Next year, 2026, Australia will be the subject of a review by the World Bank under its new B-Ready assessment process. See my earlier report on this: World Bank’s B-Ready Report on country business systems, including on the efficiency of corporate insolvency systems – Murrays Legal
B-Ready replaces the World Bank’s Doing Business Index, a global ranking system that purported to measure how easy it was to start and run a business in each of 190 countries.
That was found to be the subject of manipulation by certain countries, including China and Saudi Arabia. The scandal raised serious concerns about the use of global benchmarks to shape development policy and B-Ready was devised and launched in October 2024.
According to a report in the Conversation, B-Ready aims to evaluate business environments through more transparent and broader data, going beyond laws and efficiency and also measure social inclusion, environmental sustainability and public service delivery. However, the authors express concern that this may have “many of the same flaws that plagued its predecessor”.
The methodology is built on three pillars—Regulatory Framework, Public Services, and Operational Efficiency—and further detailed into ten topics relevant to the business environment.
These include:
- Business Entry and Business Insolvency,
- Business Location,
- Utility Services,
- Labour,
- Financial Services,
- International Trade,
- Taxation,
- Dispute Resolution, and
- Market Competition.
A number of countries have already been assessed.
Business insolvency
A review of Australia’s ‘business insolvency’ might be assessed against the World Bank’s 2021 Principles for Effective Insolvency and Creditor/Debtor Regimes, and raise these issues:
- There has been no government response to the 2023 PJC recommendations on corporate insolvency.
- There is no specific insolvency and restructuring regime for small business. While the government introduced small business restructuring under Part 5.3B in 2021 for small corporate businesses, ideas for a small business specific insolvency regime, for harmonisation across the corporate and personal insolvency systems, and for a one-year bankruptcy, have each gone nowhere.
- Those in a failed business face the prospect of a 3 year period of bankruptcy restrictions, despite the World Bank’s saying that the period before discharge is granted “should be short to encourage a fresh start, continued entrepreneurial activities and reduce stigma”.
- There is no government official receiver role to address the World Bank’s call for “mechanisms for covering the costs of implementing simplified insolvency proceedings where assets and sources of revenue of the debtor are insufficient to meet those costs”;
- nor options, “including through procedural consolidation or coordination of linked proceedings, for the treatment of personal guarantees provided for business needs of the MSE debtor”;
- nor any “regime for personal and business debts combined”.
- there is limited data to assess the efficiency and effectiveness of Australia’s business insolvency regime.
Subsequent comments
While the World Bank refers only to corporate insolvency, it should be necessary to also examine the intersection with personal insolvency.
As the World Bank itself says, in its 2017 Report on the treatment of MSME insolvency, MSMEs are often financed with a mixture of corporate debt and personal debt taken on by the entrepreneur, including by way of personal guarantees. The failure of the MSME may thus have severe consequences for the entrepreneur and their family. The Bank says that “further exploration is needed between the intersection of personal insolvency frameworks and MSME insolvency”.
This was the view also of the 2023 PJC report into corporate insolvency, that there should be a more comprehensive review not only of corporate insolvency, but also personal insolvency.
With all insolvency law and policy now placed within Treasury, under Ministers Dr Andrew Leigh (insolvency) and Dr Anne Aly (Small business), Australia’s response to the 2026 B-Ready process can be the more co-ordinated.
It will be interesting to see how Australia fares against its trading partners and other comparable jurisdictions.
One Response
Great research in the making Michael, I look forward to read more. I always reflect on these learnings to compare the reform debate for India’s IBC. In my article that was co authored with Harris, we have argued that ‘one size fits all’ law making has failed to provide recourse to the MSMEs in both countries. There is another work being finalised on this soon. I am of the strong view that legal transplantation does not work for MSMEs. There are a number of socio-economic factors in play and that’s my area of future research – from a comparative perspective.