Media Release: Insolvency Profession Welcomes Announcement of Essential Review of Insolvency Laws
The Australian Restructuring Insolvency & Turnaround Association – the peak professional body for experts who manage business and personal financial distress – has welcomed today’s announcement by Senator Deb O’Neill, the Chair of the Parliamentary Joint Committee on Corporations and Financial Services, of a comprehensive review of Australia’s insolvency and bankruptcy laws.
“ARITA has been seeking a root and branch review of our personal and corporate insolvency regimes for more than half a decade. There has not been a proper consideration of Australia’s insolvency laws since the Harmer Inquiry of the 1980’s despite an economy that has fundamentally changed,” said ARITA CEO, John Winter.
Since the election of the Albanese Government, we have raised these issues with a number of members of the Government, including Senator O’Neill. In contrast to many years of prior neglect, Senator O’Neill has moved swiftly to get this review happening before we see a significant rise above pre-COVID insolvency levels.
“Australia’s insolvency and restructuring regime has some world leading features – like our Voluntary Administration and Safe Harbour regimes which are far more effective than, say, Chapter 11 in the US. As the Productivity Commission found in 2015, by not being court-driven, our regime is also cheaper than in many other jurisdictions.
“Our laws are ridiculously complex. They are so difficult for directors to understand that five times as many businesses are wound up by ASIC than are properly closed down. They make the process unnecessarily expensive, with registered liquidators forced to do work which is not needed and they often have to do this work without getting paid.
“No one wins from this – not investors, not creditors, not workers and not the community.”
“We want to see our laws redrafted under what we call the SEE principles: simple, effective and efficient. Using this framework, we will have more usable laws, reduced costs and better outcomes for all.”
“Australia also has separate regimes for personal and corporate insolvency, with two regulators doing almost identical jobs and adding substantially to the cost of all insolvencies. This makes no sense when so many of SME insolvencies also end up with the personal bankruptcy of directors. The regimes need to come together to deal with this reality under the guidance of a single, dedicated regulator,” said Winter.
“The simplified small business restructuring and liquidation frameworks enacted by the previous government are in urgent need of reform. These are far too complex and expensive for practical use and in these uncertain economic times urgently need to be replaced by efficient and effective small business frameworks.”
“And we also need to deal with issue of company trusts in insolvency. Somewhat unbelievably, this is an issue that was first called out in the Harmer Inquiry of 1988 and has still never been fixed, despite every second small business having a trust structure.”
“We are pleased that the new government understands the importance of Australia having a fit for purpose insolvency law. We look forward to working closely with Senator O’Neill and the committee, and other participants in the inquiry, to build recommendations that will deliver an insolvency and restructuring regime that sees more viable businesses being saved, individuals in bankruptcy given a chance to rebuild their lives, and, generally, build a culture that focuses on rescuing distressed business to protect jobs,” concludes Winter.
The full terms of reference of the inquiry can be found at: https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Corporations_and_Financial_Services/CorporateInsolvency/Terms_of_Reference