Who is qualified to deliver a meaningful solution?
In an effort to reduce costs associated with the insolvency process for small businesses, the proposed debtor-in-possession model introduces a new classification of insolvency advisor called a Small Business Restructuring Practitioner (SBRP), charged with administering the restructuring of a company.
The draft legislation released last week, announces that only a registered liquidator may consent to act as a SBRP.
Providing appropriate advice regarding a distressed business requires a specialised skill set and knowledge that is acquired through years of education and experience. Furthermore, registered liquidators operate in a highly regulated environment and are subject to strict professional standards, accountability and ethics, unlike many "advisors" in the unregulated pre-insolvency market. While SMEs may appear to have simplified affairs, in order to achieve a successful outcome in any business turnaround process, it is important for those managing that process to have the correct expertise, a well-planned and articulated strategy, and the ability to support all key stakeholders.
While more detail will follow as to whether an additional sub-category of registered liquidator licence will be introduced, the legislation requiring stringent qualifications and experience is in line with previous reforms proposed by Treasury and indeed ARITA1, to limit economically adverse activity such as illegal phoenixing of businesses.
With over 47 years' experience in the SME insolvency space, we understand and support small business. Our 26 Worrells partners are well equipped and positioned to manage any new formal appointment insolvency options available. We are qualified to give advice that explains all of the options and their relevant ramifications to clients in challenging circumstances.
If you or your clients have any questions about the proposed insolvency legislation, or any insolvency related matter, please don't hesitate to contact your local Worrells partner.
Footnotes
1 Australian Restructuring Insolvency & Turnaround Association.
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