Ironbark
23 September 2026
Insolvency law reform on hold – what it means for liquidator recoveries – “Quick Take”
Ironbark Litigation Funding’s “Quick Takes” are for time poor people – we do the work distilling the subject matter so you don’t have to.
What happened
On 6 August 2026 the Federal Government released its response to the Parliamentary Joint Committee on Corporations and Financial Services (PJC) report Corporate Insolvency in Australia. The PJC tabled that report in July 2023.
The PJC’s central recommendation was a comprehensive, independent review of Australia’s corporate and personal insolvency laws. It named the unfair preference and other voidable transaction provisions among the areas needing attention.
The Government supported one of the PJC’s 28 recommendations outright, supported 25 in principle and noted the remaining two. It rejected none. However, most of them have been handed to the Productivity Commission’s (PC) broader inquiry into business dynamism, not acted on directly. The PC is due to deliver an interim report in November 2026 and a final report in May 2027.
Commentators have pointed out that several of the more technical insolvency issues, including unfair preferences, don’t appear in the PC’s terms of reference. They also expect any legislative change is unlikely before 2028.
The backdrop: insolvencies remain high
The deferral comes while insolvency numbers remain high. ASIC data for the 2025–26 financial year shows 14,152 companies entered external administration. That is slightly down on 14,722 the year before, but still above the long-term average. Construction again led with 3,472 companies, followed by accommodation and food services with 2,078. Creditors’ voluntary liquidations made up around half of all appointments.
Why it matters
For liquidators and the creditors they act for, the practical message is certainty for now. The voidable transaction regime is not about to change:
Unfair preferences, uncommercial transactions and other voidable transaction claims will continue to be run under the current provisions, as interpreted by the High Court in cases such as Bryant v Badenoch Integrated Logging Pty Ltd [2023] HCA 16 (peak indebtedness) and Metal Manufactures Pty Ltd v Morton [2023] HCA 40 (no statutory set-off against unfair preference claims).
Insolvent trading claims against directors, and the safe harbour defence, likewise stay on their current footing.
Time limits have not moved. The s 588FF(3) window for bringing voidable transaction claims keeps running regardless of reform debates.
Many of these companies will have little or no cash in the administration. That doesn’t mean there is nothing to recover. Preference payments, related-party transactions, loan accounts and director liability often remain to be investigated. Where the company cannot pay for that litigation itself, a liquidator’s options usually come down to creditor funding, a litigation funder, or assignment of the claim.
What it means for liquidators, lawyers and creditors
Don’t wait for reform. Claims should be assessed and pursued under the law as it stands. Waiting for legislative change risks losing claims to the limitation period.
Investigate early. Early analysis of bank statements, loan accounts and related-party dealings makes it easier to identify viable claims and to put a proposal to creditors or a funder while the evidence is fresh.
Get approvals in order. Where a funding agreement or long-term costs agreement is involved, consider early whether approval under s 477(2B) of the Corporations Act 2001 (Cth) is needed.
Engage with the PC process. Practitioners who want the voidable transaction provisions reformed now have a formal channel through the PC inquiry.
Summary
The Government has accepted the case for insolvency reform in principle, but in practice the work has been handed to the Productivity Commission. Meaningful legislative change looks some years away. With company insolvencies still above the long-term average, liquidators should keep pursuing recoveries under the current regime, and funding remains a practical way to do that where the administration has no cash.