IPA welcomes ASBFEO's insolvency inquiry recommendations

“We know that small business is doing it tough and faces huge challenges, particularly in this current COVID-19 environment,” said IPA chief executive Andrew Conway.

“It is therefore critical for the survival of small business that a new regime is implemented which encourages small businesses to assess their position and execute a turnaround with specialist advice from their chosen trusted advisers."

One of the most pertinent recommendations in the ASBFEO's report is that of a Small Business Viability Review, where a voucher of up to $3,000 would be provided to obtain tailored advice to improve business operations. If the business is assessed as unviable then another $2,000 would be provided to aid in the winding-up process, making the support a total of up to $5,000.

“In the latter circumstances, the ASBFEO report recognises that a restructure of business affairs managed by the small business owner, and with approval from a registered liquidator, may have more positive outcomes beyond what is the current norm, including greater returns to creditors," said Mr Conway. 

“To help facilitate this, it has been recommended that a Directors Insolvency Agreement be established where the small business owner can provide a proposal to a registered liquidator on the best way to manage the business. The proposal may seek a restructure or the winding up of the business, with the retention of the existing company and a sale of the business and/or its assets to an unrelated party."

Another key aspect of the report relates to the accessibility of information, including for the small business owner and for creditors.

"The report recommends that a modernised approach be taken to information, including simplification, use of plain language, using fact sheets, limiting the volume to relevant information and greater use of electronic means. The IPA agrees that we need to demystify the process to enable more informed choices and better outcomes,” said Mr Conway.

“The IPA is fully supportive of the recommendations and urges the government to implement them as soon as possible.”