The Productivity Commission’s report – Shifting the Dial – is a valiant attempt to move us out of the comfort zones of many assumptions about what can and can’t be done in commerce and society generally.
Its recommendation [2.5] on how pharmacy services might be revolutionised is a dramatic example.
But in my focus on insolvency and the failure of businesses, and the economic need for a regime for the efficient reallocation of assets for better use, with minimum cost, StD is rather tame.
StD harks back to the Commission’s own 2015 report – Business Set‑up, Transfer and Closure – which in itself had a rather limited insolvency perspective, with industry given assumptions throughout, and little of the economic analysis that might have been expected from the Commission.
As StD says, the government has
“responded to the recommendations to improve insolvency and liquidation processes that should increase the ability of firms to recover and for entrepreneurs to start again”.
StD then says that more is and needs to be done to address phoenixing, citing the usual figures of the recalcitrant involved and moneys lost.
But StD’s one sentence that is of value, but which is then left hanging, is that the
“real gain comes from more efficient use of resources and the improvement in trust that a reduction in the risk of phoenixing would bring over time. The gains will not just be found in tax revenue improvement; sub‑contractors and staff are often casualties of phoenixing”.
That should be a message taken in by Treasury when it considers its anti-phoenix reforms. At least some people will be conveying that message, that the corporate landscape that allows phoenix activity to exist must be changed.
The point this is leading to is a presentation to which I recently spoke at the Asian Law Centre of Melbourne Law School about what China is doing in setting up its ‘new’ insolvency regime. The paper of the excellent academics from the Centre is soon to be published.
China’s insolvency law only came into operation in 2007. China therefore has the benefit of starting afresh, in a world where technology offers so much.
China’s system is all on-line. The Supreme People’s Court web based bankruptcy information platform went live in August 2016. It comprises a series of three portals which each share information and facilitate communication with and between courts, administrators, investors, debtors, creditors, government agencies and other stakeholders, and forms a work platform to deal with insolvency cases for judges and administrators.
It is of the nature of the Finnish model and other Scandinavian countries that offer transparency, open access and much information, in real time.
Phoenixing does not thrive in the sunlight, and there are plenty of dark corners to be found in our controlled business landscape and its limited information and data. As StD rightly says, open those corners up to the light and the value in the improvement in business trust would economically and legally be more valuable than any tax revenue improvement. Web-based insolvency administrations would likewise lead to greater efficiencies the reallocation of capital.
In comparison, we here in Australia are focused on the forms to be lodged, the events to be published, and the creditors to whom various notices must be sent, and even emailed …... but directors will at least be numbered, if not biometricated.