Michael.1
Insolvency and related law and policy, and more

Michael Murray is an Australian author and commentator on corporate and personal insolvency law and related issues, in Australia and internationally. He has a strong law and policy background, is independent of any connections, and his views are his own. He gives no legal advice. 

Where’s personal insolvency nowadays? Australian parliamentary confusion

This rather painful transcript of Senate estimates hearing on 27 October 2020 illustrates many things but in particular how small business insolvency law reform is unco-ordinated.

It reinforces my earlier comments that proposed reforms for the insolvency of small business under the draft Corporations Amendment (Corporate Insolvency Reforms) Bill 2020 are too narrow, only or largely handled by Treasury and only or largely based on ASIC statistics.

The hearing involved Senator Cash, the Minister for Employment, Skills, Small and Family Business and officers of the Department of Industry, Science, Energy and Resources. It focused on the government’s announcement of “changes to Australia’s insolvency framework to better serve Australian small businesses” and who was consulted.

I endured the many pages of transcript but only up to the point where “the confusion” – that small business extends well beyond corporations – was suddenly identified, that it

“may involve the difference between ‘corporate insolvency’ and ‘personal insolvency’”.

But then:

“Ms Kelly: … Corporate insolvency is the Treasury’s responsibility. With personal insolvency, I can’t find it listed under the Attorney-General’s Department; nor is it listed under the Treasury. We will need to clarify that. But corporate insolvency—

Senator PRATT: But personal insolvency would be if you were a sole trader. That would still be personal insolvency, would it not?

Ms Kelly: It’s certainly possible, yes.

Senator PRATT: Thank you”.

The questioning then proceeded to the one year bankruptcy – the former Bankruptcy Amendment (Enterprise Incentives) Bill.

Silos

These are examples of siloed approaches to an issue, common in the public sector but also the private. In the 2019 Independent Review of the Australian Public Service, chaired by David Thodey AO, it was reported that

“siloed approaches, rigid hierarchies, and traditional ways of working have created barriers to providing joined-up services and integrated policy advice, and to sharing data, information and resources to best delivering government priorities across agencies”.

That results in an ‘us and them’ approach, a narrow focus, and a departmental as opposed to a customer focus.  That is then transmitted to the regulators and the industry players involved.  Hence we have trustees and liquidators, separately regulated – a practitioner registered as both was recently put through two separate discipline processes; a person registered as a trustee must be separately registered as a liquidator, with different processes applying. The industry sees itself through that lens as the narrow submissions on the ‘SME’ Bill show.

This also goes to the issues raised about the professional identity of practitioners, that even our lawmakers don’t know who they are or what they do: see the thesis of Dr E Streten.

And it is telling that the law requires the Inspector-General in Bankruptcy and ASIC to “work cooperatively” with each other, but only in relation to persons who are both trustees and liquidators: s 10-5 Schedules 2.

Bankruptcy does not belong in Attorney-General’s, it should be in Treasury, as I have long recommended, as but one measure to resolve this confusion.

Meanwhile, would it be up to three quarters of small businesses won’t be assisted by the proposed corporate insolvency reforms?

 

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