The concept of artificial intelligence (AI) has been around for decades and has been visualised in movies ever since – think the Tin Man from Wizard of Oz or probably most notably, the Terminator movies. For some, AI is considered a threat to humans whilst to others, AI may be seen to eventually replace humans within many industries that exist today.
One of the AI systems that has been developed, which has been garnering plenty of attention of late, is ChatGPT developed by OpenAI. For those unfamiliar with ChatGPT, it is an AI language model and is able to answer questions on a wide range of topics.
The basis of this article was to test whether ChatGPT was able to advise a client on Australia’s insolvency laws and whether it could develop a proposal to put to creditors in a Voluntary Administration.
Questions
To test the ability of ChatGPT, I asked the following standalone questions:
- What to do when I can’t pay my debts?
- My assets are $100,000 and my liabilities are $200,000, am I insolvent?
- My company is insolvent, what are my options?
- I have assets of cash at bank of $5,000, debtors of $20,000 and related party loan account of $100,000. I have liabilities of trade creditors of $500,000 and related party loan account of $1,000,000. How do I propose a Deed of Company Arrangement?
- The same facts as question 4 but whether ChatGPT could design a proposal to be submitted to creditors as part of the Voluntary Administration process.
Responses
As a general observation and having never used ChatGPT prior to writing this article, I was impressed with the amount of information quickly provided and the way in which it was written.
What I found when asking these questions was that whilst the information provided was somewhat informative, it was of a basic level and did not always provide specific solutions that may exist for a particular situation.
For example, in response to question 3, the Small Business Restructuring option was not listed as an option to the company. I also noted that differing answers could be produced depending on whether a question was a standalone question or a follow-on question from an answer.
In relation to the specific scenario set out in question 5, ChatGPT advised that it was not authorised to provide financial or legal advice and was unable to generate a specific Deed of Company Arrangement (DoCA) proposal for the specific situation set out in the question. Whilst a specific response was not provided, ChatGPT helpfully provided basic information about what the purpose of a DoCA was including:
“Overall, the goal of a DoCA proposal is to create a sustainable plan for the company to repay its debts while continuing to operate and generate revenue. By working with creditors to develop a mutually beneficial plan, a company may be able to avoid liquidation and continue operating into the future.”
ChatGPT was also very careful to ensure that in all its responses, it identified that professional advice, be that either financial counsellor, lawyer, accountant, or insolvency practitioner, was required to be sought. This is well demonstrated by the following paragraph in response to question 3:
“It’s important to note that each option has its own advantages and disadvantages, and it’s essential to seek professional advice from a qualified insolvency practitioner to determine the best course of action for your specific situation.”
Ultimately, whilst ChatGPT at the time of writing this article, was able to provide basic but useful information into the Australian insolvency laws, it was unable to provide detailed advice that may help guide a client experiencing financial difficulty.
Future of AI in Insolvency
Given the speed at which technology is evolving, no one can say for certain how AI will affect the professional services industry, including the insolvency/restructuring. As I see it, other than any technological impediments that are well beyond my knowledge, an important hurdle for such AI systems appears to be whether they will be authorised to provide financial and/or legal advice and importantly are insured for that advice.
Conclusion
For a client, whilst ChatGPT can be rather useful for the purposes of gathering basic information, I would always recommend that the client meets with an appropriate professional to discuss any financial difficulty they are facing. At SV Partners, we offer a confidential, free, no-obligation first meeting to discuss the client’s financial difficulty and provide options that are designed to address that financial difficulty.
Finally, in my opinion, the best piece of advice obtained from the answers to my questions from ChatGPT was:
“Remember, the most important thing is to take action as soon as possible. Ignoring your debts will only make the situation worse, so be proactive and seek help if you need it.”
Wise words from ChatGPT and I doubt there would be an insolvency practitioner who would disagree with this statement.
Article written by Travis Olsen (Director) – Adelaide