From the front line of insolvency
By John Winter, Chief Executive Officer of ARITA “There is a real risk that businesses will now push The Australian Restructuring Insolvency and
the maxim “you can’t get more broke than broke”
Turnaround Association (ARITA) doesn’t collect
even further and that some will attempt to rack
and collate data related to insolvency and its
up bills without concern or, perhaps, will just do so
effects on credit.
out of sheer desperation.
But as Chief Executive Officer John Winter points
“Concerns about insolvent trading claims always
out, the peak body representing Australia’s
acted as a moderator to reckless director
restructuring and insolvency profession has
behaviour in the majority of instances. But now the
something equally valuable.
handbrake is off and the car is rolling down the hill.
“ARITA is in the unique position of being in daily
“There’s a practical reality that businesses in many
discussion with insolvency professionals from
sectors are absolutely already hopelessly insolvent
across the country,” Mr Winter said.
and so credit professionals almost need to move to a default assumption that your client won’t be
“We gather anecdotal information about what
able to pay,” Mr Winter said.
level and type of inquiries our members are fielding – canary in the coal mine type information.”
Unfair Preferences
“Our members will be talking about a range
“It does need to be said that unfair preference
of support that covers everything from early-
claims in this environment are going to be
stage distress where informal restructuring
challenging for credit professionals,” Mr Winter said.
and turnaround is the solution, through to providing safe-harbour advice to directors
“A liquidator’s legal requirement is to pursue unfair
who are likely to have to trade while insolvent
preferences. Credit professionals will need to take
in a turnaround, right through to taking a
note that, as mentioned above, you’re almost
formal appointment over a business that’s
going to need to presume a debtor is insolvent
insolvent,” Mr Winter said.
and that will open you up to unfair preference claims should they fail.
So what trends are ARITA’s member’s seeing as the Australian economy grapples with combined
“To avoid preference claims from a liquidator,
effects of a devastating bushfire season and the
credit professionals need to be well out in front
economic freeze bought on by the COVID-19
of any insolvency risk and to be able to shift
pandemic?
trading terms to manage any exposure,” he said.
Insolvent Trading
Sectors at Risk
“The suspension of insolvent trading provisions
“ARITA members are seeing rising inquiries and
should be a red-flag to all credit professionals,”
distress among tourism, hospitality, retail and
Mr Winter said.
resources and construction,” Mr Winter said.
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Analysis & Commentary
AICM Insolvency Risk Report 2020
