Small Business Ombudsman encourages Business Owners to seek advice
- Posted by: Admin
- Category: Market briefing
The Australian Small Business and Family Enterprise Ombudsman has urged the Federal Government and regulators to reactivate temporary insolvency protections to protect small and family businesses at risk during the lockdown. The necessity of public health orders and lockdowns significantly impact small and family businesses. It is considered that the re-introduction of temporary insolvency protection in addition to existing safe harbour provides an opportunity to help those businesses that may be trading insolvent due to current restrictions. According to CreditorWatch, businesses going into administration increased by 75% in the last week of June, a trend expected to continue.
Mr Bruce Billson mentioned, “Insolvency protections introduced temporarily last year worked to reduce the threat of creditors taking action against an SME business and offered temporary relief for directors from any personal liability for trading while insolvent. “Crucially, its measures like this that give otherwise viable small businesses more time to recover or turnaround, preventing a wave of unnecessary insolvencies”. Until the government provides a specific answer on temporary relief, the Ombudsman suggested that SME businesses experiencing financial difficulties seek advice from trusted advisors. Without the right advice, cash flow issues, compounded by falling revenue, can prove devastating for business owners and stakeholders, he mentioned. He also suggested the sooner a small business owner reaches out to accredited professionals, the better the outcome for the future of the business.
However, we have seen that not everyone will be a winner, even with the re-introduction of temporary insolvency protection laws. At most, these temporary pauses reduce the risk of legal redress sought against company directors for trading a company insolvently. This short-term regulatory relief is no long-term solution to the woes of an ailing business entity, it does nothing to the company; despite the protection, it may give to directors. Debts incurred whilst trading insolvently will still have to be paid.
It takes experience and many years of day-to-day interaction to identify a way out of financial difficulties. Sometimes business owners are blind to solutions due to fear of rejection or a reluctance to engage with creditors. If your business is affected by the current lockdown restriction and is seeking expert advice, CONTACT US today. We offer you OBLIGATION FREE ADVICE to assess your or your clients’ financial situation.