Government’s insolvency framework could save small businesses
The Institute of Public Accountants (IPA) has welcomed the Government’s insolvency framework as it could be the difference between “survival and extinction” for small businesses.
IPA chief executive, Andrew Conway, said the reforms would test the viability of small businesses and support their recovery, restructure and survival. Or, it would help them wind down and exit without the devastation that was often attached to the process.
“One of the key elements of these reforms includes a new debt restructuring process following key features of the US Chapter 11 bankruptcy process,” he said.
“This is a great initiative as it allows eligible small businesses to restructure their debt and improve their chance for survival. Importantly, while accessing a single, streamlined process, the small business owner remains in control of their business. This empowerment will help rebuild small business confidence.”
Conway also said the reforms would introduce a “rapid 20 business day period” for the development of a restructuring plan by a “small business restructuring practitioner”.
“Once a plan is drawn up, creditors are then asked to vote on the plan. The plan must achieve the requisite majority for it to be binding,” he said.
“It should be noted that while these reforms are due to commence on 1 January 2021, it is recognised that time is needed for practitioners to become familiar with the new processes and they will need to register as a small business restructuring practitioner. The detail will also have to be worked through to ensure the objectives are achieved.”
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