Insolvency reprieve on the cards for business leaders

Insolvency reprieve on the cards for business leaders

Tough insolvency rules could be relaxed, according to a federal minister, as the government looks to reduce the number of businesses pushed “prematurely” into insolvency.

Speaking to a recent industry conference, financial services minister Kelly O’Dwyer said the onus should be on supporting businesses to survive and grow, not on penalising difficulties.

“The government believes Australia’s current insolvent trading laws put too much focus on stigmatising and penalising failure,” Ms O’Dwyer said.

“In many cases laws push directors to prematurely enter a formal insolvency — even where the company may be viable in the longer term.

“With that in mind, the government’s proposed safe harbour will support directors to restructure the business and continue operating for the overall benefit of the company and its stakeholders.”

As Ms O’Dwyer told delegates, the safe harbour rules would only apply when there is a reasonably likely chance of delivering a better outcome and only to businesses whose leaders have diligently met their obligations as directors.

Ironically, however, one debt recovery agency claims it is the government and its agencies which are leading the push for business insolvencies.

Prushka Fast Debt Recovery CEO Roger Mendelson said nearly two-thirds of insolvency petitions between November 2016 and June 2017 came from government agencies, with the ATO being chief among them.

Meanwhile RSM Australia’s national head of restructuring and recovery, Peter Marsden, previously told My Business that company directors often don’t realise their business is heading for insolvency until it is too late.

“What you find is that those directors that act earlier tend to get a better result, because there is more flexibility with the value of assets and the size of liabilities, so there is a deal there to be done,” he said.

 

Insolvency reprieve on the cards for business leaders
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