The small business sector is calling for a voucher scheme for employers looking to restructure and more help for sole traders, as it welcomes Josh Frydenberg’s insolvency reforms.
Thousands of small businesses facing imminent closure will be thrown a lifeline under new US-style Chapter 11 bankruptcy laws that will allow them to trade their way out of insolvency and avoid being wound up by “vulture” administrators.
The stay of execution for small and family-run businesses as well as sole traders owing less than $1m to creditors will be the most significant reform to corporations and insolvency laws in 20 years, and could save thousands more small companies that are on the brink of collapse.
Council of Small Business Australia chief executive Peter Strong said on Thursday he still wanted more support for businesses looking to restructure, particularly sole traders.
“It really gives a small business person more control,” Mr Strong said.
“They currently watch an insolvency practitioner take as much money as they can from their business, and sit and watch it get destroyed,” he said.
“We are talking to Treasury about extra support for sole traders.
“We also want assistance for businesses getting a restructuring plan together, such as a voucher scheme to help them restructure or develop a plan for reopening.”
Australian Chamber of Commerce and Industry chief economist Ross Lambie said the changes were needed because “under the current legislation, small business owners stand to lose everything — the family home used to guarantee the business as well as life savings.”
“These measures mean they have the space to restructure debts and, if necessary, their business, and negotiate directly with creditors before the administrators are called in,” he said.
“Hopefully, it will reduce the overwhelming sense of powerlessness that sets in under the current system and provide small business owners with breathing space to be able to trade out of their situation.”
Insolvency partner at global law firm Ashurst Michael Sloan, who helped put together proposals for insolvency changes with the Turnaround Management Association, said the government should now look at insolvency rules for medium and large businesses.
“In some ways, those rules are more complex because there’s much more at stake, but there are changes that can be made,” he said.
“This proposal is very positive as it gives small businesses a speedy, low-cost way to manage if they fall over.
“But there will still be a problem with wages affecting businesses’ ability to stay operating and JobKeeper ending will still lead to closures,” Mr Sloan said.