Chapter 2
Key concerns regarding the BAEI bill
2.1
Many submissions that the committee received were from firms
specialising in bankruptcy and personal insolvency. These submitters focused on
the amendments in Schedule 1 concerning the reduction of the default period,
which would limit the restrictions placed on a bankrupt, such as directorship
and travelling internationally, to one year rather than three years. These key
concerns included:
-
inconsistency between the bill's intention and its practical operation;
- the reduction in the default period;
- lack of anti-abuse provisions;
- operation of the income contribution obligations scheme;
- impact on the debt agreement regime; and
-
inconsistency with other laws requiring financial reporting.
2.2
This chapter discusses the main concerns raised by submitters about the Bankruptcy
Amendment (Enterprise Incentives) Bill 2018 (BAEI bill).
Will the bill succeed in fostering entrepreneurship and reducing stigma?
2.3
A number of submitters raised concerns that the BAEI bill would not
achieve its stated intention of fostering entrepreneurism.[1]
Distinguishing between personal and
business bankruptcies
2.4
Submitters argued that the majority of bankruptcies in Australia are in
relation to personal or consumer debt. Submitters suggested that approximately 20
per cent of personal bankruptcies are business-related, the remainder being
personal or consumer‑related bankruptcies.[2] Furthermore, the Australian Financial Security Authority (AFSA) provided statistics
suggesting that the main reasons for personal bankruptcy are excessive use of
credit, unemployment, or loss of income, as opposed to business-related reasons.[3]
2.5
The Assistant Minister explained in the BAEI bill's second reading
speech that distinctions between personal and business bankruptcies can be
blurred in cases where owners of small businesses need to secure business loans
with their personal assets or provide personal guarantees.[4]
2.6
The Department stated that it had considered restricting the application
of the proposed one-year default term to business-related bankruptcies, but
found that it was extremely difficult to draw a distinction between personal
and business-related bankruptcy:
There is the abstract notion of how you define it, what basis
you define it on and who falls through the cracks as a result of that. There's
also the real world blur between the two, and that comes to the fore for small
businesses and sole traders. Small businesses often need to secure their
business loan with their own personal finances—use their own credit cards to
fund their business—and at that point it's even harder than in the abstract to
define the difference between the two.
Moreover, even if theoretically it was possible to draw a
distinct line, whilst yes, the centre of gravity of the government's policy
intention here is to encourage entrepreneurship, it's to reduce the stigma of
bankruptcy across the board, to encourage people to engage in business
ventures—whether that be people who are already engaged in business ventures to
re-engage, or people who are not yet engaged in business ventures to become
engaged in business ventures. Even if you could draw that line and only allow
one-year bankruptcy for business bankruptcy, there are people who might be going
through what is able to be defined as personal bankruptcy. This reform would
encourage them and allow them to step out of that as quickly as possible and
allow them to undertake business ventures should they choose to do so.[5]
Fostering entrepreneurship
2.7
The BAEI Explanatory Memorandum draws a connection between the reduction
in the default period and the intended aim of fostering entrepreneurship:
As part of the National Innovation and Science Agenda these
reforms aim to foster entrepreneurial behaviour and to reduce the stigma
associated with bankruptcy. Reducing the automatic discharge to one year will
reduce stigma, encourage entrepreneurs to re-engage in business sooner and
encourage people, who have previously been deterred by the punitive bankruptcy
laws, to pursue their own business ventures.[6]
2.8
Mr Michael Lhuede, an insolvency practitioner, noted that this bill's
provisions are similar to those enacted in the Bankruptcy Amendment Act 1991 (Cth), which was subsequently changed in the Bankruptcy Legislation
Amendment Act 2002 (Cth). Mr Lhuede argued that the 2002 amendments
arose in recognition that the earlier provisions had encouraged debtors to act
irresponsibly in relation to bankruptcy.[7] He further expressed concern that the BAEI bill 'advances a proposition
that may well favour a regime designed to promote entrepreneurship over
individual responsibility for financial decisions'.[8]
2.9
Many submitters expressed concerns that the measures in the BAEI bill,
namely the proposed reduction in the default period, would not foster
entrepreneurship. CPA Australia stated that its previous submission to the Treasury
Proposals Paper 'National Innovation and Science Agenda‑Improving
bankruptcy and insolvency laws' (Proposals Paper) outlined its concern
with this approach, stating that the types of people and the reasons behind
personal bankruptcies did not indicate that entrepreneurs were routinely
bankrupted, and that the proposal to foster entrepreneurship was 'illusory'.[9]
2.10
Evidence collected by the committee suggested that the industry was
divided on whether the amendments proposed by the bill would achieve its
objectives. The Australian Restructuring Insolvency & Turnaround
Association (ARITA) stated:
...among our members who practice in the field of personal
insolvency (bankruptcy) there are divided views as to whether this stated goal
will be achieved by the reduction of the default bankruptcy period to one year.
