THE Australian Institute of Company Directors has welcomed the package of insolvency law reforms announced by the Minister for Corporate Law, Chris Bowen, labelling the move "sensible and important".
The AICD said yesterday the High Court decision in Sons of Gwalia had adverse consequences, both for the cost and availability of redit to Australian business and for the cost and complexity of external insolvency administration.
"It created major practical problems for insolvency administrations, meant added delays and costs and reduced the pool of assets available to ordinary creditors," said John Colvin, chief executive officer of AICD.
"It also gave litigation funders added impetus to bring class actions against insolvent companies," he said.
“The modified Business Judgement Rule being proposed would help avoid that situation.
“However, the Government could go further in this area," Colvin said.
“AICD strongly believes there is a need more generally for a broad-based Business Judgement Rule defence, or safe harbour, for directors, consistent across Commonwealth, state and territory laws. The defence would be available when directors make commercial decisions in good faith, having informed themselves about the subject matter and having acted in the best interests of the company.
“This Business Judgement Rule could apply more generally in the area of insolvency, not just in the case of work-outs.”