The Australian Small Business and Family Enterprise Ombudsman (“the Ombudsman’) has convened an inquiry into the insolvency system.
The Ombudsman has established an Inquiry Reference Group, chaired by former Nationals Senator John Williams, who established the 2010 Senate Inquiry into Insolvency.
As most of you will know, Shabnam Amirbeaggi and I were both invited to be a member of the Inquiry Reference Group; an invitation we both accepted as advocates of the insolvency profession and of our fellow practitioners.
We see this Inquiry as an opportunity to inform the wider community; those that are affected by the process but are not always well advised, about the insolvency process and impact on all stakeholders, including practitioners.
We seek comments from practitioners on:
- current insolvency law in respect of its practicality in use for small business
- the impact on recoverability of costs incurred on insolvency practitioners operating as a small business in competition with larger businesses/pre-insolvency advisors.
Submissions to the Reference Group
Members of the AIIP Committee have actively reached out to the Reference Group to provide information to assist in the Inquiry on behalf of practitioners.
We invite you to submit your comments to the Inquiry and make a contribution to developing beneficial reform of insolvency practice, either directly with the Ombudsman via firstname.lastname@example.org , or via your membership body, AIIP (www.aiip.org.au).
Comments to the Inquiry are required by no later than 20 December 2019.
The report is due by February 2020. The 3 major areas for reform that we have promoted to date within the Reference Group are:
The “prepack” framework written by Professor Fisher (co-author of the voluntary administration (“VA”) framework) should be used as the basis to create a new regulatory framework which will help small business survive insolvency.
This framework is based upon the UK prepack framework which has been in operation for over 15 years.
Similar to Part IX of the Bankruptcy Act (also co-authored by Professor Fisher), we propose a there be a prescribed threshold that limits the use of prepacks to SME matters ($250K in assets, $2M in creditors).
We note the Productivity Commission has recommended ASIC, with the assistance of the Ombudsman, issue a Regulatory Guide for owners of small business, which could adopt a prepack framework if stakeholders agreed.
See extract: Productivity Commission 2015 Prepacks
2. Experts Assessment By Courts
At this year’s AIIP annual conference, Justice Lee of the Federal Court of Australia promulgated the Court using experts to make assessments of disputes on a more regular basis.
Justice Lee’s practice is to limit submissions and the time for hearing by experts in his Court.
Potentially this practice may provide insolvency practitioners with quicker and cheaper access to the courts.
77C For Corporations Act
Section 77C of the Bankruptcy Act (or similar power) should be adopted into the Corporations Act.
This section permits a mini public examination of a director at a fraction of the cost that is required via the Courts.
We hope you can set aside some time to contribute to the reform of our law and practice.