ARITA’s further submission to parliamentary inquiry into corporate insolvency in Australia now available
The Australian Restructuring Insolvency & Turnaround Association welcomed the opportunity to make an additional contribution to the Committee’s inquiry into corporate insolvency and has made a further substantive submission.
The submission provides some high-level observations of the progress of the inquiry to date and some specific issues that have emerged during the hearings that we wished to make some substantive comments on. The remainder of the submission addresses questions on notice, the questions the Committee has asked of all participants, and identifies and/or corrects some points made in evidence by others.
Included in the submission is a summary of what ARITA sees as an emerging consensus in the material now before the Committee:
- Australia’s insolvency system is too complex from the perspective of small and medium businesses and this is leading to excessive cost, reduced incentives and likelihoods of business turnaround, and low returns to creditors.
- The primary cause of this is the legislative complexity, particularly in relation to small business restructuring and simplified liquidations, and the separation of personal and corporate insolvency.
- Practitioners are not being remunerated properly for the necessary work they do in relation to small insolvencies.
- The cost of small insolvency administration could be reduced by more nuanced, risk-based reporting requirements and the bringing together of personal, corporate, trust and partnership insolvencies under a single law administered by a single insolvency agency.
- The system seems to be generally working well for listed and other large businesses although legislative simplification and better education of both directors and creditors would be welcomed.
- A substantial (root and branch) review is generally preferred over piecemeal reform to legislation which the ALRC already considers is not fit for purpose.
In providing the supplementary submission we acknowledge the thoughtful and constructive way the Committee has conducted this inquiry and its obvious commitment to meaningful nonpartisan reform of Australia’s insolvency framework.
ARITA appreciates the Committee’s recognition of and ongoing references to its primary submission, including the Chair’s comments that ‘it's a really high-quality submission. It's beautifully written and it takes us to some critical issues about the construction.’
We continue to monitor the inquiry closely, including the ongoing public hearings.
Click here to download a copy of ARITA’s supplementary submission.