsections (5) and (7), and to any order under section 434K.

Example: A right to terminate a contract will not be enforceable to the extent that those rights are triggered by the appointment of a managing controller.

(8) Schedule 1, item 8, page 17 (line 13), at the end of subsection 434J(4), add:

; or (d) is a reason referred to in paragraph (1)(c) or (d).

(9) Schedule 1, item 8, page 19 (line 16), omit "a reason referred to in paragraph 434J(1)(a) or (b)", substitute "one or more reasons referred to in paragraphs 434J(1)(a) to (d)".

(10) Schedule 1, item 8, page 20 (after line 3), after section 434L, insert:

434LA Self -executing provisions

(1) The object of subsection (2) is to ensure that a self-executing provision:

(a) cannot start to apply against a corporation for certain reasons; and

(b) can be the subject of a Court order providing that the provision can only start to apply against a corporation with the leave of the Court, and in accordance with such terms (if any) as the Court imposes.

(2) Sections 434J to 434L also apply in relation to a self-executing provision in a corresponding way to the way they apply in relation to a right. For this purpose, assume those sections apply with such modifications as are necessary, including any prescribed by the regulations for the purposes of this subsection.

Note 1: This subsection achieves the object in subsection (1) by extending the application of all of the outcomes, exceptions and powers in sections 434J to 434L.

Note 2: These modifications include, for example, treating:

(a) a reference that a right cannot be enforced (however described) as including a reference that a self-executing provision cannot start to apply; and

(b) the words "if the right arises for that reason by express provision (however described) of a contract, agreement or arrangement" as being omitted from subsection 434J(1); and

(c) a reference that one or more rights are enforceable as including a reference that one or more self-executing provisions can start to apply; and

(d) paragraph 434L(2)(b) as alternatively providing that the Court is satisfied that one or more reasons referred to in paragraphs 434J(1)(a) to (d) can cause the self-executing provisions to start to apply.

(3) In this section:

self -executing provision means a provision of a contract, agreement or arrangement that can start to apply automatically:

(a) for one or more reasons; and

(b) without any party to the contract, agreement or arrangement making a decision that the provision should start to apply.

(11) Schedule 1, item 8, page 20 (line 5), omit "434L", substitute "434LA".

(12) Schedule 1, item 14, page 21 (lines 3 to 19), omit subsection 451E(1), substitute:

Stay on enforcing rights

(1) A right cannot be enforced against a company for:

(a) the reason that the company has come or is under administration; or

(b) the company's financial position, if the company is under administration; or

(c) a reason, prescribed by the regulations for the purposes of this paragraph, that relates to:

  (i) the company coming, or possibly coming, under administration; or

  (ii) the company's financial position;

if the company later comes under administration; or

(d) a reason that, in substance, is contrary to this subsection;

if the right arises for that reason by express provision (however described) of a contract, agreement or arrangement.

Note: This result is subject to subsections (5) and (7), and to any order under section 451F.

Example: A right to terminate a contract will not be enforceable to the extent that those rights are triggered by the company coming under administration.

(13) Schedule 1, item 14, page 22 (line 18), at the end of subsection 451E(4), add:

; or (d) is a reason referred to in paragraph (1)(c) or (d).

(14) Schedule 1, item 14, page 23 (lines 7 to 9), omit subsection 451E(7), substitute:

(7) Subsection (1) does not apply to the right to the extent that:

(a) the administrator of the company; or

(b) if a liquidator of the company is appointed after the administration ends—the liquidator;

has consented in writing to the enforcement of the right.

(15) Schedule 1, item 14, page 24 (lines 7 and 8), omit "a reason referred to in paragraph 451E(1)(a) or (b)", substitute "one or more reasons referred to in paragraphs 451E(1)(a) to (d)".

(16) Schedule 1, item 14, page 24 (after line 26), after section 451G, insert:

451GA Self -executing provisions

(1) The object of subsection (2) is to ensure that a self-executing provision:

(a) cannot start to apply against a company for certain reasons; and

(b) can be the subject of a Court order providing that the provision can only start to apply against a company with the leave of the Court, and in accordance with such terms (if any) as the Court imposes.

