Legal and Accounting Regulatory Framework for Corporate Groups: Implications for Insolvency in Group Operations

This article takes a cross-disciplinary approach to examine how the current legal and accounting regulatory frameworks present problems for an equitable, orderly administration of the insolvent company within a corporate group. It is proposed that the Australian legal and accounting frameworks do not provide specific, systematic solutions for ongoing operation of corporate groups and also their administration in liquidation. Further, that corporate, legal and accounting regulation are closely intertwined but lack consonance. The discrepancies between legal and accounting regulation have an adverse impact on the relevance and usefulness of financial information, particularly when insolvency strikes. Suggested reforms include explicit recognition of corporate groups in the Corporations Law, joint development of common precepts within law and accounting regulation, and statutory provisions facilitating a group solution in the event of insolvency.