Commissioner calls for insolvency provisions for small business
Says some businesses are confused by the process
15 December, 2022
The NSW Small Business Commissioner Chris Lamont has recommended special provisions be introduced for small business to help them better understand the insolvency process and have greater confidence in it.
In a submission to a parliamentary inquiry into Australia’s insolvency laws, Commissioner Chris Lamont said businesses found the laws difficult to understand and were wary of the insolvency process.
“There is often a perception that as insolvency practitioners are paid through the restructuring process, they are incentivised to close businesses to pay creditors as quickly as possible,” Mr Lamont said.
“This perception, whether real or perceived, means some small businesses fail to act early and engage professional advice prior to their situation worsening.”
The Commissioner suggested small businesses might have greater confidence in the system if a two-step process was introduced where an independent practitioner was first appointed to find a solution to a company’s problems.
“An independent practitioner could first work with a small business to explain and identify appropriate alternative methods, such as mediation to address and work towards a resolution for their insolvency issues. If required, a restructuring practitioner could then undertake the restructuring process,” Mr Lamont said.
The Commissioner said there could be an increase in small business insolvencies in coming years due to COVID-19-related debts and cashflow problems.