Important Update for Insolvency Reforms
Starting from 1/1/2021, eligible businesses experiencing financial distress can access a new and simplified debt restructuring process. It could allow the businesses to restructure their existing debts while remaining in control of their business.
1. The new restructuring process commences when a Restructuring Professional (RP) is appointed.
2. When commenced, creditors cannot enforce against the company or guarantor.
3. There is no requirement for meetings of creditors, but creditors do have rights to request information.
4. Creditors will receive a proposal within 20 business days after the appointment of an RP.
5. Within 15 business days, creditors will need to make decision either accept or reject the proposal.
6. Within 5 business days of advising the RP of the correct debt value or submitting a new debt, creditors must notify acceptance, rejection or significant variations.
7. The proposal will be accepted if >50% of creditors approve (by value).
8. Once accepted, all unsecured creditors will be bound by the proposal.
If companies are unable to appoint an RP and access the Debt Restructuring Process between 01/01/2021 and 31/03/2021 (eg due to the short time frame for RP’s to be registered and trained), eligible companies can declare its intention to access the debt restructuring process.
Let us know if there is any concern for the above, either you or any of your clients suspecting financial distress, or need help from debt collectors. We will work together and do the best to protect your receivables and enhance your cash flow!
Further details for the new insolvency reforms can be found via https://www.ato.gov.au/Tax-professionals/Your-practice/Insolvency-practitioners/New-insolvency-reforms-to-support-small-business/
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