The Federal Government has announced plans to overhaul insolvency rules, in a bid to make it easier for small businesses to restructure or wind up.
In line with the recommendations outlined in the Australian Small Business and Family Enterprise Ombudsman (ASBFEO)'s Insolvency Practices Inquiry final report, the new rules will give business owners more time to recover – preventing a wave of unnecessary insolvencies.
“Our July report found that in many cases, small businesses were not getting the chance to turn their business around and instead finding themselves on an express train to winding up with zero control over the process," said ASBFEO, Kate Carnell.
Reforms will:
- Allow small businesses to restructure their debts while remaining in control of their business
- Reduce the threat of creditors taking action against a small business impacted by trading restrictions
- Extend temporary relief for directors from any personal liability for trading while insolvent
- Make the liquidation process quicker and easier for businesses that must close.
The ASBFEO recognises that the COVID-19 pandemic, among other factors, has driven many businesses to the brink and has therefore pushed for more protections for small businesses needing to restructure, but unable to gain immediate access to an insolvency practitioner.
With Deloitte Access Economics modelling estimating 240,000 small businesses are at risk of failure, the government's overhaul announcement has been described as a 'lifeline' by the ASBFEO.
For more information
Australian Small Business and Family Enterprise Ombudsman: Small businesses spared from unnecessary insolvency pain: Ombudsman