This update follows on from Greg Quin’s article from 2020 regarding the rollout of the Small Business Insolvency Reforms by the Federal Government in response to the expected surge in insolvencies resulting from the financial impact of the COVID-19 pandemic.
The Small Business Insolvency Reforms came into effect on 1 January 2021, with Treasury stating that these reforms were introducing ‘new insolvency processes suitable for small businesses, reducing complexity, time and costs’, which would ‘enable more Australian small businesses to quickly restructure’.
Treasury further stated that ‘where restructure is not possible, businesses can wind up faster, enabling greater returns for creditors and employees’.
The uptake on these reforms has been slow, with only 19 companies declaring with the Australian Securities and Investments Commission (“ASIC”) their eligibility to access the Small Business Restructuring regime, with less than 10 of these progressing to the appointment of a Small Business Restructuring Practitioner.
The slow uptake is likely attributable to the tight liability cap set on eligibility for companies, being liabilities of less the $1M. However, with the cessation of the JobKeeper scheme on 28 March 2021, one would expect the uptake of these reforms to gather momentum as companies previously being supported by the JobKeeper scheme, now fending for themselves without Federal Government support.
Now Treasury has released its first consultation process in relation to these reforms, the ‘Consequential amendments to small business insolvency reforms’, which was released on 23 April 2021. The consultation process runs through to 7 May 2021 and primarily relates to extending and tailoring the debt restructuring and simplified liquidation processes for Aboriginal and Torres Strait Islander corporations, but also includes several other clarifying amendments to the general operation of the processes.
We will endeavour to provide you further updates surrounding these reforms when additional information becomes available.
About the author
Benjamin Mitchell is a Senior Insolvency Accountant at HLB Mann Judd Insolvency WA. Benjamin assists the Principal and Director with the many Corporate and Personal insolvency appointments managed by the HLB Insolvency team.
If you have any queries about insolvency matters, please feel free to contact the team on 08 9215 7900.