World News – UA – Businesses can continue to trade: Bankruptcy law changes to keep businesses open

Business owners will benefit from a faster way to fend off financial collapse by using new bankruptcy laws that will give them more control over how they restructure their debt and recover from the recession

The new regime will promise flat fees for companies that hire advisers to escape trouble as experts predict wave of insolvency due to forced shutdowns to stop the spread of COVID-19

Treasurer Josh Frydenberg amends small business insolvency laws to help them avoid collapse during recessionCredit: Alex Ellinghausen

The changes will take effect as millions of employers and their workers lose access to the $ 101 billion JobKeeper wage subsidy, forcing them to survive without extraordinary taxpayer support

As part of the biggest overhaul of bankruptcy law in decades, Treasurer Josh Frydenberg will adopt key features of U.S. Chapter 11 laws that allow business owners with debts below $ 1 million to stay in charge while paying off debts

« The reforms are a critical part of our economic recovery plan and will help build business confidence and dynamism across the economy by enabling viable businesses to survive as our economy rebuilds itself » said M Frydenberg

The changes come as M Frydenberg resets fiscal policy to ditch old assurances of return to surplus amid widely rumored estimates the October 6 budget will show a deficit of over $ 200 billion

The treasurer will deliver a speech on Thursday to outline a two-step strategy that offers financial support during the recovery and is followed by a second phase that rebuilds the budget while keeping taxes low

A crucial part of the formal strategy will be to maintain the existing tax cap as a share of the economy, which is 239 percent

Thousands of businesses have resisted insolvency or temporary liquidation, Mr. Frydenberg in March and extended until December 31, raising questions about how many people will collapse when the rules end

The government claims a 46% drop in the number of businesses that were put into administration from March to July compared to last year

By borrowing from the U.S. regime, the government will provide a new avenue for companies with liabilities below $ 1 million to bring in a small business restructuring specialist to deal with creditors

Once approved by the board of directors, the business owner would benefit from protection against unsecured creditors and certain secured creditors, who would not be able to assert personal guarantees against the directors. or their relatives

The owner of the business would have 20 days to develop a plan to restructure the debts while retaining control, a big change to existing laws that give control to outside directors or receivers

Once the plan is in place, creditors have 15 days to vote on it and any percentage of disbursement that would go to the small business restructuring specialist, in addition to the original fixed costs

If the plan gets majority support in a creditors’ value vote, the business proceeds and the practitioner oversees the distribution of all funds to those owed money.

If a plan is rejected by creditors, the company would go into administration and insolvency under an amended version of existing laws

Promising to speed up the process, the government is considering a « streamlined liquidation procedure » that reduces investigation and reporting requirements for liquidators

The insolvency regime will also be amended to remove the fees associated with registering a liquidator

While the government’s aim is to provide businesses with a faster and cheaper way to restructure, the sweeping changes have yet to be submitted to the insolvency industry for comment on the details

M Frydenberg aims to bring the reforms to the federal parliament within weeks and get them passed so the rules can go into effect on January 1.

The Australian Chamber of Commerce and Industry has called for insolvency arrangements to be gradually restored rather than reverting to normal in one fell swoop The Council of Small Business Organizations of Australia also said some companies choose to stay open only to receive JobKeeper for their employees.

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Small Business, Josh Frydenberg, Insolvency, Administration, Bankruptcy, Government, Law