(2) Sections 451E to 451G also apply in relation to a self-executing provision in a corresponding way to the way they apply in relation to a right. For this purpose, assume those sections apply with such modifications as are necessary, including any prescribed by the regulations for the purposes of this subsection.

Note 1: This subsection achieves the object in subsection (1) by extending the application of all of the outcomes, exceptions and powers in sections 451E to 451G.

Note 2: These modifications include, for example, treating:

(a) a reference that a right cannot be enforced (however described) as including a reference that a self-executing provision cannot start to apply; and

(b) the words "if the right arises for that reason by express provision (however described) of a contract, agreement or arrangement" as being omitted from subsection 451E(1); and

(c) a reference that one or more rights are enforceable as including a reference that one or more self-executing provisions can start to apply; and

(d) paragraph 451G(2)(b) as alternatively providing that the Court is satisfied that one or more reasons referred to in paragraphs 451E(1)(a) to (d) can cause the self-executing provisions to start to apply.

(3) In this section:

self -executing provision means a provision of a contract, agreement or arrangement that can start to apply automatically:

(a) for one or more reasons; and

(b) without any party to the contract, agreement or arrangement making a decision that the provision should start to apply.

(17) Schedule 1, item 14, page 24 (line 28), omit "451G", substitute "451GA".

(18) Schedule 1, item 15, page 25 (line 4), omit "415D to 415F, 434J to 434L,", substitute "415D to 415FA, 434J to 434LA,".

(19) Schedule 1, item 16, page 25 (line 7), omit "451E to 451G,", substitute "451E to 451GA,".

(20) Schedule 1, item 17, page 25 (line 10), after "under", insert ", or self-executing provisions of,".

I also table an explanatory memorandum relating to the government amendments I have moved to this bill. The government is moving these amendments in response to submissions received during the Senate committee's review of the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017. I would like to thank all those who contributed to the Senate committee process and note that the committee recommended that the bill be passed.

However, the government considers that certain technical amendments are warranted to ensure the bill operates as intended. These amendments apply only to the operation of the stay on ipso facto clauses in part 2, schedule 1, of the bill. That part provides for stay against the enforcement of rights that it amend or terminate an agreement because of a formal restructure. The amendments amend the application of the stay on the enforcement of applicable rights under an ipso facto clause to (1) strengthen the anti-avoidance mechanisms to ensure that parties cannot contract around the stay, (2) extend the right to consent in writing to an enforcement of a stay to a liquidator who is subsequently appointed following an administration or scheme of arrangements and (3) clarify that the stay also applies to self-executing ipso facto clauses.

The anti-avoidance mechanism has been strengthened by adding an additional integrity provision and clarifying that regulations can be used to address other attempts to circumvent the operation of the stay. The bill already provides for an administrator and a person administering a compromise arrangement to be able to consent in writing to lift the stay on the enforcement of rights under applicable ipso facto clauses. These amendments extend that right to a liquidator who is subsequently appointed to the company should the company be wound up. This prevents an illogical and unintended outcome where an administrator has agreed to the operation of an ipso facto clause, only to have the arrangement fall away on the appointment of a liquidator. When the stay operates, it prevents the enforcement of contractual rights against a company undertaking a formal restructure. In some cases, an ipso facto clause will operate automatically on the occurrence of a certain event, without a decision by a party to the contract being made to enforce that right. For example, the entire contract will automatically terminate if one party enters into external administration. This results in all of the restructuring company's rights being extinguished and, thus, negatively impacts on the prospects of a successful restructure or sale of the business as a going concern. The amendments clarify that such self-executing clauses will also be caught by the stay on ipso facto clauses, as originally intended.

This is a bill that promotes a culture of entrepreneurship and innovation to drive business growth, global success and help save local jobs. These amendments are necessary to ensure that the provisions in the bill operate as they were intended to operate. I've already tabled the explanatory memorandum.