Apart from scepticism as to the 'untapped entrepreneurialism' which will be
engaged by a one-year default period of bankruptcy, registered trustees are
more familiar than most with the practices and behaviour of those debtors who
will seek to either abuse or 'game the system' of a one-year bankruptcy for
their own benefit (and to the detriment of creditors).[10]
2.11
Nonetheless, the Attorney-General's Department (the Department) advised
that the bill would positively affect a number of entrepreneurs who are
currently impeded by bankruptcy restrictions. According to AFSA statistics,
approximately 35 per cent of all debtors in a bankruptcy between September
and December 2017 self-reported that their bankruptcy was related to business‑incurred debt.[11] The bill would therefore address a large number of relevant business-related
bankruptcies and thus assist in fostering entrepreneurship.
Reducing stigma
2.12
Many submitters were generally supportive of the BAEI bill's aim to
reduce the perceived stigma associated with bankruptcy.
2.13
For example, the Law Council of Australia (Law Council) noted that the
bill seeks to implement changes recommended by the Proposals Paper. The paper
noted that the aim of the reforms was to drive a 'cultural shift' away from the
perceived failure of bankruptcy, and encouraging entrepreneurship. To this end,
the Law Council was supportive of the bill's aim.[12]
2.14
However, some submitters were sceptical that the bill's measures would actually
counter the stigma of bankruptcy.[13] The Commercial and Property Law Research Centre (CPLRC) noted recent Australian
research indicating negative public attitudes toward people who are, or have
been, bankrupt.[14] The study suggested that there is a divergence in attitudes between business
and consumer bankruptcies, as business-related bankruptcies are perceived as
attributable to 'unscrupulous entrepreneurs'. The study concluded that a
reduction in the default period for business‑related bankruptcies may
increase stigma by perpetuating current attitudes.[15]
2.15
Similarly, the Australian Banking Association (previously the Australian
Bankers' Association) argued that the bill would not affect the stigma of
bankruptcy because:
...reducing the discharge period alone would have no effect on
the numerous restrictions (for example, barriers to entry to professions) which
currently exist, which add to the stigma of bankruptcy in employment and
business.[16]
2.16
However, the Department stated that the proposed reduction of the default
period, and consequently other associated limitations on travel and other
matters, would reduce the stigma attached to bankruptcy by encouraging
entrepreneurs to move onto new business ventures:
The Productivity Commission found Australia's current
personal insolvency laws put too much focus on stigmatising and penalising
failure. A reduced bankruptcy term is designed to decrease the stigma
associated with entering into bankruptcy by recognising the importance of
giving bankrupts a fresh start. This reduced period is designed to encourage
entrepreneurs who have previously been deterred by punitive bankruptcy laws to pursue
their own business ventures. This of course includes people who have already
experienced bankruptcy. Not only will these people be able to exit bankruptcy
and therefore enter into business again sooner; they will also be less deterred
from taking sensible risks in future business endeavours. However, this also
covers people who have never been through bankruptcy but who might be deterred
by the stigma of the regime from taking the same sensible risks that are
necessary to make a successful business. Certain restrictions, such as overseas
travel, obtaining credit and company board eligibility, will be lifted after
the one-year default bankruptcy period.[17]
Reduction of the default period
2.17
A significant number of submitters objected to the bill on the grounds
that a reduction of the default period would have unintended and far-reaching
consequences.[18] A submitter representing personal insolvency and accounting firms told the
committee that industry members do not support a reduction in the default
period, citing concerns regarding the potential for abuse and unintended
consequences.[19]
2.18
Some submitters noted that the majority of bankruptcies are consumer‑related,
rather than business-related.[20] These submitters argued that, as bankruptcy tends to be in relation to consumer
debt, targeting all bankruptcies indiscriminately will create unintended
consequences in addition to failing to promote entrepreneurship.[21]
2.19
The Law Council recommended that a distinction should be drawn in the
bill between consumer-related personal bankruptcies and business-related
bankruptcies.[22]
2.20
This was similarly suggested by Pitcher Partners, who also submitted
that the bill should establish three categories of bankrupts in order to
reflect the differing circumstances:
- Category 1, which deals with 'compliant bankrupts' who are fully
compliant with their obligations, have little or no divisible property, pay
income contribution assessments in the manner required by their trustee and
where a longer period as an undischarged bankrupt would be unnecessary and
unfair;
