In consultation with the CA ANZ Insolvency Management Committee (IMC), we provided an initial response to the Australian Small Business and Family Enterprise Ombudsman in relation to the Insolvency Practices Inquiry on 19 December 2019.
This submission made on 30 January 2020 responds to the Discussion paper published by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO).
Key points from our response include:
- We encourage the Inquiry to focus on helping small businesses avoid insolvency. Education can play an important role for directors in understanding insolvency process, as well as increasing awareness of the warning signs of insolvency so that they can seek help earlier in the process when there are more options available to them. Consideration should also be given to requiring first time directors to complete an online course, which could be provided by ASIC, and includes some basic education on their roles and responsibilities.
- There are several existing 'control' mechanisms in place that deal with costs. However, small business owners don't understand and appreciate that the financial outcome of an insolvency process is determined by the assets left for creditors. Typically, by the time registered liquidators are engaged, there are limited assets left.
- This Inquiry might give consideration as to whether there should be an appropriate funding model for small business insolvencies with little or no assets and additional funds made available for registered liquidators undertaking such appointments. Alternatively, there may be a role for a government liquidator, similar to the AFSA Official Trustee.
- Whilst registered liquidators may provide pre-insolvency advice, there are some pre-insolvency advisers who are unregulated, unlicensed and typically don't have professional indemnity (PI) insurance. Good advice should be supported where possible with fact sheets. We consider requiring them to provide businesses with hard copy fact sheets and the reasons for recommending a particular course of action would help increase transparency and accountability in this sector.
We would like to thank the CA ANZ IMC for contributing to our submission.
CA ANZ’s initial response to the Insolvency practices inquiry
CA ANZ provided an initial response to ASBFEO in relation to the Insolvency practices inquiryRead CA ANZ initial response to inquiry