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Choppy Waters or Gently Rising Tide? Key Insolvency Issues for 2024

Law as stated: 15 December 2023 What is this? This episode was published and is accurate as at this date.
Join Cowen Schwarz Marschke Partner Richard Cowen as he dials in to Curiosity from Queensland to chat to David about the return to a “new normal” in the insolvency market. Touching on the impact of COVID-19 on insolvency, the raw numbers, and just what we can expect to see in 2024.
Substantive Law Substantive Law
Richard Cowen
Cowen Schwarz Marschke
1 hour = 1 CPD point
How does it work?
What area(s) of law does this episode consider?Key insolvency issues for 2024.
Why is this topic relevant?Against the backdrop of the COVID-19 pandemic, Australia witnessed the dynamics of its insolvency market go through an unprecedented shift. The economic fallout of the virus, coupled with policy interventions, created a swirling set of challenges for lawyers specialising in the insolvency domain.

While the virus might have become endemic, many of those shifts have come to a natural conclusion. But is it really back to business as usual for insolvency and insolvency professionals? This episode aims to provide practitioners with a comprehensive overview of the key insolvency issues set to shape the Australian legal landscape in 2024 as we return to a ‘new’ insolvency normal.

What legislation is considered in this episode?Corporations Act 2001 (Cth)
What are the main points?
  • The insolvency market in Australia experienced unprecedented shifts due to the economic impacts of COVID-19 and subsequent policy interventions.
  • Despite the virus becoming endemic, the shifts have not entirely concluded, and “business as usual” has yet to return for insolvency lawyers and professionals.
  • New insolvency processes such as the small business restructuring regime and the simplified liquidation process were introduced during the COVID-19 pandemic, these follow earlier efforts at tinkering with the market.
  • Historically, voluntary administration was a significant legislative change affecting insolvency, shifting market dynamics by allowing directors greater control of the insolvency process.
  • During the 2008-2009 Global Financial Crisis, banks became reluctant to make formal insolvency appointments, leading to a preference for informal workouts and restructuring.
  • The small business restructuring regime, which had a slow start, is designed for businesses with less than $1 million in liabilities and aims to provide a simpler alternative.
  • Despite early skepticism, insolvency professionals have gradually accepted the small business restructuring regime due to its fit for smaller businesses heavily impacted by the pandemic.
  • The post-pandemic period is expected to witness a “cleanup” of accumulated insolvencies, partially driven by increased activities of the Australian Taxation Office.
  • There is speculation that Australia may face a rise in insolvencies in the future due to economic factors such as interest rate hikes and labour shortages.
  • Personal insolvency numbers have not yet returned to pre-pandemic levels, but there are early indications of a potential rise in corporate insolvencies.
  • The Parliamentary Joint Committee on Corporations and Financial Services has suggested a comprehensive review of the corporate insolvency regime, highlighting the need for legislative reform.
  • The PJC report recommends interim changes to address pain points in the insolvency market, such as unfair preference claims and corporate trustee insolvencies.
What are the practical takeaways?
  • Insolvency is a broad practice area touching several fields of law, offering an engaging and dynamic career for lawyers who aspire to enter this specialty.
  • Retail, tourism, and hospitality, together with the residential construction industry, are areas predicted to face challenges and thus potentially higher insolvencies in the future.