Small and medium businesses (SMBs) that are facing insolvency shouldn’t be subject to the same rules as other businesses, the Law Council of Australia said. The peak body of Australia’s legal profession said that Australia should move away from a one-size-fits-all approach under the Corporations Act of 2001, CRN reported. The Law Council said it was supporting Treasury’s draft exposure bill, which provides an alternative regime that allow SMBs to restructure, or transition to liquidation in a more cost-effective way.
Data from CreditorWatch shows that 436 businesses across Australia went into administration in September, which is 11 per cent higher than previously, MacroBusiness reported. The number of businesses going into administration in locked-down Victoria rose by 23.8 per cent, although there was a 1.6 per cent decline in business administrations in New South Wales. CreditorWatch’s chief economist Harley Dale says there is some correlation between the increase in business administrations and the recent reduction in government support measures such as JobKeeper wage subsidy.
In March this year, the Australian Government implemented new measures to assist financially distressed businesses and individuals to navigate the economic impacts of COVID-19, Mondaq reported. As expected, we have seen a drastic downturn in the filing of Wind Up Applications and Creditors' Petitions with the Courts, and the uptake of voluntary administrations. The number of Wind Up Applications filed between July and August 2020, as compared to July and August 2021, are down by 89% and Court Liquidations have also significantly decreased by 74%.
Josh Frydenberg Announces Plans to Overhaul Insolvency Laws In the Wake of COVID – Will It Be Enough to Prevent 50 Operators Forecast From Exiting the Sector?
The Treasurer says he expects the reforms to cover around 76% of businesses facing insolvency today – 98% of whom who have less than 20 employees, The Weekly SOURCE reported. Taking elements from the United States’ Bankruptcy Code, the measures – which have yet to be legislated but will start on 1 January 2021 – will see a shift from the current ‘creditor-in-possession’ regime to a ‘debtor-in-possession’ system.
Australia said on Friday it would simplify bank lending rules to free up credit in a bid to stimulate the economy, which slid into its first recession in nearly 30 years due to the coronavirus pandemic, Reuters reported. Shares of Australia’s “Big Four” banks rallied after the announcement in early trade, with the heavyweight financial sector surging more than 3%. The benchmark index was up more than 1%. National Australia Bank and Westpac Banking rose nearly 6%, while Commonwealth Bank of Australia was up more than 2%. Australia and New Zealand Banking Group rose nearly 5%.
Australia on Thursday unveiled its biggest shakeup in bankruptcy laws in nearly three decades, allowing businesses to trade while insolvent and take more control over debt restructuring, in a bid to help firms through the coronavirus crisis, Reuters reported. Under the proposed rule changes, businesses with liabilities of less than A$1 million ($708,000) will be able to keep operating while they come up with a debt restructuring plan, rather than be placed in the hands of administrators.
Australia will extend its temporary insolvency and bankruptcy protection rules until the end of this year, Federal Treasurer Josh Frydenberg said on Monday, providing businesses a lifeline to recover from the impact of the coronavirus pandemic, Reuters reported. Under the rules, which were first introduced in March and due to expire on Sept. 30, creditors cannot issue bankruptcy notices to businesses for debts below A$20,000 ($14,558). The creditors’ notice period to act on debts could also be extending letting many firms keep trading without paying rent, tax and loans.
Thousands of employers are forecast to fail within weeks in a new sign of the pressure on jobs as the Morrison government promises a budget plan to lift the economy out of recession, The Sydney Morning Herald reported. Insolvency firms are preparing for a spike in the number of companies going broke at the end of this month, when safe harbour rules introduced in March to help businesses hibernate through lockdowns are due to end.
STA Travel Group Has Gone Into Voluntary Administration After Its Parent Company Filed For Insolvency
Travel agent STA Travel Group has gone into voluntary administration. It comes after the collapse of the travel group’s Swiss-based parent company STA Travel Holding AG, which filed for insolvency, Business Insider Australia reported. STA operates online travel agent services and 27 outlets in Australia, with Deloitte’s Jason Tracy and Timothy Norman appointed as administrators on August 21.
Virgin Australia Holdings Ltd’s unsecured creditors will receive an average return of 9-13% of their funds as part of U.S. private equity group Bain Capital’s proposed purchase of the airline, administrator Deloitte said in a report on Tuesday, Reuters reported. The unsecured creditors include 6,500 bondholders who are owed A$2 billion ($1.43 billion) by the country’s second-biggest airline and will receive a return of 8.4-12.8%, less than the 14.4% return for critical suppliers. Priority creditors and employees will receive 100% of funds owed, the report said.