Treasurer Josh Frydenberg says the insolvency reforms will allow small businesses to restructure their debts while remaining in control of their business, rather than immediately being placed in the hands of an administrator or creditors.
The Federal Government is planning to overhaul insolvency rules, adopting an American-style model to help small businesses struggling because of the coronavirus pandemic to either restructure or fold.Finance bodies expect a wave of insolvencies when emergency protections for business owners expire at the end of the year
The new system would be two-tiered, with large companies required to work under existing insolvency rules while business with liabilities of less than $1 million having a simpler system. For small businesses that can't be revived, liquidation would be changed, too, in an effort to make it quicker and easier.
"The Government's new reforms draw on key features of the US Chapter 11 bankruptcy process allowing small businesses to restructure their debts while remaining in control of their business."The number of companies entering external administration is down 46 per cent compared to last year, with many unviable businesses being propped up by the Federal Government's JobKeeper wage subsidies.
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