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Possible way out for small businesses struggling to survive

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Published by:
David Armstrong
Published on:
January 28, 2021
Modoras Accounting (SYD) Pty Ltd ABN 18 622 475 521
small businesses struggling to survive

SME’s simplified debt restructuring process

Is your small business insolvent or at risk of insolvency: having cashflow difficulties and unable to pay its debts when they’re due.

Is your company incorporated under the Corporations Act? And are its total liabilities less than $1 million?

If you answered yes to all these questions, you may be able to keep your business alive.

How? By taking advantage of the federal government’s new, simplified debt restructuring process.

From 1 January 2021 to 31 March 2021, eligible companies can appoint a ‘small business restructuring practitioner’ to oversee the restructuring of the company’s debt.

This could help your company stay afloat while providing greater certainty to your creditors and employees.

The restructuring practitioner, who must be a registered liquidator, can work with you to develop your debt restructuring plan.

The plan would set out how your company’s creditors would be repaid. This could be as a proportion of the debt owing to them or the ‘cents in the dollar’ they’d receive, for example.

The plan would include all unsecured debts, except employee entitlements.

Though the practitioner oversees the restructuring process, you would remain in control of your company.

Not only that, you could continue trading ‘in the ordinary course of business’ – even if your company is insolvent.

Within 20 days of entering the process, you would have to put your debt restructuring plan (and a restructuring proposal statement) to your creditors for a vote.

It would have to be accepted by more than 50 per cent of the creditors by value that vote.

If your plan was accepted and your company paid off its obligations under the plan, it would be released from all debts or claims covered by the plan.

Your business would live to fight another day.

For more information, visit the Australian Government’s simplified debt restructuring web page.

 

If you’re unsure whether your company is insolvent or at risk of insolvency, contact Modoras for advice on 1300 888 803.

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IMPORTANT INFORMATION: This blog has been prepared by Modoras Accounting (SYD) Pty Ltd ABN 18 622 475 521. The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals’ personal circumstances have been taken into consideration for the preparation of this material. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Accounting (SYD) Pty. Ltd. recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog can change without notice. Modoras Accounting (SYD) Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Accounting (SYD) Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Accounting (SYD) Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication. Liability limited by a scheme approved under Professional Standards Legislation.

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