Katy Gallagher (ACT, Australian Labor Party) Share this | Link to this | Hansard source

The opposition will be supporting the government's amendments. We acknowledge and thank Minister O'Dwyer for briefing my office on Friday on these amendments, but the briefing was arranged at quite short notice. So we have only had the weekend, really, to understand the oral briefing, and I think the amendments were provided and circulated quite late as well.

With that as a preface to my comments, we take the government at its word that these amendments are necessary to fix some gaps that came to the attention of the government during the course of the Senate inquiry, particularly in relation to part 2 of the bill, which sets out new provisions to stop the enforcement of ipso facto clauses that are triggered when a company enters administration. As I said in the second reading speech, we certainly support part 2 of the bill. An ipso facto clause creates a contractual right that allows one party to terminate or modify the operation of a contract upon the occurrence of some specific event. Currently, such rights may allow one party to terminate a contract just because of the financial position of the company, even though the company is still meeting its obligations under the contract. Our understanding of the government's amendments is that they will address the following gaps. The current bill, unamended, may not cover self-executing ipso facto clauses and may only be limited to the regular ipso facto clauses, which require a party to elect to rely on the ipso facto clause. The amendment will fix this to make clear that the self-executing, or automatically operating, ipso facto clauses can also be covered. Also, the bill, as drafted, allows for an administrator to release a party from the stay on the ipso facto clauses that the bill contains. However, if the company goes into liquidation, the current bill does not allow for the liquidator to release a party from the stay on the cause. The amendment will fix this so that the liquidator can also have this power.

Labor will be supporting the amendments.

Chris Ketter (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

The question is that amendments (1) to (20), moved together by leave, on sheet GZ221, be agreed to.

Question agreed to.

Katy Gallagher (ACT, Australian Labor Party) Share this | Link to this | Hansard source

by leave—I move opposition amendments (1) to (15) on sheet 8224, circulated in my name, together.

(1) Schedule 1, item 1, page 3 (lines 7 to 13), omit all the words from and including "evidence" to the end of subsection 588E(8A), substitute:

it has been proved that:

(a) subsection 588GA(1) applies in relation to a person and a debt; or

(b) subsection 588WA(1) applies in relation to a corporation and a debt;

it must be presumed that the relevant subsection applies in relation to the person or the corporation and the debt.

(2) Schedule 1, item 2, page 3 (line 16), after "harbour", insert "defence".

(3) Schedule 1, item 2, page 3 (lines 19 and 20), omit "Subsection 588G(2) does not apply in relation to a person and a debt if", substitute "In any proceedings against a person under subsection 588G(2), it is a defence if the person proves, in relation to a debt, that".

(4) Schedule 1, item 2, page 4 (line 7), omit "an evidential", substitute "a legal".

(5) Schedule 1, item 2, page 4 (lines 13 to 15), omit all the words from and including "For" to "whether", substitute "For the purposes of subsection (1), a course of action is reasonably likely to lead to a better outcome for the company only if".

(6) Schedule 1, item 2, page 4 (line 18), omit "or", substitute "and".

(7) Schedule 1, item 2, page 4 (line 21), omit "or", substitute "and".

(8) Schedule 1, item 2, page 4 (line 24), omit "or", substitute "and".

(9) Schedule 1, item 2, page 4 (line 27), omit "or", substitute "and".

(10) Schedule 1, item 2, page 4 (lines 31 and 32), omit "an evidential", substitute "a legal".

(11) Schedule 1, item 2, page 6 (lines 4 to 6), omit the definition of evidential burden in subsection 588GA(7), substitute:

legal burden, in relation to a matter, means the burden of proving the existence of the matter.

(12) Schedule 1, item 4, page 8 (line 15), after "harbour", insert "defence".

(13) Schedule 1, item 4, page 8 (lines 17 and 18), omit all words from and including "Subsection" to "debt, if", substitute "In any proceedings against a corporation under section 588W, it is a defence if".

(14) Schedule 1, item 4, page 8 (lines 27 and 28), omit "an evidential", substitute "a legal".

