Nicola Howell from the Queensland University of Technology has explored whether public bankruptcy records impact business activity. A common objective for many bankruptcy systems in developed countries is to provide a fresh start for the debtor. This goal is seen as particularly important for entrepreneurs and those involved in small businesses as governments want to encourage re-entry into the market as quickly as possible after a bankruptcy. This is the case in Australia, where the proposal to reduce bankruptcy to 12 months was designed ‘to foster entrepreneurial behaviour and to reduce the stigma associated with bankruptcy’ – a proposal that is still under active consideration.
In Australia, there is a permanent public record of personal insolvency events, including bankruptcy, designed to protect creditors and the community. However, this public record may act as a counter to other initiatives in bankruptcy law reform that are designed to facilitate business activity. Potential business partners, providers of finance and investors may be reluctant to support a new business operated by a person who is or has been bankrupt. The availability of public records may also make it harder for entrepreneurs and business owners to re-start after bankruptcy.
The full article is available in the Insolvency Law Journal (#125). For more information about the study and its findings, contact Nicola Howell at the Queensland University of Technology via email at nicola.howell [at] qut.edu.au.