The Federal Government has announced that it is changing the insolvency laws to allow companies running small businesses to restructure their businesses and trade out of insolvency.
The changes have been introduced to help those businesses severely affected during the COVID-19 pandemic and include the following:
* the new scheme will apply to those businesses with debts under $1m
* businesses will be given 20 days to come up with a plan to trade out of insolvency with creditors having 15 days to decide whether to accept the proposal
* directors of a company will be able to trade even though the company is insolvent without them being personally liable for the debts of the company
* directors of a company will only be allowed to use the process once every 7 years to prevent corporate misconduct
* more businesses will be saved from financial hardship and creditors will receive more money than if the business went into external administration
Here is a link to a full report in the Australian newspaper:
September 2020