THE Treasurer’s Insolvency Law Reform Bill 2014 is set to become law next year.
It aims at increasing the accountability of the insolvency profession for fees and charges, while boosting the Australian Securities and Investments Commission’s supervisory power.
Insolvency practitioners are the running dogs of banks, mostly on a long and loose leash.
Typically, banks write business loans against real estate for a fixed term of a year or two, to be reviewed at the end of the term, charging all the borrowers’ and guarantors’ assets and undertakings in the meantime.
The borrower has to meet conditions, such as lodging timely financial reports and ensuring the value of the secured assets, relative to the amount advanced, does not fall below a certain percentage.
Particularly since about 2008, financiers have frequently pulled the rug, just before a loan is due to be rolled over.
However “farmer friendly” the banks have painted themselves, when times are tough for the men on the land, little sympathy is shown.
The assets of borrowers are simply treated by banks as grist for the insolvency industry mill.
The appointment of an investigating accountant from an insolvency firm to look at your business is an early sign that your bank is planning to move against you.
It is not difficult for a lender to engineer a default. Once the receivers move in you are as good as gone.
When the bank holds you in default, you get flogged with penalty interest rates of about 15 per cent. The receivers clock up big fees and protract the receivership where the business is a good fee earner.
People who have invested their sweat to build businesses, develop projects and run enterprises, are crushed while the insolvency industry, hand-in-glove with the finance sector, lets someone else walk off with your loot, often for a bargain.
Giving ASIC more responsibility for the insolvency industry will not work unless ASIC is reformed first.
There is a revolving door through which staffers pass, claiming jobs at ASIC, in the big banks and in major insolvency practices, moving from one to the other.
Our law-makers are letting us down. Our nation’s most enterprising continue to be at the mercy of the arbitrary application of poorly conceived and misapplied insolvency laws, while our economic lifeblood is sapped by bloodsuckers.
● Stewart Levitt, of Levitt Robinson Solicitors & Attorneys, ran and settled class actions against banks over the Storm Financial collapse