Insolvency laws for small business are changing
- New insolvency reforms apply to incorporated small businesses with liabilities of less than $1 million.
- Reforms include new debt-restructuring and simplified liquidation processes.
- Government is creating a new ‘class’ of registered liquidator who can only undertake the debt-restructuring process.
The Australian Government has introduced further insolvency reforms for small businesses, to come into effect on 1 January 2021. These reforms follow the temporary measures introduced in March 2020 in response to the COVID-19 pandemic. These measures only apply to eligible incorporated small businesses with liabilities of less than $1 million.
The reforms include a new:
- restructuring relief for incorporated small businesses
- simplified liquidation process for incorporated small businesses
- ‘class’ of registered liquidator who can only undertake the debt-restructuring process.
Do these insolvency reforms apply to my small business?
These reforms apply to your small business if it:
- is incorporated (structured as a company)
- has liabilities of less than $1 million.
If you are a sole trader or in a partnership, these reforms do not apply to your business.
If you (in your role as company director) wish to access these measures:
- for a debt-restructuring, you are required to make a declaration that your company is eligible to access the new process. To be effective you must publish it on ASIC’s Published Notices Website and give a copy of this to ASIC.
- for a simplified liquidation, you are required to give the liquidator you appointed a declaration that you believe the company will meet the eligibility criteria for a simplified liquidation. This declaration must happen within five business days after appointment.
ASIC is Australia’s corporate, markets and financial services regulator.