ARITA calls for insolvency regime review

The Australian Restructuring Insolvency and Turnaround Association is calling for a review of Australia's insolvency laws, saying the current regime does not do enough to support the restructuring of potential viable businesses.

Laws that impose on directors and advisers are in ARITA's sights in a discussion paper released yesterday, with practitioners pushing for the first wide review since 1993.

ARITA wants more support for potentially viable businesses that have found themselves in, or heading towards, financial distress.

It says that, although the current insolvency regime has served Australia well, it has "evolved to have a bias towards protecting the rights, and capital, of creditors."

"In other markets, the bias may be viewed as been more towards the sustaining of the corporate entity itself, at the cost of the creditors' interests," it said.  

"There are significant arguments around where the balance is appropriately set between these two approaches."

Businesses that have good financial systems and controls, are tax compliant, compliant with other regulatory obligations (such as corporate, health and safety, environmental and product safety) warrant the "recycling of capital from non-performing businesses to performing businesses," ARITA said.

It outlines the wider social and economic benefits of restructuring, adding that good corporate governance would also be essential.

Proper remuneration for its practitioners and full cover for costs also made the ARITA spiel.