- Category 2, which deals with 'non-compliant bankrupts' who do not
comply with obligations, co-operate with their trustee or pay income
contribution assessments in the manner required by their trustee; and
- Category 3, which deals with bankrupts likely to abuse the
bankruptcy process, including those whose pre- or post-bankruptcy conduct and
behaviour are risky or unlawful, those who are non-compliant with tax law or
have unpaid tax liabilities, or those who engage in illegal phoenix activities.[23]
2.21
Pitcher Partners argued that bankrupts in Categories 1 and 2 should be
eligible for a reduction in the default period, provided that those in Category
2 were compliant with duties and obligations under the Act. However, Pitcher
Partners stated that those in Category 3 should not be eligible for a one year
default period except in exceptional circumstances.[24]
2.22
Further, Pitcher Partners stressed that the one year period should not
be an automatic discharge but instead that eligibility for early discharge
should be assessed. They also stated that the trustee be empowered to object to
early discharge, on prescribed grounds which were outlined in detail in their
submission.[25] Pitcher Partners stated:
While Pitcher Partners recognises that the prospect of a one
year bankruptcy would foster entrepreneurial activity by reducing the
restrictions that would otherwise be placed on prospective business people and
entrepreneurs, a bankrupt wishing to avail themselves of a 'fresh start' sooner
than the three year period of bankruptcy should apply to do so through an
administrative process. This process would facilitate the ability of the vast
majority of bankrupts to take up the opportunity for a 'fresh start' after one
year, but will provide a safeguard to ensure a small minority of
'non-complying' bankrupts are not inappropriately and automatically discharged.[26]
2.23
AFSA noted that the reduction of the default period would not restrict
the time period that a bankrupt trustee can administer a bankrupt estate.[27] AFSA further noted that:
The reduction of the default period will directly impact on:
- Objections: The period of time a trustee can lodge an objection
to discharge will be reduced. This has implications for incentivising
cooperation by debtors with the process post-discharge and may impact on the
volume of objections to discharge lodged by trustees, particularly in the lead
up to commencement of the reforms.
- After acquired property: Shortening the default bankruptcy period
will impact on the value of after-acquired property vesting in bankrupt
estates. For example, it is less likely that inheritances received after the
commencement of bankruptcy would vest in the estate with a shortened bankruptcy
period.
- NPII [National Personal Insolvency Index] and credit reporting:
On commencement of the reforms AFSA (as administrator of the National Personal
Insolvency Index) and credit reporting bodies would need to ensure that the
personal insolvency records of affected individuals reflect the change to the
default bankruptcy period in a timely way.[28]
2.24
The Australian Securities and Investments Commission (ASIC) similarly raised
concerns about whether the proposed one year default period would be sufficient
to protect creditors, consumers and financial investors. ASIC stated:
Businesses regulated by ASIC (which offer financial products
and services to the public) often fail because the owner/manager lacks the
necessary business acumen and fails to keep adequate accounts and records. A
question therefore may arise as to what is an appropriate period to allow a
businessperson, whose business fails and is disqualified as a director, to
undertake appropriate education and skills development training to reduce the
risk of future failures[.][29]
2.25
ASIC further noted the risk posed by a shortened period of directorship
disqualification under the default bankruptcy period, which it could
unintentionally promote excessive risk-taking.[30]
2.26
ASIC recommended amending subsection 201A(a) of the Corporations Act 2001 (Corporations Act) to require that a person made bankrupt within the last
three years cannot be included for the purpose of satisfying the minimum director
requirement, which currently provides that a proprietary company have at least
one director. ASIC stated that if a proprietary company has as its sole
director a person made bankrupt in the past twelve months, 'risks such as
inadequate skills and excessive risk-taking within the company are
exacerbated'.[31] According to ASIC, the suggested amendment would be consistent with the bill's
objectives and enable bankrupt persons to act as directors, but would also
require that management of a company be shared with at least a third party who
would also be responsible for the company's actions and be subject to the care
and diligence obligations under the Corporations Act.[32]
2.27
In the second reading speech, the Assistant Minister to the Prime
Minister explained that the reduction in the default period was appropriate for
the majority of bankrupts. The Assistant Minister stated:
One year is sufficient time for the administration of the
vast majority of bankruptcies. Currently, where more time is required, trustees
can continue to administer a bankruptcy after discharge. This may occur for
