No more official liquidators?
JLA are here to help!
The process of an official liquidation has always been a bit of a lottery for insolvency practitioners. The process by which court ordered liquidations were allocated to official liquidators in the past meant that insolvency professionals had to take the good with the bad meaning that an official liquidator would have to accept a liquidation appointment that was given by the court.
Unfortunately, many of these businesses that were being liquidated did not have enough assets to not only cover the costs of the outstanding debts but had insufficient assets to cover the costs incurred by the company liquidator. What this meant was that in a lot of cases the official liquidator was actually funding the cost of the liquidation.
ILRA 2016 - Insolvency Law Reform ACT 2016
The ILRA 2016 (commencement date expected early 2017) will change the way that the process works. The ILRA has removed the position of "official liquidator" from insolvency law. What this basically means is that insolvency practitioners are no longer required to fund these liquidations that are economically non-viable.
Who will pay for the liquidations?
It is likely that the liquidation of these companies will now need to be paid to some extent by agencies such as ASIC or by the creditors themselves.
How does it work now?
Now that the concept of "official liquidator" has been repealed there will be no obligation for a liquidator to take a job without there being an agreement between the entity requesting the liquidation and the liquidator themselves. Liquidators may still choose to take on unprofitable jobs however it will now be their choice.
What are the consequences?
It is likely that there will be insolvent companies that do not actually get liquidated unless there is someone (like ASIC) who is prepared to front the bill.