Insights into the New Insolvency Reform

Wednesday October 14, 2020

Messages, posts and comments have been running wild recently following the introduction of the new Small Business Restructure reform announced late September 2020 by the Treasury. That along with the “new” risk around the interpretation of the protection from insolvent trading and the timing of achieving that protection has been enormous.

Regarding the Small Business Restructure Reform, we think that any reform in this area is a good thing. There will no doubt be cases where using this “Debtor in Possession” model is exactly what will be needed to help a business through difficult times by creating a cost-effective pathway for small businesses to deal with their distress. Although we are all awaiting more detail on how it will work and more importantly how creditors will receive it, it is without a doubt a great addition to the tool kit for directors.

The important thing to remember with any of these reforms is that it is just “another tool” that is available to directors, not the “only tool”. Now more than ever it will be critical for business owners to get the appropriate independent and holistic advice to ensure that if they need to consider any of the “tools” in the insolvency bag they pick the right one for them – for both the business and them personally.

There has also been a lot of noise of late regarding the impact of the protections from insolvent trading provided by the government through this pandemic, and of a potential deadline for appointing an insolvency practitioner by 31 December 2020 to take advantage of this. This legislation was clearly designed to provide safe harbour for directors from insolvent trading claims during the pandemic.

Whether any further changes are made before 31 December, we will have to wait and see. There is no doubt that there will be a push for a director “to have dealt with a company” before that date, due to the interpretation, however we cannot stress enough that it is only one factor that a director should be considering when making decisions about their company. There are options and all of these need to be reviewed when decisions are being made.

It is sad to think that with agendas everywhere directors and their advisors are walking a mine field of differing opinions over the next few months and years as they fight to keep their dreams and businesses alive.

We too have an agenda – Our agenda is simple, for our team to “guide directors and individuals through the insolvency framework” to get the best result possible.

Please, lean on us to get that holistic, independent advice that is needed to walk that mine field that is ahead of everyone of us. de Jonge Read provide an obligation and cost-free appraisal to directors and individuals who are facing hardship to ensure they have the right advice before they make a decision.

We believe through the pain and hardship businesses and individuals can find their path, whatever it maybe to get to the other side of this pandemic.

Should you have clients or associates that you know are struggling with financial issues or need assistance in reviewing their business affairs in preparation for what’s around the corner, our team of Strategists would be pleased to discuss options that are available on how to best design and implement insolvency strategies. Contact us now on p. 1300 765 080 | ua.mo1721815067c.arj1721815067d@ofn1721815067i1721815067

View All Blogs

Did you know?

Phoenixing is another name of business restructure. Read more about business restructures and when this can be an option for you.

Business Restructure

Read Our Latest Case Studies & Insights