The government's insolvency reforms, which are aimed at helping small businesses ride out the economic storm caused by COVID-19, are now in effect. These reforms have introduced two new processes – a new debt restructuring process and a simplified liquidation process.
For an explanation of the mechanics of the Small Business Restructuring process (“SBR”), please click here.
It is important to understand the focus of this is on trying to make sure the business is able to continue trading. This means that the interests of creditors who are owed the money have a much lower priority. This focus can be clearly seen throughout each of the SBR steps.
While the SBR has a role to play in keeping businesses afloat, it will not be as effective as the government has claimed due to the practical difficulties that businesses, directors and creditors will face. Some of these difficulties are set out below.
