The Global Financial Crisis was an effective tool for making plenty of Australian companies brutally aware of the nation’s bankruptcy laws. However, as the government continues to declare we are ‘open for business’, is the current legislative regime the best we can provide for struggling corporate entities?

 

 

This is the subject of much discussion among various ministers, the Australian Chamber of Commerce and Industry, and many of Australia’s largest companies. As the operating environment continues to move towards a version with continued reduction in red tape, the introduction of protections for restructuring companies - similar to those found in the US - are being mooted as an appropriate model. Such a scheme would shift the balance slightly away from the responsibility of a company to meet its commitments while providing increased opportunity to restructure its business to ensure ongoing survival.

Or to put it simply, If the business can survive then jobs are saved and the cost to the economy is minimised.

 

 

One place that the government might find a sympathetic ear (for a change!) is in the senate, where The Australian is reporting that Clive Palmer’s representative, Dio Wang, could join David Leyonhjelm as the nub of a strong collection of cross-benchers that could see any proposed legislation through. After Senator Leyonhjelm’s extraordinary spray yesterday regarding families and their burden on the economy, it seems the libertarian would be an obvious choice for any move to shore up support for a change in Australia’s corporate protections.

The government is expected to hand down its innovation statement in December. This document will be the confirmation of what the government is really thinking and how it proposes to bring a high-tech industry back to Australia and to stimulate investment. Where the bankruptcy laws fall into this discussion is regarding the risk profile for start-ups and entrepreneurs - the argument being that with different protections there will be more incentive for capital to be injected in to fresh ideas that we can sell the world.

 

 

While any proposal to reform Australia’s corporate governance regimes is worthy, it will be important to ensure due process and plenty of consultation. Hopefully the innovation report adequately sets out this path.

Needless to say, there will be plenty of businesses around Australia watching true government’s next move.