Small business restructuring and simplified liquidations – january 2021
Jan 05 2021
Our network members may recall that on 23 September 2020, the government announced a new insolvency regime to provide an alternative streamlined voluntary administration and simplified liquidation process.
The insolvency amendments and the associated regulations received royal assent and registration respectively during December 2020 ensuring that the insolvency reforms commenced 1 January 2021 as planned.
In summary, the legislation introduces the following: -
- Small Business Restructuring
An alternative for eligible incorporated small businesses with liabilities of less than $1 million to restructure their debts and maximise their chance of survival whilst remaining under control of the Directors.
With the assistance of a small business restructuring practitioner, a plan is developed and certified within a 20 business day period followed by a 15 business day period for creditors to vote whether to approve the plan. Once accepted, the small business restructuring practitioner would manage the disbursement of funds to creditors.
- Small Business Liquidation
A simplified alternative to the existing liquidation process to allow a more expedient and lower cost liquidation available to eligible incorporated small businesses with liabilities of less than $1 million. The alternative liquidation process reduces the investigative functions of the liquidator and the circumstances within which unfair preference payments may be clawed back from creditors.
The amendments to the Act have been rushed to commence on 1 January 2021 to coincide with the expiry of the insolvent trading safe harbour provisions and the changes to the threshold and periods to comply with statutory demands introduced in March 2020 given the effects on business of the COVID-19 pandemic.
The Directors of PCI Partners are registered to act as small business restructuring practitioners and liquidators and will be able to assist you or your clients to navigate the new legislation and consider the restructuring or liquidation options available.
For a free, no-obligation discussion, please feel free to contact Stephen Michell | Philip Newman | David Quin