I posted earlier about the formation by the Institute of Chartered Accountants of Australian of the Insolvency Management Committee. Hadn’t heard much since but received and email today from the ICAA regarding the IMC which I thought I would share (in part):
Earlier this year the Institute launched the Insolvency Management Committee (IMC). The primary role of the IMC is to engage with insolvency members of the Institute, as well as to provide a positive contribution to our response to the Federal Government’s law reform agenda and drive thought leadership initiatives. Importantly, the IMC liaises closely with the Insolvency Practitioners Association of Australia (IPA) to ensure collaboration on IMC initiatives and to further strengthen the Institute and IPA relationship for the benefit of members of both professional bodies.
In terms of the Insolvency Law Reform Bill 2013, despite considerable work to date from all the professional bodies and other parties involved, the Bill was not tabled in the recent parliamentary sitting as planned, effectively stalling the passing of the Bill for the foreseeable future. In spite of this setback, the Federal Government assures us that work continues unabated on developing the reform package. We remain optimistic that at some point in the near future the Federal Government of the day will support the reform package, as we believe many of the proposed reforms are warranted and will achieve a number of the intended policy outcomes.
However, we note that the proposed reforms did not seek to achieve substantial reform in key areas, rather they were primarily focused on the registration, discipline and regulation of practitioners, as well as harmonising various provisions between the Bankruptcy Act 1966 (Cth) and Corporations Act 2001 (Cth).
As well as being in a position to advocate for substantial reform, the IMC is developing key thought leadership themes. Like all thought leadership initiatives driven by the Institute, our goal is to see tangible reform that is in the broader public interest. In the insolvency domain this includes providing more relevant legislation to company directors and shareholders when dealing with entities in financial distress, thus maximising the potential of better outcomes for creditors.
The IMC is liaising with the IPA on these thought leadership initiatives so that we can ensure we have access to all available resources. We have identified two areas of focus: a Pre-pack model for SMEs and Safe harbour reforms. Our initial focus will be on developing a pre-pack model for SMEs, essentially a legislative framework to reduce the administration costs of restructuring SMEs.
I thought it was of interest that the IMC is going to focus on pre-packs for SMEs as its first ‘cab off the rank’. My concerns around this area of pre-pack is the criticism that was leveled at similar legistlation in the UK when it was introduced there regarding phoenix activity. I would suspect that such phoenix activity is more prominant in SMEs rather than large corporates so any model would need to be fairly robust to ensure it wasnt abused.
The insolvency industry is often an easy target for journalists and by potentially making pre-packs an option for SME insolvent companies with insolvency pracitioners the facilitators, we may be just be painting a target on ourselves for no real gain