various reasons, including: ongoing investigations, assets to be realised,
outstanding income contributions, and incomplete distribution of funds. This
safeguard will continue to operate to ensure trustees can properly administer a
bankruptcy even after a bankrupt's one year discharge.[33]
2.28
Some submitters also raised concerns regarding the capacity for
creditors to recover debts owed within the one year default timeframe proposed
by the bill. One submitter noted that unless AFSA was able to action all
referrals promptly, income contribution collections may diminish.[34]
2.29
The Department noted concerns raised by submitters regarding the one year
default period. The Department stated in its submission that a number of
suggested solutions had been considered during the stakeholder consultation
period:
Limiting a one year bankrupt to first-time bankrupts, or
restricting access to return bankrupts to once every 10 years, would contradict
one of the core aims of the reforms, being to reduce the stigma associated with
bankruptcy. To effectively combat the stigma, the reforms must ease bankruptcy
laws for all debtors, without discrimination.[35]
2.30
The Department explained that:
...the intent of government in putting these reforms forward is
that if you are going to encourage risk-taking, risk-taking by definition is
going to result in failure sometimes. So, if you are going to encourage
risk-taking you have to tolerate failure. If you are going to tolerate failure,
saying you're only going to tolerate failure once, or tolerate failure twice,
but then the third time you're going to say that necessarily means you're a bad
person as opposed to an unlucky person, or you took a risk that just didn't
turn out, is contrary to the intention.[36]
2.31
Further, the Department advised that treating distinct groups of
bankrupts differently would be contrary to the bill's intention of simplifying
the regime and lead to additional burdens on regulatory bodies.[37]
2.32
However, the committee also notes that some submitters were supportive
of the reduction of the default period.[38] The Financial Rights Legal Centre, Financial Counselling
Australia and Consumer Action Law Centre (FRLC, FCA and
CALC) stated:
[The amendment] strikes an appropriate balance between the
interests of creditors, and ensuring that bankruptcy enables a fresh start for
debtors, and is not needlessly punitive. Reducing the bankruptcy period as
described in the bill is likely to have a fairly minimal effect on the amounts
recouped by creditors from bankrupt estates, but significantly improves the
bankrupt’s opportunities for early financial rehabilitation and participation
in economic activity.[39]
Lack of anti-abuse provisions
2.33
Many submitters expressed concerns that the proposed amendments do not
contain anti-abuse provisions. The submissions raised two issues in particular:
the possibility of serial bankrupts, and the perceived increased risk of phoenix
activity.
2.34
It was observed that the reduction of the default bankruptcy could
potentially increase the risk of serial bankrupts abusing the proposed system.
Pitcher Partners stated to the committee that it manages a number of 'rogue'
bankrupts who actively abuse the bankruptcy system:
We say rogue bankrupts are those bankrupts whose behaviour
either pre-or post-bankruptcy demonstrates what we would call a willingness to
abuse bankruptcy and other laws to their benefit at the expense of others. They
are often dishonest or have engaged in undesirable commercial behaviour. A
significant proportion of rogue bankrupts have complex affairs. They involve
tax avoidance, fraud or evasion and sometimes even serious criminal conduct.[40]
2.35
Pitcher Partners argued that the legislation should aim to balance the
need to reduce perceived stigma with the risk of rogue bankrupts abusing the
system.[41] They proposed that this could be achieved by implementing three changes to the
bill:
- Clearly identifying and separating rogue bankrupts from eligibility
for the one-year default period by prescribing behaviour or events that would restrict
the rogue bankrupt from seeking early discharge;
- Strengthening the objection-to-discharge procedures; and
- Incentivising post-discharge compliance through the income
contribution assessment period.[42]
2.36
The Law Council recommended that the bill provide that a bankrupt should
be required to demonstrate to the trustee that their bankruptcy is in relation
to business‑related debt. The trustee would subsequently be empowered to
decide whether to approve the early discharge, subject to the review of the
Inspector General in Bankruptcy.[43]
2.37
Some submitters raised concerns about the bill adequately protecting
against phoenix activity.[44] The Australian Criminal Intelligence Commission (ACIC) stated in its submission
that its intelligence suggested that the reduction of the default bankruptcy
period may increase the risk of serious and organised crime groups exploiting
the bankruptcy provisions. It stated:
Through the use of illegal phoenix activity as a business
strategy by serious and organised crime groups, ACIC intelligence indicates
that there are individuals who exploit bankruptcy provisions to facilitate
illegal activity. These individuals and groups are often aided by professional
