First Nations entrepreneurs can now apply for the Barayamal accelerator programme and access $50,000 in grant funding. After running the world’s first Indigenous Accelerator in November 2016, Barayamal is now running its second accelerator program in Victoria on the 7th September 2020 – thanks to LaunchVic. Barayamal believes that First Nations Entrepreneurship can change the Read More…
Insolvency inquiry to help small business
Kate Carnell, the Australian Small Business and Family Enterprise Ombudsman
Fri 11 October 2019 - 10:37 amNews
The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, has today announced an inquiry into the insolvency system, to investigate if current insolvency practices achieve the best possible outcome for small and family businesses in financial trouble.
This inquiry into insolvency aims to help more Australian businesses survive when they go into administration as currently, once a bank forecloses on an Australia farm or business, they very rarely survive.
“We know there is a very low success rate in restructuring Australian businesses under external administration, and the impact of the insolvency process is often devastating for the small business owner,” Ms Carnell said on Thursday.
“Few small businesses that enter formal insolvency administration are able to navigate their way through the process to reach a restructuring agreement.”
“The latest data reveals more than 8,000 businesses entered external administration in 2018/19. Of those, small and family businesses in rural and regional Australia have been among the hardest hit.”
As part of the inquiry, the Ombudsman has established a reference group, chaired by former Senator John Williams, to act as a forum for input and discussion on the challenges faced by small and family businesses facing insolvency.
Mr Williams took a lead role in the 2010 Senate Inquiry into the regulation, registration and remuneration of liquidators.
Williams said the banks had been better at not pushing farms into liquidation during the drought.
“Penalty (interest) rates are not being used, they’re not being instituted and paying more, I haven’t seen farms being sold up, which is a very good thing,” he told reporters in Canberra.
But Ms Carnell said the same care needs to be applied to businesses in rural areas, where the drought was affecting cash flows in entire communities.
“There needs to be a better approach, not to have the same system as bigger companies for smaller companies,” she told reporters.
“Of those, small and family businesses in rural and regional Australia have been among the hardest hit,” Ms Carnell said.
- the existing insolvency system through the experience of small business
- the degree of transparency of the governance, processes and costs of practitioners including legal advisers, valuers, investigating accountants, administrators, receivers and liquidators
- how the insolvency of a small or family business may lead to bankruptcy for the owners
- how the framework impacts the practices and fees of insolvency practitioners.
The CEO of CreditorWatch, Patrick Coghlan, has said that when it comes to getting better outcomes for businesses and creditors there’s definitely room for improvement.
“This is a positive initiative. Shining a light on insolvency practitioners will be a benefit to all businesses — from small family enterprises right up to larger corporates. It should also include scrutiny of pre-insolvency consultants, whose practices are often responsible for the illegal phoenixing of companies,” he said.
“When it comes to restructuring a business, the success rate is currently too low. This doesn’t just have a negative impact on the small businesses involved, it also has a carry-on effect to creditors, who are lucky to receive cents to the dollar.
“My hope is this inquiry leads to regulation that improves transparency for small businesses going through restructuring or liquidation, as well as more education to help them understand the process.”
The inquiry has asked small and family business owners to share their stories, with an interim report released in December and a final report handed down in February next year.
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