New cross border insolvency law may shield company subsidiaries and assetsDOWNLOAD
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Newly adopted Australian cross border insolvency law may provide some comfort to companies with foreign subsidiaries and their suppliers in the current volatile market, according to Neil Cussen, Deloitte’s Corporate Reorganisation Group Partner.
Presenting to 250 guests at Deloitte’s National Corporate Reorganisation Group this week (Monday 25 August), Mr Cussen said that the Australian version of the United Nations Commission and International Trade law (“UNCITRAL”) model law became effective on 1 July 2008. In addition, Court Rules are being drafted and will be available within the next three months.
“International trade and financing increasingly mandates insolvency solutions across international jurisdictions with the application of multiple, often conflicting laws,” said Mr Cussen. “This new legislation may possibly provide a modest shield for Australian companies, their suppliers and their assets, against foreign interests being sold from underneath them by providing a due process for the sale of assets.”
Australia has joined many other countries in adopting this model law. It has already been adopted and enacted in Mexico, British Islands, United Kingdom, Columbia, Eritrea, Japan, Montenegro, New Zealand, Poland, Romania, Serbia, South Africa and the United States. The United States is adopting it under its Chapter 15 legislation in 2005, and Canada has also adopted parts of it.
“Australia’s Cross Border Insolvency Act 2008 encompassing the model law will go a long way to protecting creditors in local jurisdictions from wealthy foreign interests,” says Mr Cussen. “The model law should provide an efficient mechanism for dealing with cross border insolvencies. It will promote greater co-operation, legal certainty, fair and efficient administration of cross border insolvencies, protection and maximisation of the value of debtors’ assets and facilitate the rescue of financially troubled companies.”
At the conference, Deloitte hosted an open forum to discuss how UNCITRAL will apply to Australia. The debate was particularly timely as the harmonisation committee has recently appointed a sub-committee, the Cross Border Insolvency Court Rules Sub-committee, which is presently drafting the Court Rules before putting in a submission in around three months time.
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