facilitators, who are intrinsic enablers of serious and organised financial
crime. A current concern to the ACIC are liquidators and unregistered
pre-insolvency advisors who are developing a niche in the criminal environment
by facilitating and promoting the exploitation of bankruptcy provisions and
illegal phoenix type activities. For example, by encouraging directors and
accountants to transfer assets to new entities for less than market value, or
to destroy or alter company records.[45]
2.38
Some submitters suggested that the risk of abuse of the proposed regime
may undermine public confidence in the strength of bankruptcy laws, especially
in the case of high-profile examples.[46]
2.39
The Department noted that existing compliance mechanisms in the wider bankruptcy
regime provide anti-abuse protections:
So the bankruptcy regime provides a mechanism for
consequences when risks are taken and fail without being unduly punitive and
discouraging that sort of risk-taking but understanding that there is that risk
for people to abuse the system. The rating already includes a number of
safeguards, and those safeguards will either be retained or enhanced through
these reforms. There are four safeguards, in particular, I draw senators'
attention to. These are the income contribution payments; the objection to
discharge regime; the Official Receiver's rejection of a petition power; and
interim control orders under section 50 of the bill.[47]
2.40
The Department further noted that provisions in the BAEI bill are
designed to combat potential abuse, such as a proposed commencement date being
six months after Royal Assent to enable trustees to prepare objections to
discharge of bankruptcies on foot.[48]
2.41
The Department also pointed to the income contribution obligations as a
mechanism to enforce compliance and deter abuse:
This is the first safeguard; bankrupts will still be
required, if they earn over the income threshold, to make income contributions
for the full three years, as is the case now, and there are also a number of
mechanisms in the act to ensure and facilitate the payment of those payments,
including garnishee notices and the supervised account regime.[49]
2.42
Additionally, the Department advised the committee that the Government's
priority was to simplify the bankruptcy regime in order to assist genuine
bankrupts:
I'd like to say it's a balance. Sure, we could introduce a
regime to make it particularly complicated and have criteria that have to be
assessed. We could probably not guarantee but we would probably have a very
good shot that all these so-called rogue bankrupts would be excluded or given a
more punitive or more difficult regime. But the consequence of that would be
that the majority of bankrupts, who aren't rogue bankrupts, would have to go
through a far more complicated, far more administratively involved process to
get into bankruptcy That's pretty much the antithesis of what the government is
seeking to achieve with these amendments, which is a combination of the stigma
notion, but there's a sub-element of that, which is simplification—trying to make the bankruptcy
regime a bit simpler, a bit more efficient.
...
The safeguards in the system, I would assert, are sufficient
to allow mechanisms for those rogue players, such as the ability for the
official trustee to reject the petition based on grounds of abuse.[50]
Income contribution obligations
2.43
The bill proposes to extend income contribution obligations for
discharged bankrupts for a minimum period of two years following discharge, or,
in the event of the bankruptcy's extension due to non-compliance, for a period
of five to eight years.[51]
2.44
Submitters were generally supportive of the extension to income
contribution obligations. For example, FRLC, FCA and CALC noted in its
submission that, while it supported the income contribution payments scheme as
a method of enforcing post‑bankruptcy compliance, there had been no
change to rules regarding financial hardship. They recommended amending:
- Section 139T, which details situations in which the income
contribution assessed produces an immediately harsh result, to include a
situation where the assessment is valid at the time it is made but can no
longer be met because of a subsequent change of circumstances;
- Section 139ZH, which provides that there is no refund payable
regarding overpaid contributions. This was argued to be unduly harsh in
situations where overpayment is not due to any act or omission of the bankrupt
and provides an incentive for bankrupts to under-estimate income, and it was
recommended to account to the bankrupt where overpayment occurs in the final
contribution assessment period; and
- Allowing bankrupts to keep income earned after bankruptcy at the
discretion of the trustee.[52]
2.45
ARITA recommended amendments to improve a bankrupt's accountability to
the trustee:
The extension of income contribution obligations for two
years following an automatic discharge after one year is an important measure
to accompany any decision to reduce the default bankruptcy period. While there
are measures open to a trustee in bankruptcy to enforce these obligations
post-discharge, it is worth considering whether a breach of a discharged
