At the PJC inquiry into corporate insolvency, in the context of the 2015 Productivity Commission (PC) Report on Business Entries and Exits, the point was made that going through a corporate insolvency was a “very long and complex process” with completion of a liquidation taking on average over 500 days.
“That was the median, and then there was a tail of liquidation processes that was longer still”.
As the chair commented
“today I could get an ABN, get a business going and get things moving, but when I want to wind it up using the current legislative structures it would take over 500 days to liquidate?”
See transcript 13 December 2022 Hansard – Committee 13/12/2022 Parliament of Australia (aph.gov.au)
That was in 2015. We may yet be given more recent timings.
Bankruptcy
The PC representatives also spoke of the PC’s recommendations around personal insolvency aimed at
“reducing the stigma and the consequences of some entrepreneurs failing, with the idea of making it more acceptable for some of these entrepreneurs to have a go, fail fast, if you like, and then try again with less consequence ….”.
That fail fast was the one-year bankruptcy recommended by the PC, which would still have a bankruptcy taking at least 365 days to complete.
It was not mentioned that the PC recommendation was not accepted, with personal bankruptcy still taking at least 3 years, well over 1,000 days, as at 2023.
Even with “quicker” Part X agreements, between 2014 and 2019, their mean length was 560 days, with the median 301 days: www.ag.gov.au.
Triage
Perhaps we should have something in the nature of a triage system, deciding which of any insolvency could be fast-tracked away, while others might more closely be examined. AI could be used effectively in that process. That could be coupled with financial dis/incentives for prompt handling of administrations. The overall aim would be to have insolvency law focus on more achievable and productive outcomes, perhaps according to a set of established purposes and identifying criteria.
Comments welcome.
2 Responses
Liquidations have traditionally provided an excellent training avenue for would-be RLs. (I was one of them.)
They are the only corporate external administration which can be put “on the shelf for a rainy day”, and reactivated when receivership/secured creditor work is slow.
Garry
With respect, that is hardly a valid reason not to attend to a liquidation promptly.
Michael