Insolvency law reform in Australia and Singapore: Directors' liability for insolvent trading and wrongful trading. Issue 3 (19th November 2019)

• Record Type: Journal Article
• Authors: Steele, Stacey; Ramsay, Ian; Webster, Miranda
• Is Part Of: International insolvency review. Volume 28:Issue 3(2019)
• Page Start: 363
• Page End: 391
• Publication Date: 2019-11-19
• Subjects: Australia -- directors' liability -- insolvency -- insolvent trading -- safe harbour -- Singapore -- wrongful trading; Bankruptcy -- Periodicals; 346.078
• DOI: 10.1002/iir.1349
• Languages: English
• ISSNs: 1180-0518

Abstract

Abstract: This article compares reforms to directors' liability for insolvent trading in Singapore and in Australia. We analyse the law in these two countries because they are important Asia‐Pacific trading partners and their laws were originally largely the same—Singapore's law on insolvent trading reflected the law in Australia from the 1960s. However, the law in the two countries has now diverged substantially. The comparison of these two countries therefore represents an interesting case study in how countries differ in their approaches to balancing the competing interests evident in laws that impose personal liability on company directors for insolvent trading. Reform of the prohibition against insolvent trading was a focus of Australia's insolvency law reforms in 2017, which led to the introduction of a safe harbour for directors from liability. Singapore's omnibus insolvency law reforms of 2018–19 include amendments to update Singapore's fraudulent and insolvent trading provisions by introducing a concept of "wrongful trading." The article finds that there are some areas of convergence between these two jurisdictions when it comes to debates about such provisions but concludes that the different contemporary legislative histories in Australia and Singapore have affected their approaches to reform. Reformers in both jurisdictions have attempted to find an appropriate balance between protecting creditors, discouraging director misconduct, and encouraging entrepreneurship and innovation; however, this comparison suggests that the weight that reformers place on creditor protection compared with the concern that excessive personal liability can make directors unduly risk‐averse is influenced by their existing legislative framework and experience of those laws. Although Australia has shifted away from a strict focus on creditor protection, to give directors more opportunities to engage in restructuring, Singapore's amendments may provide a more creditor‐friendly regime.