I've successfully submitted a letter to the AFR.



Background:

An article in the Australian Financial Review (April 28, front page) talked

about ASIC's insolvency commissioner, Michael Dwyer, flagging some degree of

leniency towards small/medium business who are found to have traded while

insolvent. The article addressed several other issues surrounding external

administration.



There was a letter from Andrew Heard (a partner in an (accounting?) firm) on

April 29, mainly concentrating on the high cost of external administration.



The letter, as printed:



     Creditors want fairer insolvency process



As a vocal creditor of a high profile company collapse in 2002, I read with

interest your "ASIC Leniency for business failure" (April 28). However, I feel,

from a creditor's viewpoint, that some issues have been missed.



The main problems with the current insolvency law, for creditors, is its sheer

complexity, and that a deed of company arrangement is wide open to abuse. The

perceived (and sometimes actual) lack of independence of administrators is also

a serious problem.



Most crediors have never dealt with a formal insolvency before, in sharp

contrast to administrators who deal with insolvency law every day. Because

creditors are unfamiliar with their rights, and the sheer expense of obtaining

professional advice, it is far too easy for administrators to pull the wool over

their eyes, usually to benefit the insolvent company's directors.



One way to address concerns of independence is for the Australian Securities and

Investment Commission to operate a random or round-robin allocation of

administrators and other insolvency practitioners to insolvency cases: the

directors (or major creditor) say when (and what), but ASIC decides impartially

(*1*) who.



We also need far better education, aimed at smaller creditors, about their

rights, and the process of administration (or receivership, etc) and more

prescriptive requirements on deeds of company arrangements, to lessen

opportunities for abuse and reduce complexity.



ASIC insolvency commissioner Michael Dwyer is clearly smart - his observation of

the destruction of company value upon entering external administration (also

alluded to in Andrew Heard's letter, April 29) is absolutely spot-on. I think

that if he can also (*2*) make the process fairer, the proposed changes would

vastly improve results for creditors and insolvent companies alike.



Nick Bishop, Vermont South Vic.



Apart from the minor edits ...

(*1*) two words swapped: "impartially decides"

(*2*) shortened from: "I think that if he can also use the opportunity to make

the process fairer for creditors, the proposed ..."

I still think "impartially decides" is correct grammar - it's an adverb-verb

combination.



Conclusion:

I'm quite happy that my letter got in, more or less unmolested. I presume ASIC

keeps an eye on these things, so hopefully I've vocalised at least some of the

issues that creditors grapple with, and hopefully it won't be thrown in the

"mindless/pointless complaints category".

--- In otmushrooms@..., nick4mony <no_reply@...> wrote:

>

> I've successfully submitted a letter to the AFR.

>



I think that while we've got the chance, others can also write letters,

focussing on different insolvency issues.



I purposely chose 2-3 core issues and stayed away from other issues, in the

interests of conciseness.



Ideas that others could develop:

  * expand my code "more prescriptive requirements" => creditors must be paid in

full in a DoCA, and must stay in a DoCA until creditors have physically been

paid.

  * Destruction of business value: if this problem was removed (eg if suppliers &

major customers were still tied to their contracts), it would remove a major

incentive for insolvent trading.

  * For employees: do you know that GEERS no longer pays out in a DoCA situation?

They only pay in cases of liquidation (if a DoCA proceeds to a liquidation,

they'll pay but payments MAY be reduced).

  * For employees: There is Schedule 8A, but I'm still not convinced, even today,

that a DoCA is compelled to follow it (but a liquidation must). Schedule 8A

dictates the order/priority of payments amongst the various classes of creditor.

  * For employees: absolute requirement on administrators to produce group

certificates (this is a problem in a surprising number of cases).

  * Conduct business electronically to save costs.

  * Attending meetings by telephone: make this an absolute right (this was not

possible for Mobilesoft meetings).

  * Creditors have no feasible way of putting forth alternative DoCA proposals.

  * Most creditors have no feasible way of finding out what's brewing (in terms

of the DoCA/negotiations between major creditors, customers, and the directors).

  * Variation to round-robin idea: that ASIC chooses 3 sets of professionals, and

creditors choose one by popular vote, with fixed renumeration (eg $20K + 1% of

debt) for the losers.

  * Andrew Heard's letter (April 29): rebuttal - allowing directors to run a

company in administration seems a bit unwise.



Regards,



Nick.

Solar went into receivership  on Monday  and  they  are  all  dismissed

without entitlements. By Friday some will  be choosen to  stay in for

another 3 months to  assist with the sale.



  <http://www.news.com.au/heraldsun/story/0,27574,26042602-2862,00.html>

http://www.news.com.au/heraldsun/story/0,27574,26042602-2862,00.html



World's biggest solar power station in doubt



September 08, 2009 08:09am



A BID to build the world's largest solar power station in Victoria is in

doubt after the company involved was placed in receivership.



The $420 million project, planned by Solar Systems, was to have produced

power for about 45,000 houses and has provided work for 150 people, Fairfax

reported.



Administrator Stephen Longley of PricewaterhouseCoopers said he hoped to

have news for the workers by the end of the week.



"We are assessing Solar Systems' operational and financial position with a

view to continuing operations on a reduced scale over the next three months

in order to provide us with sufficient time to restructure and sell the

business as a going concern," he said.



The proposed 154 megawatt power station would use photovoltaic solar cells

to magnify solar energy 500 times and deliver electricity to the national

grid by 2013, the newspaper said.



A pilot power station has been finished at Bridgewater, near Bendigo, but

work on the main station is yet to commence.



Investor TRUenergy's parent company, China Light and Power, wrote down its

$A53 million investment in the project last month.



A spokesman for TRUenergy said the company still believed in the technology

and would still invest if a partner could be found.



The Victorian opposition was highly critical of the state of the project,

but a government spokeswoman blamed the situation on Solar System's

inability to raise capital in difficult world financial circumstances.



The first meeting of creditors is scheduled for September 17.



Solar Systems did not return calls from Fairfax.











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