TRANSCRIPT

Australian Small Business and Family Enterprise Ombudsman Bruce Billson interview with Luke Grant.

Money News 2GB/3AW/4BC

13 December 2022

Subject: Insolvency laws

 

Luke Grant

There probably needs to be a change to the system to help business avoid insolvency during these rather spectacular times, if that's the right word. That's what the Small Business Ombudsman has been arguing in Parliament hearings, calling for SMEs to have better access to debt hibernation when they face a crisis beyond their control. If you're a small business owner, and I know there's many of you listening to Money News, this could be the difference between winning and losing.

Bruce Billson, the Small Business and Family Enterprise Ombudsman, is one of the most passionate people when it comes to small business in this country, and I'm delighted to say he joins us now on Money News. Bruce, I hope you’re well mate.

Bruce Billson

Luke, it’s fabulous to be with you and the Money News listeners and I am well, and like many, looking forward to a delightful festive season that I hope brings some joy for many small and family businesses as well.

Luke Grant

Let's hope so. Just to start off, take me through what exactly debt hibernation is, how you see the system working and just why it’s needed by Australian businesses.

Bruce Billson

Look, it's one of a range of measures we put to the parliamentary joint committee that's inquiring into our insolvency system. The laws under which business insolvency and personal bankruptcy – and I'll come back to why both matter - haven't really had a serious look at them for about three decades, with the exception of the previous government's introduction of a restructuring process that was designed to help small businesses in the COVID-impacted environment actually get the chance to make the case to their creditors that, you know, let's keep the business going, let's make some changes to the business, some adjustment, but keep a pulse in the business and the economic opportunities it represents, and we will be better placed to service the debt that at the moment are too much for us to cope with.

So that was a great measure. But we've hardly seen much uptake of that Luke. We still see, you know, it's about 1 or 2% of all the insolvencies in each year as a proportion, that actually look at this restructuring opportunity.

If I can quote my inner John Lennon just for one minute, all we are saying is give restructuring a chance.

Give it a chance so that businesses that are facing some choppy waters can sit down, have a genuine conversation about their credible prospects of recovery and what creditors can do to help with that process.

One of the other ideas we put forward was this debt hibernation concept where there's catastrophic events beyond people's control, whether it's a natural disaster or the pandemic. There's really a case to just calm the farm for a minute, give the business a chance to make the case, to stay in control, to navigate a course out of the difficult financial times that they may be experiencing at that point.

Luke Grant

Yeah, well, if we didn't already understand it, the pandemic proved just how many conditions outside the control of a small business operator can be the difference between surviving or not. I note one of the things you said is that liquidators get paid three times as much to shut down a business as they do to save it. And that indicates, does it not, that perhaps the focus, we've got that somewhat wrong.

Bruce Billson

I think we have and that was the point we were making to the parliamentary committee. Not a criticism of liquidators, but just a statement of reality. This restructuring process that's supposed to be within reach for small businesses has hardly got out of first gear. And we've looked at why that might be. And one of the reasons is it's supposed to be a faster, lower cost way of resetting the business and giving the business a chance to, you know, sail into less choppy waters and look after the people that count on it, the livelihoods that are dependent on it, a chance to trade their way through with the business owner and manager in control.

That's usually around, you know, $5000 to $6000 is the intended cost of that restructuring plan process. You compare that with an insolvency process and the work that's required under Australian law and you're talking about $15,000, $16,000.

So, there's a lot of work that insolvency practitioners do because the law requires them to do it. This frankly doesn't add a whole lot to the economic vitality of the country, but it costs time and money. And so, this restructuring process was supposed to be a more affordable way for a small business who may be facing some financial challenges, might not have a lazy five or six-grand lying around, to get advice early to work with the practitioner that can look at genuine prospects of recovery and then go to creditors. It might be the tax office, it might be the bank, it might be someone else, and say, here is a legitimate plan to get this business out of choppy water.

Don't pull the trigger on it now. Don't harvest the organs with a fire sale of the assets just so you can get your money back as creditors, without taking account of the fact that the business owner has invested much time, possibly a lifetime in the business, that the employees and those others, depending on the business for their livelihood, surely, they should have a stake in what happens next. And the customers as well.

So, it takes a broader view of who's got an interest in keeping this business going? Is there a genuine prospect of recovery through adjustment? And can we say to creditors, look, please consider this alternative rather than an insolvency action that just kills off the business, can harm an enterprising man or woman and really limit their prospects for future business opportunities and frankly, leave a lot of people who've got an interest in the business, but aren't those priority creditors, out of pocket and wondering when their interests get taken into account?

Luke Grant

Yeah, very well said. Let's hope they take notice. Small Business Ombudsman, Bruce Billson, can I wish you a happy Christmas and no doubt we'll talk in the New Year, my friend. Stay well, Bruce.

Bruce Billson

Thanks Luke and look after yourself and to all your listeners have a splendid festive season. And if you're stuck for a dad joke: what did one snowman say to the other? Is that carrot I can smell? Boom, tish. There’s a gag for Christmas. If that doesn’t lift your spirits, I don’t know what will.

Luke Grant

Thanks so much. Bruce Billson, part-time comedian, full-time Small Business Ombudsman and a good human being.

 

Ends