Professional body and regulators collaborate to produce Guide.
Getting the right advice is critical, particularly when a client is feeling in despair and their livelihood is at risk.
Last month our industry representative body the Australian Restructuring Insolvency and Turnaround Association (ARITA) and regulators AFSA and ASIC (the Australian Financial Security Authority, and the Australian Securities and Investments Commission) released a brief guide called ‘Personal Bankruptcy and Liquidation of a Company’ for business operators and company directors. Its aim is to assist those individuals and their advisors to understand “the common pitfalls when individuals are running businesses that may be financially vulnerable” and explains what is involved in a bankruptcy and liquidation and how those types of insolvencies interact. The guide is structured into two parts: part A for business people in an insolvency situation, and part B for ‘more detailed information for them and their advisors’.
Worrells commends and supports these efforts that help educate clients and advisors about how to deal with insolvency or financial difficulties if they arise. Many readers will already be familiar with the Worrells’ annual Guides to Insolvency (Corporate insolvency edition and Personal insolvency edition) that provide the fundamentals of insolvency law and practical commentary and examples that we deal with every day. We believe that educating our referral network is one of the key elements to ensure appropriate advice is provided to clients.
As at June 2016, there were over two million businesses in Australia, of which 59 percent have an annual turnover of less than $200k and 88 percent have 0-4 employees*. This represents a substantial number of Australians who have some degree of financial risk and business difficulties. Most of those businesses turning over less than $200k per year are considered ‘small business’, and it is fair to assume that most would seek some sort of financial advice from an accountant, solicitor and/or other trusted professional. Therefore, it’s critical these business owners gain credible information and solutions to address insolvency issues from experienced, regulated and qualified professionals to ensure advice is appropriate to the circumstances.
As liquidators of the notorious collapse of financial advisory firm Storm Financial, Worrells saw first-hand how inappropriate advice can result in extraordinarily bad outcomes for clients. Essentially, Storm Financial had only one financial strategy on offer, and it negligently steered clients with all sorts of circumstances to follow that one strategy. That advice was not personalised, often not considerate of all circumstances of the client, and ultimately did not assist the client—rather it put the client in a far worse position than what they came to Storm Financial with. Unfortunately, somewhat frequently, we are called upon to help deal with the aftermath of inappropriate or unqualified insolvency advice—separate to general financial advice or specific investment advice.
We cannot understate the importance of delivering accurate and appropriate advice to clients who are facing financial difficulties, whether at the early onset stage or heavily insolvent. Worrells are regulated insolvency practitioners (personal bankruptcy trustees and corporate registered liquidators) and we offer a wealth of experience and resources, including our Guides to Insolvency.
To obtain a copy of the regulator’s guide—Personal Bankruptcy and Liquidation of a company. – Information guide for people in business and their advisors—from AFSA’s website, click here.
* Data obtained from the Australian Bureau of Statistics: http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/8165.0Main%20Features1Jun%202012%20to%20Jun%202016?opendocument&tabname=Summary&prodno=8165.0&issue=Jun%202012%20to%20Jun%202016&num=&view