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SME insolvency must shun one-size-fits-all approach: Law Council

Adrian Flores
Adrian Flores
19 October 2020 1 minute readShare
Pauline Wright

There needs to be a shift towards a more cost-effective approach when it comes to dealing with small to medium enterprises facing insolvency, according to the Law Council of Australia.

Law Council of Australia president Pauline Wright wrote in a recent Treasury submission on the Corporations Amendment (Corporate Insolvency Reforms) Bill 2020 that the current economic circumstances facing SMEs should be reason to fast-track reforms allowing SMEs to restructure, or transition to liquidation, in a more cost-effective way.

“The COVID-19 pandemic has made it difficult for some enterprises to remain solvent,” Ms Wright said.


“Therefore, timely changes to the Corporations Act will assist businesses that need to either restructure to remain viable, or transition to liquidation, in a way that will cause the least financial damage.”

The Law Council suggested changes to the bill, including the criteria for qualifying companies to be laid out in the primary legislation, and clarifying whether a company that fails to have a restructuring plan approved should fast-track direct to liquidation or voluntary administration.


“The Law Council believes the current economic circumstances and the likely consequences that will be experienced in the coming year make it imperative that further insolvency reform is needed,” Ms Wright said.

“While Treasury is to be commended for tackling the issue of SME insolvencies, with the overall objective of providing greater flexibility, it should not be assumed that the existing forms of external administrations are always suitable for all larger companies.

“There are a number of aspects of the draft amendments which may also have some relevance for larger businesses. Consultation should ensue in respect of broadening the categories of companies that may be better suited to more flexible solutions.”



SME insolvency must shun one-size-fits-all approach: Law Council
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Adrian Flores
Adrian Flores

Adrian Flores is the deputy editor of MyBusiness. Before that, he was the deputy editor for SMSF Adviser as well as features editor for ifa (Independent Financial Adviser), InvestorDaily, Risk Adviser, Fintech Business and Adviser Innovation.

You can email Adrian at [email protected].

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