Insolvency practitioners and lawyers acting for small business clients are advised that the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 and Corporations Amendment (Corporate Insolvency Reforms) Regulations 2020 commenced on 1 January 2021.
Small business restructuring
Under Part 5.3B of the Corporations Act 2001 an eligible company may have a small business restructuring practitioner appointed. This enables small companies that are financially stressed to restructure debt to continue to trade. The process is supervised by a small business restructuring practitioner, who must be a registered liquidator. Directors play a large role and retain control of the business under supervision. This reduces the costs of external administration and may see the company survive the financial stress experienced.
Simplified liquidation process
Eligible companies may access a simplified and faster liquidation process under Part 5.5 of the Corporations Act 2001, which reduces the costs and time of the process to ensure creditors are paid. In this process liquidators are able to adopt a simplified liquidation process with reduced compliance requirements.
The two new processes are aimed at supporting small businesses in financial stress.
The By Lawyers Insolvency – Company Liquidation commentary has been updated accordingly.