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. Incorporated entities with liabilities of less than $1 million will be able to access the scheme with the aim to help more small businesses keep trading while they restructure or wind down their operations. The Government had introduced a six-month temporary safe harbour regime to protect directors from being found personally liable for insolvent trading in March. Read more