The Morrison Government will undertake the most significant reforms to Australia’s insolvency framework in 30 years as part of our economic recovery plan to keep businesses in business and Australians in jobs.
The reforms, which draw on key features from Chapter 11 of the Bankruptcy Code in the United States, will help more small businesses restructure and survive the economic impact of COVID-19. As the economy continues to recover, it will be critical that distressed businesses have the necessary flexibility 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, 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 possession” model to a more flexible “debtor in possession” 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 reforms will cover around 76 % of businesses subject to insolvencies today, 98 % of whom who have less than 20 employees.
Together, these measures will reposition our insolvency system to reduce costs for small businesses, reduce the time they spend during the insolvency process, ensure greater economic dynamism, and ultimately help more small businesses get to the other side of the crisis.
This reform is brand new and the government are writing the legal framework as we speak. You still need to be confident in making profit over a period of time in order to satisfy your creditors. Armada and their trusted partners can point you in the right direction.
Lots of businesses are struggling because of COVID. You’re not on your own. We’re all not sure what the future holds but this is a positive direction by the government as they try to assist businesses who have stopped or reduced trade because of COVID.
This not a “one size fits all’ solution. You need to be up to date with ATO and employee entitlements to access this specific solution.
This is why you must go to an expert who can assist you in getting everything in place to get the best outcome for you and your business. Armada offer a FREE ASSESSMENT for all enquiries. This way you have nothing lose and everything to gain. Doing nothing in not an option and having an exit strategy and a direction can be the end to the months of worry and sleepless nights.
Armada are here and available to talk. Armada can walk you through a FREE ASSESSMENT to see what is best for you. Just click here to learn more and have an Armada team member contact you for a quick chat.