The Federal Government has announced a package of reforms to help streamline insolvency processes for small businesses affected by the economic impacts of COVID-19. The reforms, which are due to start on 1 January 2021, include the following changes:
- a new, simpler debt restructuring process for incorporated businesses with liabilities of less than $1 million
- introduction of a more flexible model to allow eligible small businesses to restructure their existing debts while remaining in control of their business
- a rapid 20 business-day period for insolvency practitioners to develop a restructuring plan followed by 15 days for creditors to vote on the plan
- a new, simplified liquidation process to allow faster and lower-cost liquidation
- introduction of complementary measures to make the registration of insolvency practitioners more flexible, and the use of technology to make processes run more efficiently.
Why have these changes been introduced?
These changes are designed to help small businesses quickly restructure and survive the economic impacts of COVID-19 by giving distressed businesses the flexibility they need to either restructure or wind down their operations in an orderly manner.
Which businesses are eligible?
Incorporated businesses with liabilities of less than $1 million, and whose employee debts and tax returns are not overdue, can access the new process.
When will these changes occur?
While the changes come into effect from 1 January 2021, it may take some insolvency practitioners time to become familiar with the new processes and to register as small business restructuring practitioners. As such, not all small businesses will be able to access the process immediately on 1 January 2021. To manage this transition, eligible small businesses may be able to declare their intention to access the simplified restructuring process to its creditors through ASIC’s published notices website. The ability to declare such an intention is available until 31 March 2020.
Do you need Asset Protection advice?
If your business is struggling to survive the effects of the impacts caused by COVID-19 you should seek immediate advice about restructuring your business and protecting your assets.
Find out more
Please get in touch with us by phone on: 3286 4077 or by email at: mailbox@cjlawyers.com.au to discuss how these reforms may impact your business, and how we can help you.
