By Andrew Hack, Solicitor, and Stephen Mullette, Principal, of Matthews Folbigg Lawyers, in our Insolvency, Restructuring and Debt Recovery Group.
The Corporations Amendment (Corporate Insolvency Reforms) Bill 2020 has been passed in the Senate as of yesterday. The legislation will take effect from 1 January 2021.
The centrepiece of the legislation is the introduction of a new restructuring mechanism for SME’s, called ‘Debt Restructuring’. The process allows insolvent SME’s to put forward a proposal to creditors to resolve unsecured debts and allow the company to continue trading. The process is similar to Part IX debt agreements available to insolvent individuals under the bankruptcy legislation.
Other amendments included in the legislation are:
- A temporary safe harbour period for directors’ liability for insolvent trading whilst they are attempting to appoint an external administrator – this operates from 1 January 2021 and ends on 31 March 2021.
- A ‘Simplified Liquidation’ regime for small businesses, which is designed to reduce the time and cost involved with liquidating a corporate small business.