Insolvency experts wary of options paper, SMEs call for mental health focus

Insolvency practitioners have welcomed elements of the Federal Government’s options paper, but have warned against wholesale changes to an industry they say works well.

Jim Downey, principal at insolvency specialist firm JP Downey & Co, says there’s not much wrong with the insolvency profession as its stands, and some industry-led reforms are already delivering benefits.

Downey says the industry’s decision to include remuneration details in reports to creditors has anecdotally led to a halving of complaints about fees.

The Government’s options paper, released late last week, rejected calls for the Australian Securities and Investments Commission to be stripped of its oversight role, but recommended allowing creditors to remove liquidators from a job without needing to resort to resort legal action. Other options include allowing creditors to pass a resolution capping fees, and granting creditors more control by allowing them to direct a liquidator.

Downey says the paper is “continuing a dialogue” started when a damning Senate inquiry recommended that ASIC be stripped of its oversight role.

“As one would expect, it’s exploring all options, not all of which will make it into the legislation,” Downey said this morning.

He did not have strong views on whether ASIC should be stripped of its role, saying as long as there was a “robust regulator” in place, he was indifferent about who it was.

The paper also called for greater cooperation between the Insolvency Trustee Service of Australia and ASIC, with corporate and personal insolvency to come under the one umbrella. Downey warns this might not work.

“Harmonisation of the two sounds like it makes sense, and to the man on the street that would sound logical, but they are different,” Downey says.

“A company is quite different from an individual.”

Peter Strong, executive director of the Council of Small Business of Australia (COSBOA), has largely welcomed the paper, and says his biggest concerns about the industry are fees and the way people are treated.

“The big issue is don’t let people take advantage of others who are going through a hard time,” Strong says.

He adds that insolvency practitioners should also have some awareness of mental health issues when dealing with clients.

“If the industry is dealing with stressful situations, let’s make sure they do it in the best way.”