Insolvency reform to help save jobs and boost innovation

The legislation seeks to reform Australia’s insolvency laws, which are widely recognised as among the harshest in the world.

The perverse and unintended consequence of the current framework is that directors are forced down the path of administration, even in instances where reasonable steps could be taken to turn the business around or where cash flow issues are temporary.

AICD General Manager Advocacy Louise Petschler said a workable safe harbour had the potential to save jobs and add value to the economy that otherwise would be lost.

“This legislation would help drive cultural change and encourage directors to take reasonable risks help a company’s recovery instead of simply placing a company prematurely into voluntary administration because of the threat of insolvency,” she said.

“This will help protect jobs and value in our economy, while giving businesses facing a temporary cash flow problem an option other than calling in the administrators.

“Importantly, under the legislation the safe harbour would not be an option for directors if employee entitlements, including superannuation obligations, and tax reporting obligations were not met.

“Directors would also have to show they had a reasonable plan in place to turn the business around.

“This legislation isn’t about giving directors a free kick. It’s about enabling good directors running good businesses the opportunity to explore reasonable options in order to save a company and the jobs that rely on it.

“We strongly encourage all Members of Parliament to support this important piece of legislation that will help support local jobs and businesses.”