The Australian Small Business and Family Enterprise Ombudsman has announced an inquiry into the insolvency system to establish if it encourages practitioners, in the first instance, to restructure the small or family business to turn it around when facing financial difficulties. When a restructure is not possible, the Inquiry will investigate if current insolvency practices achieve the best outcome for all parties.
The Insolvency Practices Inquiry will examine:
- the legislation, compliance and industry standards that govern insolvency practices and practitioners;
- the different outcomes depending on who initiates the action including the small business owner, a creditor by application through the courts or a secured creditor through receivership;
- the transparency, timeframes and costs across the different insolvency actions:
- how conflicts of interest, arising from the same practitioner undertaking several stages of an insolvency, are managed;
- how practitioners decide the optimal process to maximise the return for creditors;
- where winding up is delayed – ensuring the necessary expertise is engaged to manage the business to maximise the value of the assets at a future point in time;
- where the value of assets is to be realised immediately – what factors are taken into consideration to determine the target market and marketing campaign.
An interim report will be released in December with a final report to be handed down in February 2020.