On 1 January 2021, the hotly debated and greatly anticipated small business insolvency reforms came into effect. As you probably already know, the main changes include –
At the time of publication, no formal appointments have been made as yet nationwide under these reforms, indicating to me that the pressure on struggling companies has not built up to breaking point as yet.
And that makes sense, right? The Australian Taxation Office, the creditor that is normally quite active in the formal debt recovery and winding up space, seems to remain prepared to work with tax payers on overdue amounts for the time being. Additionally, the wind down of JobKeeper 2.0 is probably softening the landing for some struggling SMEs.
What we do know however is that nationwide five companies have made use of the reforms by registering for temporary debt relief. Advertisements published at the ASIC Published Notices Website show that a travel agency group and a workwear company have registered for debt relief – a precursor to entering into the small business restructuring regime. A Perth-based software development company has also registered for the relief.
By making the requisite declarations and publishing a notification, creditors owed less than $20,000 cannot issue a Statutory Demand whilst the three month relief period is in force. Creditors owed more than $20,000 can issue a Statutory Demand; however the time for the company to respond is six months, not the usual 21 days.
The temporary relief provides a company and its director/s with some breathing space; however the underlying declaration to be eligible for the relief includes an acknowledgement of insolvency and a commitment to enter into a small business restructuring process. By registering for temporary relief, directors receive an extension of the COVID-19 ‘safe harbour’ protection from insolvent trading breaches whilst the relief is in force.
So are these five trail blazers a sign of things to come? We will be watching with interest how these types of notifications play out over time.
If you have any clients who are considering using these new provisions, please feel free to get in touch with me to confidentially discuss their situation further on a cost and obligation free basis.
About the author
Greg Quin is a Partner and Registered Liquidator at HLB Mann Judd Insolvency WA and has been with the team for 12 years. Greg oversees the daily operations of the many insolvency appointments managed by the HLB Insolvency team and looks after the operations of the practice.
If you have any queries about insolvency matters, please feel free to contact Greg on 08 9215 7900, 0402 943 091 or via email to email@example.com.