Much ado about … not much?
- Posted by: Admin
- Category: Market briefing
Will post Covid 2021 see an insolvency wave, a steady flow, or a trickle?
With the expiration of the JobKeeper scheme and return of the ability of creditors to pursue payment by the use of Statutory Demands on a timely basis, we are seeing a rise in the number of applications to wind up companies, as well as voluntary appointments of both Liquidators and Voluntary Administrators. So far, there is little or no sign that statutory creditors (the ATO, workers compensation insurers) are returning to this form of collection activity, but we expect that to change as the year progresses. Casual review of the notifications of appointments suggests most are to smaller businesses, with retail and hospitality predominating, consistent with the disruption to those businesses last year.
Those who follow us will recall that at the start of the year, we questioned whether the government’s new ‘Small Business Restructuring’ law (“SBR”) would work: many other practitioners were keenly promoting this scheme as a way for smaller businesses to work their way out of difficulty. Reviewing the information available about appointments over the past 100 days, it seems our thinking has turned proved correct: so far, only 5 companies have invoked the SBR provisions, though another 40 or so have invoked the separate moratorium on payment of their creditors.
In all, this is an inauspicious beginning to a reform that was heavily promoted, both by government and parts of the profession. It appears the changes are unable to deliver independent, valuable information for creditors, and simply won’t enable businesses to be restructured as contemplated, because of constraints on the independence of the ‘Restructuring Practitioner’ and because suppliers do not get sufficient certainty of payment during the term of the Restructuring appointment. So, whether 2021 proves to be a busy year or not, we doubt the attention given to Restructuring was merited.
We will keep readers up to date with trends as the year develops.
Author: Peter Sheppard, Director