The Australian Government has now announced reforms to the insolvency regime applying to small businesses – similar to those that apply in the US and in some respects, the UK.
Summary of Changes
The reforms introduce a “debtor in possession” model for companies with liabilities of less than $1 million.
The directors of the business, assisted by a small business restructuring practitioner (“SBRP”) (working for a low fixed fee), will have an option where they have twenty (20) business days to develop a restructuring plan; non-related creditors will then have fifteen (15) business days to vote on the plan (such vote being based on a majority in value) and if the creditors accept the plan, the SBRP will then administer the plan and be entitled to further remuneration. At all times, the directors will remain in control of the company.
This is purportedly intended to be a simplified, faster and lower cost pathway for small businesses to obtain debt relief and to keep trading.
For these reasons and more, the industry is awaiting “the finer details”. Gavin Parsons and Associates will dispatch an updated article at that time.
Gavin Parsons and Associates can assist you with any questions you may have regarding legal options available in situations of financial distress for your business or that of your clients. If you are interested in how these reforms might affect your situation please contact Gavin Parsons and Associates on (02) 9262 4471 for a free no-obligation consultation today.