The time is right

The economic outlook for 2010 looks and feels stronger for the first time in the last two years.

But we can see challenges for Australian businesses particularly with the lag effect of the downturn and the increase in interest rates.

These challenges come in all shapes and sizes. Insolvent trading for Directors is one.

Recently ASIC produced a draft guide to highlight to Directors (particularly the SME community) their responsibilities relating to insolvent trading. While the aim of the guide is commendable there are improvements that need to be made. Most importantly ASIC needs to explain its communication strategy on this issue as a guide alone will have minimal benefit.

Of greater impact is a discussion paper released by Minister the Hon Chris Bowen on changes to the current insolvency laws. Oddly this paper seems to suggest that ASIC's guide will have a very short shelf-life.

We applaud the Minister for releasing the paper and wishing to engage in this debate. Some options in the paper relate to a more informal approach to business rescue plans, including greater flexibility to directors liabilities.

Laws on insolvency are finely balanced. Adjusting those laws requires a steady hand - but the goal is worth it! Inevitably attention in this debate will come to those individuals who abuse the laws, such as those involved with phoenix activities.

Dishonest behaviour should not prevent law change, particularly if substantial benefit can be gained.

Let's use this paper on insolvency laws to have a healthy debate on one of Australia's most important regulatory settings.