On the 24 September 2020, the Government announced changes to Australia’s insolvency framework to better serve Australian small businesses, their creditors and their employees. The changes will introduce new processes suitable for small businesses, reducing complexity, time and costs for small businesses. The changes will enable more Australian small businesses to quickly restructure. Where restructure is not possible, businesses will be able to wind up faster, enabling greater returns for creditors and employees.
These reforms will support Australia to emerge from the pandemic with a stronger, more resilient and more competitive economy. The need to give businesses and their creditors certainty is crucial to kick-starting confidence and activity as the economy transitions to the recovery phase.
The measures will commence on 1 January 2021, subject to the passing of legislation. This will ensure that more small businesses are able to benefit from the new processes, particularly as temporary relief to protect financially distressed businesses expires at the end of 2020.
To implement the reforms, changes to primary legislation will be made to amend the Corporations Act 2001.
Key aspects of the reforms will be progressed at a later date, through associated subordinate legislation (both regulations amending the Corporations Regulations 2001 and rules made under the Corporations Act 2001). This will include details governing the operation of the new simplified insolvency processes.
Public consultation on the exposure draft legislation and explanatory material will close on 12 October 2020.