Insolvency laws hampering business recovery: expert
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A corporate restructuring firm has criticised insolvency law, saying it makes it too hard for businesses to get out of financial trouble.
Restructuring Works says its research shows the number of companies placed into some form of insolvency administration by secured creditors in the year to November was 83 per cent higher than the average of the previous five years.
It says the value of insolvencies reached about $13 billion in the year to September, triple the average of the previous five years.
Restructuring Works chief executive Cliff Sanderson says there should be a review of the law because the current laws make it very difficult for companies to navigate if they are in financial trouble.
"I think the insolvency laws need a complete review; I think we've got to go back to square one," he said.
"[The laws] work fine for liquidations, but if you're actually trying to save a company then there's a lot of changes that need to be made."
Mr Sanderson says companies in difficulty should have much longer to get back on track.
"I think you need a lot longer than the period specified under the Corporations Law for a company to get through a restructuring and I think we need to restrict the powers of secured creditors to take control of assets during the restructuring period," he said.
