Reforms to corporate insolvency laws commenced on 1 January 2021 to assist companies with liabilities less than $1 million. These reforms under Part 5.3B Corporations Act included a new debt restructuring process for incorporated businesses, and a new simplified liquidation pathway. A new class of registered liquidator who can only undertake small business restructurings (SBR) was created, with lesser but broader criteria for those wishing to be registered. See my earlier comments about this process and about the SBRs of 19 November 2020: Australia’s small business restructuring practitioners – Murrays Legal
The use of the SBR process remains low – only 70 since January 2021. What is even lower is that only one person has been appointed as a SBR practitioner. How many have applied and been rejected is not known.
Diversity
That is a pity because the industry is trying to diversify and one important way to improve its diversity in thinking is to allow a broader range of people to enter. The government saw one of the merits of the new SBR role as being to be to improve industry capacity and diversity. This was in the face of some submissions when the new role was being proposed that only liquidators should be permitted to conduct these SBRs.
Properly we should see successful entrants who are overseas qualified, or lawyers, or bankers, or those with finance/economics backgrounds.
Nevertheless, the decision to appoint a SBR practitioner remains with the same interview committee structure as for registered liquidators, necessarily with different selection criteria and with the stated purposes of the new law to guide the committee members.
Perhaps there is some problem there?
Trustees
One odd exclusion from those authorised as SBR practitioners are trustees in bankruptcy; odd given that the majority of small businesses are sole traders or they operate on a mixed corporate/personal guarantee arrangement.
As with all other corporate insolvency arrangements, SBR and liquidation does not deal with personal guarantees or other personal liabilities.
ASBFEO
There have been calls from the Australian Small Business and Family Enterprise Ombudsman for better alignment or joint administration of personal and corporate business debt both in submissions to AGD on bankruptcy reform (18 February 2021) and to the Productivity Commission as a productivity issue (5 April 2022). Under the current law, trustee appointees would at least assist that process.
