On 23 September 2020, the Federal Treasurer announced proposed reforms to the Australian insolvency regime with an implementation date of 1 January 2021.
The proposed reforms provide business owners in financial distress a simplified way to manage their affairs which will give them more control to operate their business, as they work with an insolvency practitioner to restructure their business and business debts and develop a plan that will be acceptable to their creditors and trade out of the crisis.
The proposed rules provide a pathway effective 1 January 2021, acknowledging that the current temporary relief measures in place will come to an end on 31 December 2020.
The Federal Treasurer confirmed he wants to implement a process that is simple and that will allow viable businesses, impacted by the global pandemic and economic crisis, to restructure their business and to remain in control of their business as they design a plan to repay their creditors.
Initial information from Government fact sheets confirm the following:
A two-tiered approach will separate companies into two groups, those with creditors exceeding one million and those with creditors of less than one million.
Those companies with creditors of less than one million would benefit from a simplified system that would allow the following mechanisms to operate.
In summary, the proposed reforms offer the opportunity to preserve the value of the business, allow for a restructured business that is viable to continue to operate under the control of the owners, assisted by an insolvency specialist and trade out of the crisis, with clear plan to repay the creditors.
In addition, if the process is followed appropriately, the directors will avoid the risk and potential personal liability of trading whilst insolvent. The creditors may receive more under this process than if the directors had placed the company into liquidation.
Hamilton Murphy are Insolvency & Restructuring Specialists with offices across Australia who understand small business and have a proven record of asking good questions, listening carefully to your clients so they can provide practical advice and options that are tailored to your unique circumstances.
We will continue to monitor the detail within the proposed reforms and provide updates as more information becomes available.
Contact Hamilton Murphy on 03 8866 7600 or send us an email at firstname.lastname@example.org to organise a complimentary meeting to discuss your situation, where we can provide you with options, mindful of your particular situation, under the proposed legislation.
Alternatively, if you wish to be kept informed of current information as it is released please check our website news page https://hamiltonmurphy.com.au/news
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