(15) Schedule 1, item 4, page 9 (lines 1 to 3), omit the definition of evidential burden in subsection 588WA(3), substitute:

legal burden, in relation to a matter, means the burden of proving the existence of the matter.

I did go into this in some detail in the second reading stage, but just for the benefit of senators I will cover it off again. With the way the government's bill is drafted, the directors don't have to prove that they have the benefit of the defence. Instead, once directors bring evidence that satisfies an evidentiary burden that suggests a reasonable possibility that the matters exist or do not exist in that they are entitled to the safe harbour, the burden of proof or the legal burden falls on the party bringing proceedings to prove that the director is not entitled to the safe harbour. Our amendments on sheet 8224 would mean that directors who want to access the safe harbour bear the burden of proof in showing that they are genuinely taking a reasonable course of action to turn the company around. This is consistent with other existing defences to liability for insolvent trading.

An evidential burden in relation to a matter means the burden of adducing, or pointing to, evidence that suggests a reasonable possibility that the matter exists or does not exist, whereas a legal burden in relation to a matter means the burden of proving the existence of the matter. In civil proceedings, this is required to be on the balance of probabilities. Under the government's bill, once directors point to some evidence—that is, they satisfy an evidentiary burden—the burden of proof then falls onto the person bringing proceedings to prove that the director is not entitled to the safe harbour. We think that directors should bear the full legal burden of proof because they are in the position to have the information and knowledge about what action they've taken and why. Placing the burden of proof on directors will also mean they are more likely to take proper care and show diligence when trying to turn around an insolvent company.

Through these amendments, we are also tightening the safeguards to make sure that directors are doing proper due diligence when they put into place a plan of action to trade out of insolvency. Currently the bill contains five sensible things that the court may have regard to in determining whether the safe harbour is available. We think that each of the five factors in the bill are good but that they should be non-negotiable. Our amendments will change these from being indicia—that a court may have regard to—to being five mandatory requirements. There should be no doubt that directors in this situation must be informing themselves of the company's financial position, taking appropriate steps to prevent misconduct by the company's employees or officers, ensuring that the company is keeping appropriate records, obtaining appropriate advice, and developing or implementing a restructuring plan. I hope the Senate can support these amendments.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

The government will not be supporting these amendments. By way of background, under the current bill as proposed, a safe harbour is framed as a carve-out from or exception to liability, which means that the starting point is that liability for insolvent trading does not arise, and a director will only be liable if the company is subsequently wound up and the liquidator brings a court action and proves to the civil standard of proof that the conditions for safe harbour were not met.

The amendment as proposed frames the safe harbour as a defence to liability. This would mean that every director who tries to run insolvent in an attempt to restructure or turn the company around will end up in court and will be personally liable for insolvent trading under section 588G of the Corporations Act, unless he or she can prove—to the civil standard of proof—a safe harbour defence.

The current bill is based on extensive consultations over a period of two years, which favoured a carve-out from insolvent trading liability over defence to liability. This is primarily as a result of concerns that a defence would not provide directors of small businesses and start-ups with sufficient comfort to not place a company into administration prematurely so as to avoid the risk of personal liability. The position of stakeholders is supported by the fact that the act currently, in section 588H, provides a defence to insolvent trading liability where a director was provided with information—advice—on the company's current and future state of solvency. This defence has been rarely used, confirming it does not provide directors with the necessary comfort to avoid putting a company into administration prematurely. The proposed changes that the opposition have put forward would therefore defeat the policy intent behind the measure. Without a carve-out, the threat of litigation is generally sufficient to force directors to settle with a liquidator, rather than risk costly and time-consuming litigation.

The Australian Institute of Company Directors has said that the defence model would be counter to the bill's primary objectives:

In the context of a safe harbour designed to facilitate genuine business turnarounds and restructures, this approach is neither appropriate, constructive, nor in accordance with common sense lawmaking. Placing the legal burden on directors would perpetuate the overly strict legislative approach for which our insolvency regime is currently criticised …

The Turnaround Management Association said a traditional defence 'would be a cold comfort to directors', and pointed out that such a model would likely result in under-utilisation of the safe harbour protections. The law firm Ashurst said:

A defence would mean that directors continued to have prima facie liability for insolvent trading in the specified circumstances, subject to their being able to establish the elements of the defence.

