THE Australian Small Business and Family Enterprise Ombudsman, Kate Carnell has welcomed the passage of legislation, overhauling the national insolvency framework.
The legislation, which comes into effect from January 1, 2021, will make it easier for small businesses to restructure or wind up and are in line with the Ombudsman’s Insolvency Practices Inquiry final report released in July.
“These landmark reforms will give otherwise viable small businesses a chance to recover and prevent a wave of unnecessary insolvencies,” Ms Carnell says.
“It’s an absolute game-changer for small businesses, particularly those that have been heavily impacted by the COVID crisis. Instead of finding themselves on an express train to winding up with no control over the process, these changes will ensure small businesses have the option to turn their business around, giving them a fighting chance to survive.
“Crucially, by moving to the ‘debtor in possession’ model, small businesses can restructure their debts while remaining in control of their business.
“For those businesses that sadly need to wind up, the liquidation process will be simpler, faster and cheaper. We know the pandemic, which followed a devastating season of natural disasters, has driven many small businesses to the brink," Ms Carnell said.
“Modelling by Deloitte Access Economics estimated about 240,000 small businesses are at risk of failure.
“It highlights the need for small business owners to sit down with their trusted and accredited financial adviser for a viability assessment as a matter of urgency.
“That’s why my office continues to advocate for the establishment of a small business viability program, providing small business owners facing financial stress with a grant valued up to $5,000 to access tailored advice on the state of their business," she said.
“Ultimately this legislation represents the most progress we have seen in decades much to the benefit of the small business sector.”