The Federal Government is set to undertake the most significant reforms to Australia’s solvency framework in 30 years as part of its economic recovery plan.
The reforms, which draw on key features from Chapter 11 of the Bankruptcy Code in the United States, will help small businesses restructure and survive the economic impact of COVID-19.
Federal Member for Robertson, Lucy Wicks, said that as the economy continued to recover, it would be critical that distressed businesses have the necessary flexibility to restructure or to wind down their operations in an orderly manner.
“The government will continue to stand by small and family businesses by doing all that we can to ensure that these businesses come out on the other side of the pandemic,” she said.
“The reforms will assist incorporated businesses with less than $1M in liabilities, which covers about 76 percent of Australian businesses subject to insolvencies today, 98 percent of which have fewer than 20 employees.
“Together, these measures will reposition our insolvency system to reduce costs for small businesses, reduce the time they spend during the insolvency process, ensure greater economic dynamism, and ultimately help more local businesses get to the other side of the crisis,” Wicks said.
Earlier this year, the Morrison Government announced temporary regulatory measures to help financially distressed businesses.
On September 7, the government announced a further extension of this relief to December 31.
The new processes will be available for small businesses from January 1, 2021.
Media release, Sep 25
Federal Member for Robertson, Lucy Wicks