COVID-19 pandemic and the protection of small business …
The federal government has proposed a new insolvency regime to support small business, help them survive and maintain their present workforce.
From 1 January 2021, a company with liabilities of less than $1 million, that has no employee debts overdue and tax returns filed can create a Small Business Restructuring Plan.
These companies will remain under the management and control of the existing team. Having decided to create a plan under the scheme the company must appoint a Small Business Restructuring Practitioner (SBRP) to advise on the restructuring plan and its implementation.
Once the process has commenced there is a moratorium on claims being made against the company and the directors. The company must prepare the restructure plan within 20 business days and it must be signed off by the SBRP.
The SBRP will notify the creditors of his appointment and when prepared, send them the restructure plan. The SBRP must certify the plan and that, in his opinion, the business will be able to make the payments under the plan.
The creditors have 15 business days to vote on the plan. For the plan to be approved, 50% of the creditors by value must vote in favor of its implementation. Related parties are not permitted to vote on the approval of the plan.
Once approved the plan is implemented under the supervision of the SBRP who has the power to terminate the plan in certain circumstances.
Restrictions on Small Business Restructuring Plans
The procedure for business restructuring plans outlined above is only available to businesses that conduct their activities through corporations. A sole trader or partnership cannot take advantage of the proposed changes because the Commonwealth does not have the power to legislate in respect of state matters and the states have not as yet proposed any legislation that mirrors the Commonwealth proposal.