Last week, as part of the Australian Governments ongoing response to the pandemic-induced economic crisis, the Senate passed reforms to insolvency arrangements for small businesses with liabilities less than $1 million.
From 1 January 2021, these businesses will be able to avail themselves of:
- A new debtor-in-possession, debt-restructuring process to improve the prospects of business rehabilitation; and
- A new, lower cost and simplified liquidation pathway.
The reform package provides a user-friendly alternative for small businesses that may have accumulated unmanageable debts through (or before) the COVID-19 crisis.
In considering the debt restructuring process, there are some important things for Directors to keep in mind.