The Morrison Government continues to implement its economic recovery plan with the commencement of the most important changes to Australia's insolvency framework in 30 years.
From today, eligible businesses experiencing financial distress can access a new, simplified debt restructuring process that allows them to restructure their existing debts while remaining in control of their business.
The reforms reposition our insolvency system to help more incorporated small businesses, with liabilities of less than $1 million, restructure and survive the economic impact of the COVID-19 recession.
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.
The reforms are designed to help keep businesses in business and more Australians in jobs.
Importantly, should an eligible business not be able to immediately secure a small business restructuring practitioner to commence this new process, the business can declare its intention to access the process through a notice on ASIC's published notices website.
From the date a declaration is published, temporary relief from insolvent trading liability and responding to statutory demands from creditors applies to the business for up to 3 months. The ability to declare such an intention will be available until 31 March 2021.
For those businesses that are unfortunately unable to survive the economic impacts of COVID-19 recession, a new simplified liquidation pathway will be available to allow faster and lower-cost liquidation, increasing returns for creditors and employees.
Complementary measures have also been enacted to ensure the insolvency sector can respond effectively both in the short and long term to increased demand and to the needs of small business.
Together, these measures will reduce costs for small businesses, reduce the time they spend in insolvency process, promote greater economic dynamism, and ultimately help more small businesses through the recovery phase of the COVID-19 recession.
