Insolvency reforms to support small business recovery announced
The federal government recently announced significant reforms to Australia’s insolvency framework as part of the country’s economic recovery plan.
The reforms are designed to help more small businesses to either restructure or to wind down their operations in an orderly manner.
Key elements of the reforms include:
- The introduction of a new debt restructuring process for incorporated businesses with liabilities of less than $1 million.
- Moving from a rigid one-size-fits-all “creditor in control” model, to a more flexible “debtor in control” model, which will allow eligible small businesses to restructure their existing debts while remaining in control of their business.
- A rapid twenty business day period for the development of a restructuring plan by a small business restructuring practitioner, followed by fifteen business days for creditors to vote on the plan.
- A new, simplified liquidation pathway for small businesses to allow faster and lower cost liquidation.
- Complementary measures to ensure the insolvency sector can respond effectively both in the short and long term to increased demand and to meet the needs of small business.
The new insolvency processes will be available for small businesses from 1 January 2021.
The current measures which were brought in earlier in the year to protect businesses from insolvency laws will remain in place until 31 December 2020.
CLICK HERE to download the fact sheet.