Changes to Insolvency Laws
The Australian Government yesterday announced its intention to make quite significant changes to insolvency laws as a measure to assist COVID-19 recovery prospects. The Treasurer said the “measures will reposition our insolvency system to reduce costs for small businesses, reduce the time they spend during the insolvency process, ensure greater economic dynamismÃ¢â‚¬Â¦Ã¢â‚¬Â
Key aspects of the changes, which are expected to take effect from 1 January 2021, include:
- The introduction of a new debt restructuring process for incorporated businesses with liabilities of less than $1 million, drawing on some key features of the Chapter 11 bankruptcy model in the United States.
- Moving from a rigid one-size-fits-all “creditor in possessionÃ¢â‚¬Â model to a more flexible “debtor in possessionÃ¢â‚¬Â 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.
Click here to view the Treasury summary.