Treasurer Josh Frydenberg has announced dramatic reforms to
Australia's insolvency regime.
The reforms will significantly alter the insolvency framework
for small businesses, by allowing insolvent companies with
liabilities of under $1 million to remain in control of their
business rather than immediately being placed into the hands of
administrators. The proposal adopts a similar model to the US
Chapter 11 regime, which allows companies to restructure their
debts while remaining in control of their business. No reform has
been announced for companies with liabilities over $1million.
The reforms provide a roadmap to manage the exit from the
moratoriums on insolvency and bankruptcy enforcement, which were
recently extended1 to 31 December 2020. The extension of
the moratoriums, without more however, did not actively promote or
assist restructuring activity and potentially created the
conditions for entities to slip further into distress without any
real impetus to
