CCBR Business Review

21 B U S I N E S S T I P S By Troy Marchant, Director, Adviceco Chartered Accountants THE FEDERAL GOVERNMENT has announced reforms to simplify the Voluntary Administration process in order to help financially distressed small businesses to efficiently restructure and survive the economic impact of COVID- 19. The reforms will likely come into effect on 1 January 2021. Small businesses are historically most at risk of insolvency, with 80% of corpo- rate insolvencies involving less than 20 employees. 2020 has had its fair share of chal- lenges, but we’ve actually seen around 50% fewer corporate insolvencies com- Insolvency Reform for Small Businesses MIND YOUR BUSINESS a vote of creditors by value, the busi- ness continues and the practitioner oversees the distribution of any funds to those who are owed money. • If a plan is rejected by creditors, the company would go into administra- tion and insolvency under a modified version of the existing laws. • The insolvency regime will also be amended to waive the fees associated with registering a liquidator. The reforms are designed to make restructuring a simpler and quicker pro- cess than the current system allows. We work with many small businesses who suspect this may be a road they will need to take. In many cases, there are options to turn things around before it gets to that, or to position for greater financial resilience if it appears unavoid- able. If you would like to talk about your business’ financial structure, we offer a complementary advisory session with a qualified accountant and business advisor. pared to the same period in 2019. This is largely because of the federal govern- ment stimulus measures. As the Federal Government weans small business off stimulus measures such as JobKeeper, some small busi- nesses may wish to restructure their financial affairs. Here is how it will work… • Business owners with liabilities of less than $1 million will be allowed to stay in charge of the business while they deal with their debts. • A small business restructuring practi- tioner will deal with creditors. • The business owner would have 20 days to develop a plan to restructure the debts. • Once the plan is put in place, credi- tors have 15 days to vote on it and any percentage of disbursements that would be paid to the small busi- ness restructuring practitioner, add- ing to the original flat fee. • If the plan gains majority support in CENTRAL COAST BUSINESS REVIEW DECEMBER 2020