09 August 2017
Insolvency sector urged to embrace accountability
The Australian Small Business and Family Enterprise Ombudsman has called on the insolvency sector to improve its accountability and transparency or face louder calls for increased regulation.
Speaking at the Australian Restructuring Insolvency and Turnaround Association (ARITA) conference in Melbourne, Ombudsman Kate Carnell said there should be an external dispute resolution process or tribunal to hear complaints.
“Small business operators are often confused about the role of receivers, how they charge and what their timeframes are,” she said.
“There needs to be greater accountability and a simple way to resolve disputes.”
Ms Carnell said insolvency practitioners were required under legislation to work in the best interests of the business.
“We hear from small business people and farmers the reality is somewhat different; it often appears that the receivers work for the biggest creditor, which is usually a bank,” she said.
“There is sometimes a potential conflict between the interests of a creditor and those of a distressed business.”
Ms Carnell said submissions to the Select Committee on Lending to Primary Production Customers echoed some of those heard by her inquiry.
The business of Queensland prawn farmer Sam Sciacca suffered after Cyclone Larry. Mr Sciacca told the select committee that receivers lacked expertise to manage his aquaculture operation and he was left with substantial debt as a result.
Property and livestock agent Andrew Jensen claimed that receivers often lacked farm management skills and didn’t always achieve the highest possible price.
“What’s disturbing about these accounts and others is the lack of accountability,” Ms Carnell said.
“There’s nowhere for farmers or small business people to go if they’re unhappy with the actions of a receiver.
“In my view there needs to be an external dispute resolution process.”
Ms Carnell said insolvency fees should be clearly stated and explained.
“Going into receivership is a stressful event for any business operator,” she said.
“A good insolvency practitioner can help a struggling business achieve a good outcome.
“The problem is that a bad insolvency practitioner can’t be held to account.”