Australia's largest corporate insolvency reform in 30 years is set to be introduced at the beginning of 2021. Draft legislation, which applies to small businesses, was released last week. Organisations need to familiarise themselves with the information ahead of an anticipated wave of insolvencies in 2021, as COVID-19 related government incentives cease.
Key takeouts
R3, the association of business recovery professionals, has produced a Standard Form Covid 19 CVA Proposal and accompanying Covid 19 Standard Conditions.
The Standard Form proposals are intended for use by SME companies, in each of the jurisdictions across UK that have been affected by Covid 19, to save time and cost and make CVAs more accessible to them.
'Chapter 11 bankruptcy', the US insolvency regime, often features in the UK headlines. When Lehman Brothers filed under Chapter 11 in 2008, it marked the start of the global financial crisis. Chapter 11 (which refers to part of the US Bankruptcy Code) is a restructuring tool designed to rescue companies. Its closest UK counterpart is Administration, under Schedule B1 to the Insolvency Act 1986.
The UK Government has announced new laws to enhance the scrutiny and transparency of pre-pack administrations.
What are pre-pack administrations?
A pre-pack administration is when the sale of a distressed company and its assets is negotiated before, or shortly after, the appointment of administrators.
The Corporate Insolvency and Governance Act (CIGA) came into force on 26 June 2020 and introduced a number of temporary and permanent reforms, with the aim of supporting businesses and the economy during the pandemic.
The reactivation of wrongful trading rules at the end of last month marks the return of personal liability risk for directors of businesses that continue to trade while on the brink of insolvency.
What's next for Australian businesses after the temporary COVID-19 insolvency law relief expires at the end of 2020? The government's new announcement sheds light on the next steps.
Key takeouts
The Australian Government has announced proposed major reforms to corporate insolvency laws for incorporated businesses with liabilities of less than $1 million that are facing financial distress.
Corporate Insolvency: Temporary Measures extended
On 29 September 2020, The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020 ("the Regulations") will be laid before Parliament. It is expected that they will be passed without amendment.
The purpose of the Regulations is to extend certain of the temporary measures introduced by The Corporate Insolvency & Governance Act 2020 ("CIGA") to assist companies who are struggling to deal with the economic ramifications of lockdown.
Corporate Insolvency: Temporary Measures extended
From 30 September 2020, The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020 ("the Regulations") are in force.
The purpose of the Regulations is to extend certain of the temporary measures introduced by The Corporate Insolvency & Governance Act 2020 ("CIGA") to assist companies who are struggling to deal with the economic ramifications of COVID-19.
COVID-19 Key Developments __ Top Story | COVID-19:Temporary amendments to insolvency laws extended to 31 December 2020 On 7 September The Treasurer and the Attorney General issued a joint statement announcing that the government plans to extend temporary insolvency and bankruptcy protections for businesses impacted by the COVID-19 pandemic until 31 December 2020. MinterEllison's Michael Hughes has released an article providing an expert summary of the changes. This can be accessed on our website here.