bankrupt's obligations of payment and provision of information should
constitute an 'act of bankruptcy' under s 40 of the Act. This would make it
easy and less costly to bring about a second bankruptcy for any discharged
bankrupts who default on their income contribution obligations.[53]
Impact on debt agreement regime and other alternatives under the Act
2.46
A number of submitters raised concerns that the proposed amendments
would negatively impact on the debt agreement regime.[54] Mr Lhuede argued that the development of the debt agreement regime could be
seen as a reflection of the social perception of the stigma associated with
bankruptcy. Mr Lhuede further noted:
If that attitude is being discouraged in favour of being
accepting of financial failure then we may well be altering the very
assumptions on which debtors to date have been willing to reach agreement under
Part IX with their creditors. Any changes to the Act should be careful to avoid
any distortions that would discourage debtors from reaching commercial
arrangements with creditors under Part IX of the Act.[55]
2.47
Additionally, the submission stated that the proposed one-year default
period may significantly impact on post-bankruptcy arrangements with creditors
under section 73 of the Act.[56]
2.48
The Department advised the committee that the intention of the bill, in
addition to the BADAR bill (considered in the next chapter), was to provide choice
for debtors. The Department stated that bankruptcy is suitable for certain
situations while debt agreements are better for others, and the Government
sought to provide options for individual situations.[57]
Inconsistency with other laws requiring financial reporting
2.49
The committee received submissions that the proposed amendments would
result in inconsistency with other legislation and industry rules which place
restrictions on bankrupts.[58]
2.50
SellersMuldoonBenton noted in its submission that the bill's proposal to
eliminate the need for individuals to disclose their bankrupt status after the
one-year default period is inconsistent with financial practices requiring full
reporting. They note:
Most applications for finance, leases etc will note or ask
whether the individual has been bankrupt or subject to another form of
insolvency within the past 7-10 years. It is unclear how the responses to this
question will be dealt with any differently due to the change[.][59]
2.51
It was further observed that current credit reporting requirements also require
disclosure regarding bankruptcy.[60]
2.52
FRLC, FCA and CALC submitted that the bill does not change the rules
regarding deletion of information from credit information files under section
20X, Part IIIA of the Privacy Act 1988 (Cth). They stated:
At present, bankruptcy is retained on a person's credit
report for the longer of 2 years from discharge or 5 years from the date of
bankruptcy – effectively a minimum of 5 years. If the period of bankruptcy is
reduced by 2 years then, logically, the period that bankruptcy remains on
credit reports should also be reduced by 2 years, creating an effective minimum
of 3 years.[61]
Other issues
2.53
In its submission, ASIC suggested that the Corporations Act could be
amended in relation to disqualification of directors who have been made
bankrupt.[62] ASIC recommended that section 206F of the Corporations Act be amended to
provide for:
- expanding ASIC's powers in order to direct the bankrupt person to
take specific actions prior to participating in the management of a company,
such as corporate and financial management training;
- increasing the maximum length of disqualification from five years
to seven years in order to deter phoenix activity; and
- providing for automatic disqualification where a director has
been an officer of four or more corporations that have wound up in the previous
seven years and where, in each case, a liquidator has lodged a report under the
Act's requirements under section 533(1). This process determines whether the
wound up companies are related, thus further deterring phoenix activity.[63]
2.54
ASIC made further recommendations regarding section 206BA(5) of the
Corporations Act. Under section 206B(3) of that Act, a bankrupt is
automatically disqualified to manage a corporation if they are an undischarged
bankrupt. Section 206BA enables ASIC to apply to court to extend the
period of automatic disqualification by up to 15 years if a person has been
convicted of a relevant offence, while section 206BA(5) allows the Court to
have a broad discretion in taking any appropriate matters into account. ASIC recommended
that the scope of section 206BA(5) be broadened to enable ASIC to apply to
extend the period of disqualification to run a corporation where the person is
an undischarged bankrupt in situations where it can be demonstrated that there
are serious concerns regarding a person's capacity to manage a corporation.[64]
2.55
The Law Council also made a number of recommendations for minor
technical amendments to the bill.[65] The Department confirmed to that these recommendations were being considered;[66] however, in response to a question on notice, the Department outlined its
reasons why the suggested amendments were not accepted.[67]
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