Good intentions – the insolvency profession will make Small business insolvency reforms make it work – but beware the ‘quick fix’
Everyone connected with the insolvency “industry” has a gripe – creditors, employees, ASIC, financiers and banks and the liquidators. Everyone can point to the wrong doing of the other and so it seems change was inevitable. Combine this with what was predicted to be an unprecedented corporate failure rate, and it was not hard to see that the obvious response from the Treasurer was to reform the industry.
Make no mistake, these proposed reforms are big and whilst the Insolve Panel Liquidators are generally supportive of the changes, they have expressed one unified call – Make sure the changes are easy to understand, not overly legalist, and transparent.
As Ginette Muller said, ‘Those of us who deal with small business are not against reform and in fact most are constantly amazed by the complexity that is imposed on practitioners – paid for by creditors – with no obvious improvement to the actual outcome.’
It seems that the new system proposes reporting and investigating reductions – essentially cutting red tape. It is not a stretch to see liquidators charging less if they are obliged to do less and importantly, directors who have previously been locked out of a restructuring process because of cost, might now have just had the door open. Good news indeed.
However, in this brave new world, oversight must be paramount. Pre-insolvency advisors cannot be allowed to operate – they have no rule book, no insurance, no disciplinary processes and no oversight from ASIC. Debt agreements will need to registered, practitioners insured and licensed.
What is proposed changes the basis of the current creditor oriented system, to a debtor based protection. This is a big change. There are many sides to this story and perhaps it starts with an honest look at what the Treasurer is trying to fix. If it was only the red tape which is adding to the cost of the insolvency process, then there will be no argument from the liquidators.