People,

I plan to write letters to the editors 2-3 times a week to each paper.
It will help if other people write letters, as well, describing their
feelings about the insolvency of Open Tel.

I have concentrated on the law itself, because almost everything else
derives from the law.

Here are the contents of what I sent to the Sydney Morning Herald this
morning. The Age is almost identical. You will note the length of
the letter ... I'm trying for the single Long Letter Slot they run per
day.

Sir,

John Howard is blowing his trumpet, showing his support for families
in Australia. However, almost 100 families were left in the ditch by
Australia's insolvency laws, and the Government scheme that was meant
to pay out workers in failed companies (GEERS), from a single
corporate collapse.

Insolvency law is meant to deal with the situation where a company (or
individual) runs out of cash, and should be an attempt to prevent
insolvency in the first place, or reduce its impact, and deal with it
in the fairest way possible, without the process costing too much.

Australian insolvency law is far from that ideal. It has no
provisions to prevent insolvency, there is enormous scope for unfair
behaviour, and it costs far too much to run the process of an
insolvency. Directors can prevent GEERS (government) payouts, either
for convenience or possibly vindictiveness.

I was made redundant by the Administrators of a Sydney based software
development company nearly two years ago, along with nearly 100
others, because the company had run out of cash. I would have accepted
the result if the Administrators had said there was no future,
liquidated the company, distributed the assets to the creditors, and
sent us all home. After all, there is only a fixed amount of assets
available; or is there?

Instead, the Administrators (with crucial major creditors) decided to
trade out. This is called a Deed of Company Arrangement. In this case,
the pool of money available for creditors is NOT fixed, but keeps
increasing as time goes on, if the company becomes profitable again.
We are all of the opinion that the company then has a responsibility
to pay us in full, even if it takes some time to do so. Creditors
already have forfeited the right to be paid on time, and to collect
interest on what they are owed. They should not then put up with
being paid cents in the dollar, then see the company becoming a
runaway success in two years time.

After the redundancies, the administrators then tried a number of
legal tricks to disadvantage the employee creditors who were made
redundant:
- they tried, unsuccessfully, to deny us any redundancy payouts at all,
- they successfully reduced our redundancy payouts to those
stipulated in our Award, rather than the company's more generous policy,
- they incorrectly calculated payouts for certain employees whose
notice period took them over another year's service, but backed down,
- they gave us crucial information only one working day prior to an
important meeting, exploiting a loophole in the Corporations Law
requiring five days' notice
- presented the Deed as a fait accompli, with no genuine discussion
of issues or alternatives
- altered the normal priorities of creditors (usually the employees
come near the front), which violated the Government's policy on the
GEERS (payout) scheme
- when the company struck even more trouble, stayed silent.
- when extra investment funding was found, took unusual steps to
terminate the Deed as quickly as possible, meaning there wasn't enough
time for creditors to organise a vote to get some benefit from the
extra funding.

The Directors were also up to their own tricks:
- they arranged it so they wouldn't lose (some of) their investment
in the company, or their homes - using unregistered secured charges,
- some evidence exists that they knew the Deed they proposed would
violate the Government's policy on the GEERS (payout) scheme,
- they participated in the unusual arrangement to terminate the Deed
quickly, after the investment funding was found.

The other major problem faced by our group was the cost of legal
advice - figures of $10,000 for some simple advice, or $20,000 for
some simple legal action. This is because of the complexity and
vagueness of Insolvency Law. A similar story applies to the cost of
the Administration itself, which sometimes uses up all the assets,
leaving nothing for creditors.

We see the following problems with the current insolvency laws:
- Complexity, loopholes and anomolies (driving up costs)
- Vague definitions of insolvency, discriminatory and oppressive
behaviour, and other important concepts,
- Very few restrictions on a Deed of Company Arrangement,
- No recognition of the GEERS (payout) scheme within Insolvency Law.
- Employees confused by information and procedures not tailored to
them, although the priority they have in a Liquidation is noted,
- ASIC (the corporate policeman) unwilling to take on small-scale cases.

We call on the Prime Minister and Treasurer to view the submissions on
insolvency laws lodged by smaller creditors, and act to remove the
opportunity for unfair behaviour and other legal tricks - a good start
would be to slash its complexity.

We also want a simple concept implemented: if the company keeps going,
creditors get paid in full.

You will have the votes of at least 100 families if you do so.

Nicholas Bishop, Vermont South (Vic)
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Contact details are required, but not copied to this post. On your
letters, state your full name, address, and daytime & evening numbers
(I generally give a mobile number).