By contrast, a carve-out would mean that a director would not be liable for insolvent trading unless the liquidator or other person taking action could establish that the director had failed to satisfy the safe harbour prerequisites.

Public consultation on the exposure draft of the legislation occurred between 28 March and 24 April 2017 and 45 submissions were received. A strong majority of submissions supported the proposed safe harbour carve-out model including ARITA, the Law Council, the Australian Institute of Company Directors, the Turnaround Management Association, AVCAL, the Governance Institute, and the ABA. Only three submitters did not support a safe harbour in principle: the Australian Credit Forum, Narrow Road Capital and SV Partners.

Nick Xenophon (SA, Nick Xenophon Team) Share this | Link to this | Hansard source

I can indicate that I and my colleagues do not support the amendments on sheet 8224. We have concerns that the prescriptive approach doesn't achieve the policy intent of the bill, and I believe there will be some significant unintended consequences with these amendments. Given the significant consultations over some 18 months and broad support for the carve-out model rather than a defence model, I and my colleagues think it is reasonable to support this model but to have the review as proposed by the opposition. Throughout the consultation process, Treasury has created a safe harbour approach that is workable, imposed a test on which directors' actions will be judged objectively and contains robust safeguards, including for employee entitlements and tax obligations.

The Senate Economics Legislation Committee report on this made the point at 2.15, in part, that 'requiring that a director meet an evidential burden in order to be entitled to a safe harbour', rather than a defence, was the preferred approach. The report says:

Most submitters expressed support for this approach and argued that it is in line with the bill's objective of facilitating successful restructures outside of formal insolvency.

In its submission—

and I think Senator Cormann made reference to this—

Ashurst noted that the carve-out model would provide 'an extra level of protection for directors who are making honest and diligent attempts to restore a company to solvency'—

And I emphasise 'honest and diligent attempts'—

Ashurst also explained the operation of a defence versus carve-out safe harbour model:

A defence would mean that directors continued to have prima facie liability for insolvent trading in the specified circumstances, subject to their being able to establish the elements of the defence.

By contrast, a carve-out would mean that a director would not be liable for insolvent trading unless the liquidator or other person taking action could establish that the director had failed to satisfy the safe harbour prerequisites.

And I think that sums up the policy very neatly. The report goes on:

TMA Australia submitted that a traditional defence 'would be a cold-comfort to directors' and pointed out that such a model would likely result in under-utilisation of the safe harbour protections.

They are important reasons for keeping it as is. I do not begrudge the opposition for putting up this amendment. I understand what they are trying to achieve, but I think there are a number of serious unintended consequences.

It is important that we put on the record that the 2013 report of Singapore's Insolvency Law Review Committee had the following to say:

The Australian provisions are considered to be some of the strictest provisions amongst the major jurisdictions, in the sense that they effectively prohibit trading once there are 'reasonable grounds for suspecting' that a company is insolvent … A wide notional cessation of trading even prior to the commencement of insolvency proceedings may further endanger a financially-troubled company's ability to trade through a period of crisis, and thus worsen the company's financial difficulties. It does not strike the best balance between the interest in protecting creditors against the reckless or unreasonable incurring of debts by an insolvent company, and the interest in allowing the directors of a distressed company a fair opportunity to take reasonable steps to avoid the company's financial ruin. There should be more latitude afforded to a director to continue to trade in the reasonable expectation that, although the company is insolvent, it is most likely to be able to trade out of its present difficulties.

Can I say: they are important considerations for companies that are struggling to stay open. They do so in good faith, and they have the benefit of the safe harbour provisions, and that has huge implications for the employees of that company, where those directors are doing all they can to keep that company going.

