ARITA submission: Productivity Commission inquiry into Business Set-up, Transfer and Closure

ARITA has lodged a lengthy submission with the Productivity Commission in response to its issues paper on Business Set-up, Transfer and Closure in Australia.

The key points from the submission are:

  • Key Point 1: Insolvency of its nature seeks to balance a wide range of competing interests
  • Key Point 2: That the Commission review and consider the 11 policy positions detailed in ARITA’s Policy Positions paper
  • Key Point 3: We refer the Commission to the many studies that have been undertaken in relation to insolvency in Australia and internationally in like economies
  • Key Point 4: An efficient system to manage the insolvency consequences of market saturation ensures good capital allocation
  • Key Point 5A: All directors should be issued with a unique ‘director identify number’ (DIN) and be required to undertake basic governance and conduct training
  • Key Point 5B: Prudent lending ensures available capital is efficiently allocated
  • Key Point 5C: The choice of business structure can heavily influence how effectively the insolvency process operates and the efficient reallocation of capital
  • Key Point 6A: ARITA’s Policy Positions paper outlines key reforms that will streamline the operation of Australia’s distressed business environment
  • Key Point 6B: The choice of business structure and isolating personal wealth can influence the consequences of insolvency on entrepreneurs
  • Key Point 6C: Insolvency must find the balance between commercial effectiveness and commercial morality
  • Key Point 6D: The insolvency process is much more than simply a transfer between participants in the process
  • Key Point 6E: Insolvency is inherently a public process but there is some potential for alternative forms of dispute resolution and appellable administrative decisions
  • Key Point 6F: Employee entitlement protection schemes may present a moral hazard that encourage businesses to manipulate their creditor position prior to appointing an external administrator
  • Key Point 6G: Government policy and the actions of the ATO affect decisions regarding business closure
  • Key Point 7A: Entrepreneurism should not be at the expense of good corporate governance and good lending practices
  • Key Point 7B: Australia’s insolvency regime needs to encourage earlier intervention for viable businesses in financial distress
A copy of ARITA's full submission can be downloaded here.

If members have any queries regarding the submission, they should contact a member of the Specialist Insolvency Team.