Under amended legislation, small businesses are able to restructure their debts in a way that improves their chances of surviving financial distress, rather than turning to Voluntary Administration – which can be a complicated and costly solution to a business’ struggling financial position. See Roser Lawyers’ article on the reforms here.
The Australian Government has outlined three key elements of these reforms:
- A new restructuring process for small businesses to provide a faster and less complex mechanism for viable firms to restructure their existing debts.
- 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 the needs of small businesses.
Roser Lawyers welcomes this efficient regime and assists many clients with small businesses to maximize their chances of surviving financial hardship. Under the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (Cth), the criterion for eligibility includes:
- The company must be incorporated; and
- Liabilities must be less than $1 million.
Upon the appointment of a Small Business Restructuring Practitioner, the business and its debts will be assessed, to:
- Determine eligibility;
- Review debts and financial affairs;
- Develop a plan;
- Certify the plan to creditors;
- Manage the execution of the restructuring.
This process was introduced to provide relief to small businesses struggling with financial pressures, who would otherwise wind up or turn to the costly and complex processes of Administration or Liquidation. If you are concerned about your obligations to creditors or the cash flow of your company, please do not hesitate to seek expert advice by requesting a confidential consultation with Roser Lawyers.