Corporations and Financial Services Joint Committee Report

Tuesday, 01 August 2023

Mr HAWKE (Mitchell) (17:34): On behalf of the Chair of the Parliamentary Joint Committee on Corporations and Financial Services, I present the following reports: Report on the 2021-2022 annual reports of bodies established under the ASIC Act, Statutory inquiry into ASIC, the Takeovers Panel, and the corporations legislation: ASIC licence transfers and Corporate insolvency in Australia.

Reports made parliamentary papers in accordance with standing order 39(e).

Mr HAWKE: by leave—Section 243 of the ASIC Act requires and empowers the committee to undertake certain actions in order to maintain oversight of the activities of ASIC, the Takeovers Panel and the corporations legislation. The three reports which I've tabled today have been completed pursuant to this section.

I do want to make some remarks about our corporate insolvency report. The committee resolved, as members will know, to commence an inquiry into corporate insolvency in Australia in September 2022. The terms of reference adopted by the committee were wideranging and included matters such as trends in insolvency, the operation of the existing framework, areas for reform, supporting access to corporate turnaround capabilities, the role, remuneration, financial viability and conduct of insolvency practitioners, and the role of government agencies. The committee received 78 submissions and held five public hearings, and the committee's final, unanimous report contains 28 recommendations.

In the committee's assessment, Australia's corporate insolvency system is overly complex and difficult to access. It creates unnecessary cost and confusion for both debtors and creditors. Tellingly, few parties seem satisfied with the system as it currently stands. Unsecured creditors are understandably frustrated by stubbornly low returns in insolvency processes. Debtors, particularly smaller businesses, regard opportunities for restructure as lacking and the system costs as excessive. Insolvency practitioners and other observers consider the system is not appropriately resourced to achieve its purposes.

The committee concluded that to address the shortcomings of the corporate insolvency system there is a need for an independent and comprehensive review that addresses the system as a whole. The committee's final report identifies a number of issues that should form part of such a review, including the purposes and objectives of the system, the interaction between the personal and corporate insolvency systems, and a holistic review of the current insolvency pathways. The committee has also highlighted several matters that should be dealt with in the near term outside of any comprehensive review, which will take time. These include implementing the recommendations of the safe harbour review, reforms to the eligibility requirements to become a registered liquidator, and improving the treatment of trusts in insolvency.

I want to say a few words about statutory oversight as well. This is the committee's first report of the 47th Parliament under its statutory inquiry role under subsection 243(a) of the ASIC Act. ASIC licences to operate financial services are being transferred between companies without ASIC being able to check whether the new licence owners meet the licence requirements. ASIC has advised the committee that such transfers occur about 200 times a year. In our unanimous report the committee concluded that existing regulatory arrangements for ASIC license transfers could be improved by ASIC including information in its annual report about how many licence transfers are occurring, ASIC auditing on how many occasions a licence was transferred to an entity that previously had a licence application rejected by ASIC, ASIC examining the transfer of all high-risk licences, and, finally, a review of the economic incentives for companies to acquire an ASIC licence through a transfer rather than applying to ASIC for that licence.

On the annual reports front, subsection 243(b) of the ASIC Act requires the committee to examine reports prepared by the bodies established under that act. In undertaking the review of the reports prepared for the 2021-22 financial year, the committee reviewed the reports of eight bodies: the Australian Securities and Investments Commission, the Takeovers Panel, the Companies Auditors Disciplinary Board, the Financial Reporting Council, the Australian Accounting Standards Board, the Office of the Australian Accounting Standards Board, the Auditing and Assurance Standards Board and the Office of the Auditing and Assurance Standards Board. The committee was satisfied that each of the annual reports met their reporting requirements and was pleased to see that the bodies had implemented recommendations made by the corporations committee in previous reports.

The annual reports bring important matters to the parliament's consideration. For example, the Companies Auditors Disciplinary Board's annual report highlighted ongoing resourcing challenges both in its administrative support and in appointments to the board itself. The committee observed that these matters have now been raised in consecutive reports. CADB observed, in its most recent report, that the constraints impacted its ability to effectively discharge its statutory mandate. While noting that additional appointments have been made in the intervening period, the committee has encouraged Treasury, ASIC and CADB to work together to urgently remedy this issue and ensure that it is not repeated.

I commend the reports to the House.