New insolvency rules commence
The measures from 1st January 2021 apply to incorporated companies with liabilities less than $1 million.
For those businesses that are “unable to survive”, a new simplified “liquidation pathway” will apply for small businesses to allow faster and lower-cost liquidation.
To be eligible to access this new process a company must:
- have total liabilities which do not exceed $1 million on the day the company enters the process – this excludes employee entitlements;
- appoint a small business restructuring practitioner to oversee the restructuring process, including working with the business to develop a debt restructuring plan and restructuring proposal statement.
This principle has the potential to allow continuation of a longer term successful businesses hit by short-term or COVID cash flow difficulties.