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. 

Data Availability and Transparency Bill and Australia’s SME insolvency reforms

Following on some decades of government inattention to the collection of adequate statistical data in insolvency, but with law reforms proceeding regardless, the Australian government is now conducting a major project aiming to provide access to a wide range of government data for research purposes.  One aim of the work is said to be to modernise how the government shares its data so as to support development of good policy and programs and well directed law reforms. 

That would be welcome…..

This flowed from 2016 Productivity Commission recommendations to reform the Commonwealth data system, including to establish a National Data Commissioner and new data sharing legislation.

In 2019, in response to the Data Commissioner’s Data Sharing and Release Legislative Reforms Discussion Paper, a number of insolvency academics made a preliminary submission explaining the lack of basic data in relation to how the insolvency system works in Australia and the difficulty in extracting existing data, in particular from ASIC’s corporate databases.  The submission listed the history of Australia’s lack of attention to recommendations to government over several decades.

The history

The 1988 Harmer Report said that ‘one of the major handicaps that has impeded the Commission in this Reference has been the difficulty in obtaining pertinent statistical information about corporate insolvency in a readily available and intelligible form’.

In 1992, the then Trade Practices Commission said its study of insolvency had been hampered by difficulty in obtaining detailed relevant statistics on insolvency …. “Much of the relevant data sought from the relevant authorities and the IPAA [now ARITA] simply have not been available”.

Sixteen years later, the 2004 ‘stocktake’ report of a Parliamentary Joint Committee commented that it had ‘only the bare minimum of information on the operation of our various corporate administrations’, and it listed needed data on phoenix activity, assetless companies, ‘strategic insolvencies’, insolvent trading, unpaid employee entitlements and fraud.

Six years later, a 2010 Senate Report recommended the creation of the Australian Insolvency Practitioners Authority (AIPA) one role of which would have been to gather and report insolvency statistics.

The government rejected that proposal.

At the invitation of the Economics References Committee in its 2014 inquiry into the performance of ASIC, a submission on the need for better corporate insolvency statistics was made by a number of insolvency academics.  There was no reference to that submission or the issue itself in the Committee’s final report of June 2014.

2019

The academics’ 2019 submission said that ‘while academic and professional research and input into insolvency law reform is of high quality, it lacks empirical data both as to be able to assess the need for a particular law and as to the effectiveness of that law once introduced’.  It said that the statutory assessment of the 2017 safe harbour reforms would be limited for this reason.  As it happens that is not an issue in 2020 with the government not conducting the required statutory review.

2020

Following that process, the government is now consulting on an Exposure Draft of the Data Availability and Transparency Bill and associated materials, with submissions having closed on 6 November 2020 https://www.datacommissioner.gov.au/exposure-draft/dat

There is also a Discussion Paper on the proposed Accreditation Framework, which was also open for submissions by 6 November 2020. https://www.datacommissioner.gov.au/exposure-draft/accreditation

While this is well beyond that issue of insolvency and business law generally, it does mark some action being taken to harness the benefits of providing access to government data, in particular for example in relation to health and socio-economic issues.

SME insolvency reforms

It is not a real solution to present problems, with the SME regime looking like it will miss the majority of failing enterprises as well as a good proportion of failing corporate enterprises.

The comfort is that, we probably won’t know one way or the other.

But as to whether this constitutes ‘the most significant reforms to Australia’s insolvency framework in 30 years’, according to Mr Frydenberg (the Treasurer), given the limited data he relied upon, at a guess, perhaps not.

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One Response

  1. Love this one Michael – “The comfort is that, we probably won’t know one way or the other.”

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