Power Simon: Insolvency Amendment Bill — Third Reading 
Power Simon: Insolvency Amendment Bill — Third Reading 
[Volume:658;Page:7073] 
Hon SIMON POWER (Minister of Commerce) 
: 
 I move  
That the Insolvency Amendment Bill be now read a third time 
. The Insolvency Amendment Bill aims to maintain the integrity of the personal insolvency processes to maximise returns to creditors. The bill amends the Insolvency Act 2006 in three major areas: firstly in respect of the no-asset procedure or NAP; secondly in respect of the insolvent gift provisions; and thirdly in respect of the public register provisions in the Insolvency Act. 
The no-asset procedure was introduced as an alternative to bankruptcy in December 2007 as part of the Insolvency Act 2006. Debtors have to meet stringent criteria before entry is granted to that process. The bill explicitly provides that all debts that have been obtained as a result of a fraudulent act or behaviour are not discharged under the no-asset procedure process. This mirrors the bankruptcy provisions in the Act and ensures that debtors are granted relief from pecuniary liabilities arising contractually not from liabilities that have their origin in fraud. 
The bill also contains further provisions to strengthen the official assignee’s ability to investigate possible concealment of assets in relation to a no-asset procedure debtor. For example the official assignee will be able to extend the period of discharge from the no-asset procedure by a maximum of 25 working days to undertake a thorough investigation of any late information or objections that are received regarding a debtor’s entry to the no-asset procedure process. 
With regard to the insolvent gift provisions the bill restores the longstanding presumption that a debtor is technically insolvent for a period of time before he or she files an application for formal bankruptcy. Therefore any gifts made in the 2-year period leading up to a person’s formal bankruptcy may be cancelled. The experience of the official assignee has shown that it is within this period that most debtors shift their assets to trusts family members and friends to avoid paying the debts they are responsible for. 
The bill provides a so-called brightline rule regarding the treatment of insolvent gifts which will be easily understood administered and enforced by the official assignee for the benefit of the creditors of the bankrupt. For example contingent liabilities such as guarantees will now be included in the assessment of the solvency status of a debtor at the time the debtor makes a gift to a third party such as family members and friends. Any asset or money recovered will be added to the general pool of assets and funds for distribution to all creditors according to their pre-insolvency entitlements. 
Finally the bill makes changes to the length of time that information on no-asset procedure debtors is retained on the public register. The public registers are administered by the official assignee and are searchable online for a limited time—currently 1 year for a no-asset procedure and 7 years for bankruptcy. The bill proposes that information on no-asset procedure debtors will remain on the public register for 4 more years—a total of 5 years. Also the details of debtors who have been through multiple insolvency processes—for example a no-asset procedure followed by one or more bankruptcies—will be permanently retained on the public register. 
There will of course always be debate over whether extending the no-asset procedure time period from 1 year to 5 years strikes the right balance and in particular whether it undermines the rehabilitative objectives of that process. There is no international consensus in terms of how long information about a personal insolvency proceeding should be kept on the public register. Australia for example keeps a record of all personal insolvency proceedings on the public register indefinitely and it is searchable for a fee. The State grants individuals who are discharged from a no-asset procedure the privilege of becoming debt free after only 1 year. Creditors are entitled to get something valuable in return which is reliable information about a debtor’s previous insolvencies over a reasonable period of time as a means of ascertaining creditworthiness. This is not achieved by deleting the no-asset procedure details after 1 year particularly in the current economic climate where the flow of credit has been negatively impacted. 
Further excessive limitations on the information on the public register create a cost to the economy because they impede prudent lending practices and increase business risks. From a public interest perspective it is appropriate that the information is made available on the no-asset procedure and bankruptcy public registers for a longer period of time. The need to assist creditors and financiers in making high-quality business decisions is particularly important in the current economic environment where on the one hand the number of personal insolvencies is increasing and on the other hand the credit market is contracting. 
I thank the Commerce Committee for its valuable contribution to the development of this bill and the Opposition for its constructive discussions of particular aspects of it. In addition and in particular I thank officials for the work that has gone into drafting this legislation and for overseeing its passage through its stages up until today. I commend the Insolvency Amendment Bill to the House.