Insolvency Practices Inquiry reveals small-business pain points

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The Australian Small Business and Family Enterprise Ombudsman Kate Carnell has stated that the Insolvency Practices Inquiry has heard a vast number of harrowing small-business stories, shining a light on the failures of the insolvency system as well as the challenges faced by industry professionals.

The Ombudsman recently released a discussion paper, seeking feedback on developing a best practice framework for small businesses facing insolvency and for practitioners managing external administrations.

“More than 300 small businesses have come forward to share their experiences of going through the insolvency process. Many have spoken of being left with nothing – no business, a ruined reputation and often no home and broken families. It’s absolutely gut-wrenching,” Carnell said.

“The overwhelming experience of small businesses has been a loss of control, costs that strip the value of a business and a lack of transparency throughout the process.”

The Ombudsman also acknowledged the constructive feedback we’ve had from insolvency practitioners, industry groups, lawyers and financial advisors.

“They have sent the clear message that small businesses experiencing financial difficulties are often leaving it too late to seek help,” Carnell said. “The sooner small and family businesses get help, the more likely it is they can achieve a turnaround or restructure.”

The Ombudsman also noted how crucial it is for small and family businesses experiencing financial difficulties to understand they don’t have to go it alone and that is the time for them to lean on a trusted advisor, like an accountant.

She also noted that industry professionals have also called for a streamlined insolvency process for small business, with minimal red tape that provides a real option to turn around the profitable parts of the business.

“In releasing this discussion paper, we’ve outlined the key pain points for small businesses as well as the challenges for registered liquidators. In the meantime, this discussion paper poses a number of questions we are seeking feedback on, particularly around the transparency of the insolvency process,” Carnell said.

The Ombudsman also announced that the deadline to share insolvency stories via online survey or by providing a submission to [email protected] has been extended up to the end of January 2020. The final report will be released in March 2020.