Ross Asset Management, Dick Smith collapses spur insolvency law changes
The Ross Asset Management Ponzi scheme and the collapse of consumer electronics retailer Dick Smith have prompted recommended changes to insolvency law that's currently under review.
The Ministry for Business, Innovation and Employment is seeking feedback on a number of recommendations to amend the law, including how administrators deal with Ponzi schemes. Because the Ross Asset Management case is currently before the Supreme Court, the MBIE paper doesn't settle on any recommendations, saying once a judgment is reached the government should consider changes on the presumption of a good faith defence for an investor claiming fictitious investments, and whether to set up a compensation scheme.
The paper also recommends ranking gift vouchers on par with layby purchases after the Dick Smith collapse highlighted the lack of consumer protection for those holders, and proposes changes to voidable transactions, which case law has shifted towards the interests of individual creditors.
"The working group recommends a number of changes to the voidable transaction regime that it believes would better balance the competing interests of individual creditors and all creditors," Commerce Minister Jacqui Dean said in a statement. "I am releasing this report for consultation so I can hear from all interested parties whether the Insolvency Working Group's recommendations would strike the right balance between these two important but conflicting objectives."
Last year the government announced plans to introduce a new licensing regime for insolvency practitioners in the first step of a broader review of the law. The working group was tasked with investigating the industry, particularly problems with voluntary company liquidations and the use of phoenix companies where assets are transferred to a near-identical entity to dodge liabilities. It recommended law changes after finding too many insolvency practitioners fell well short of expected standards by overcharging or failing to protect creditors' interests.
MBIE is also seeking feedback on introducing a director identification number to help identify which companies someone is currently associated with, or has been a director of in the past.
The public has until June 23 to submit on the two papers.