The insolvency implications for corporate groups in Australia—recent events and initiatives

Abstract

The regulation of corporations and their insolvency is in most jurisdictions based upon the separate entity principle.There has been increasing concern though with how this fundamental principle of corporate law should apply in insolvency where separate entities operate as a corporate group. The primary regulation of corporations in Australia is governed by the Corporations Act 2001(Cth). This single enactment provides for the regulation of corporate insolvency within Chapter 5 - External Administration. In relation to corporate groups, the Corporations Act generally applies an entity approach that results in each company being treated as a distinct legal entity, consistent with the separate legal entity principle (common shareholders notwithstanding). However, recent proposed amendments to Chapter 5 recognize, albeit to a limited extent, an enterprise approach when dealing with the insolvency of a company/companies in a corporate group.