On 1 January 2021, the Federal Government's post-COVID small business restructuring reform package came into effect. This package introduced into the Corporations Act 2001 (Cth) (Corporations Act):
- two new insolvency regimes for companies with liabilities of less than AUD 1 million, namely:
- a "debtor in possession" restructuring and restructuring plan process (Restructuring)
- a simplified liquidation process (Simplified Liquidation)
- temporary insolvency relief for companies (and their officers) that wish to enter restructuring but cannot find a registered liquidator able to act as the Restructuring Practitioner (RP) for the restructuring during the period 1 January 2021 to 31 March 2021, including:
- a temporary insolvent trading safe harbour for directors in respect of debts incurred in the ordinary course of business
- a temporary increase to statutory demand thresholds of AUD 20,000 and 6 months (otherwise AUD 2,000 and 21 days, respectively)
In this publication:
Part A: Restructuring
- Eligibility criteria
- How does restructuring commence?
- Initial notices to creditors and the Australian Securities & Investments Commission (ASIC)
- Development of the restructuring plan
- Prerequisites for putting the restructuring plan to creditors
- Putting the restructuring plan to creditors
- Voting on restructuring plan and disputing company's assessment of admissible debts and claims
- Making the restructuring plan
- Ending the restructuring and consequences
- Effect on key stakeholders
- RP - Remuneration and liability
Part B: Simplified Liquidation Process
- Eligibility
- What will be different from a normal CVL?
- Safeguards to prevent misuse
Video: 2021 Insolvency Reforms
Peter Lucarelli and Jessica Arscott recently presented on the 2021 insolvency reforms, which covers the small business restructuring process, simplified liquidation and associated temporary insolvency relief. Watch video below.
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