This amendment would go against that. I think the government's approach is appropriate. I think that the opposition's proposal for a thorough review of this is welcome, and I support that. We cannot support this particular amendment, but we do strongly support the review proposed on sheet 8239, and look forward to the results of that report.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I want to reiterate that, while we accept Senator Cormann's explanation and Senator Xenophon's explanation about this amendment cutting across the intent of the bill, the key reason we're opposing it is that we're not sure that it is workable. It's actually set out that Labor proposes to turn the safe harbour carve-out into a defence and require the appointment of a registered liquidator to provide restructuring advice to the directors in order to prove that defence. Then, if you go on to the next part of the amendment, in order to prove the defence to the civil standard of proof, a director will need to provide evidence that he or she obtained advice from an appropriately qualified entity labelled as a registered liquidator and insolvency practitioner.

I will just go back to what I said earlier. I'm not sure why liquidators and insolvency practitioners would be entering into the corporate restructuring game as corporate doctors. It wouldn't necessarily be in their interests to do so, because they want to liquidate companies and make lots of money over a long period of time. I would be very suspicious of getting advice from a liquidator about how to restructure my company and trade out of trouble, because they actually are good at liquidating assets when companies go bankrupt. I don't support the amendment at this stage because we haven't had the information we need to see how this is workable. I reiterate that the Greens won't be supporting these amendments but we will be supporting Labor's next amendment, on sheet 8239.

The CHAIR: The question is that amendments (1) to (15) on sheet 8224, moved by Senator Gallagher, be agreed to.

Katy Gallagher (ACT, Australian Labor Party) Share this | Link to this | Hansard source

I move opposition amendment (1) on sheet 8239.

(1) Schedule 1, page 8 (after line 12), after item 3, insert:

3A At the end of Division 3 of Part 5.7B

Add:

   588HA Review relating to safe harbour

  (1) The Minister must cause an independent review of the following matters to be undertaken as soon as practicable after the last day of the 2 year period commencing on the commencement of this section:

  (a) the impact of the availability of the safe harbour to directors of companies on:

     (i) the conduct of directors; and

     (ii) the interests of creditors and employees of those companies;

     (b) any other matters the Minister considers relevant.

  (2) The review must be undertaken by 3 persons who, in the Minister's opinion, possess appropriate qualifications to undertake the review.

  (3) The persons who undertake the review must give the Minister a written report of the review.

  (4) The Minister must cause a copy of the report to be tabled in each House of the Parliament within 15 sitting days of that House after the day on which the report is given to the Minister.

  (5) The report is not a legislative instrument.

This amendment introduces a requirement for the minister to initiate a review of the safe harbour provisions by an independent panel two years after it commences. It is an opportunity to make sure the safe harbour is not having any unintended consequences. It is fair to say that Labor does have concerns with how the safe harbour provisions will be utilised. We would have liked them to have been tougher than they are presently going to be. This amendment would allow a three-person independent panel to review and look at the impact of the availability of safe harbour on the conduct of directors and the interests of creditors and employees of those companies and any other relevant matter. In the interests of time, I commend the amendment to the Senate.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

The government will not be opposing these amendments. We are confident that a review will confirm the government's view that this legislation will significantly improve the current insolvency regime to encourage more investment in Australian businesses. The reason for that confidence is because of the extensive process of consultation that we've gone through to put this bill together. We will not be opposing these amendments.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I wanted to reiterate my concern earlier: we support this amendment and it is good the government is supporting it, but I don't think there's been a lot of thought gone into how we are going to track the use of safe harbour in the next two years before this review is up. I wanted the government to take on board that we need a process of notification. If it has to be done privately, that's fine. But there needs to be a way that we can actually track this and no-one yet has been able to tell me how that's going to happen.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

I have heard Senator Whish-Wilson's comments. We are taking that on board and are going to give that some consideration as to how that can best and most sensibility be done.

The CHAIR: The question is that opposition amendment (1) on sheet 8239 as moved by Senator Gallagher be agreed to.

Question agreed to.

Bill, as amended, agreed to.

Bill reported with amendments; report adopted.