2021 Insolvency Reforms - The Simplified Liquidation
Recently announced changes to Australian Insolvency Laws have introduced the concept of Simplified Liquidations.
A great concept! You should expect reduced costs and greater benefits to creditors. However, the devil may be in the detail which is currently being developed and is expected to pass through parliament between now (October 2020) and Christmas…
What is a Simplified Liquidation?
Based on the current Exposure Draft a Simplified Liquidation will be a streamlined version of the current Creditors Voluntary Liquidation (CVL) process. It will only be available for insolvent companies who have less than $1 million in creditors that they cannot pay.
There will be less clawbacks (including potentially no third party unfair preference actions!) available to the Liquidator and simpler and more efficient processes involved in the conduct of the Liquidation aimed at ensuring that creditors returns are maximized. This will mean no meetings and better use of technology throughout the process including for creditor reporting.
Complete details of the process are not yet available and it remains in Exposure Draft form, but we know the intention is to develop a simple and cheap liquidation process specifically with Small Business in mind to help handle the myriad of expected failures arising out of the Pandemic.
We think this concept is a move in the right direction and something we (as specialists in SME business insolvencies) have been calling for for some time. It is just a shame that the government and regulators only realise this is a good idea in the middle of a crisis! With a start date of 1 January 2021, there is a lot to be clarified before these Simplified Liquidations can start rolling out….
As specialists in SME insolvency, the team at RCIG look forward to further honing our systems and processes to deliver these vital services to people in business and suffering from financial distress, at a low cost.
At RCIG we already conduct many CVLs and Bankruptcies each year for SMEs. In this time of crisis and with a deep recession already upon us, we will be among the first to get to grips with the new changes and help our clients use all of the available tools to address their unique situations as best we can, with expert advice and tailored, low cost solutions.
What do we know about how the Simplified Liquidation will differ from a standard CVL?
There will be fewer circumstances in which a liquidator can seek to recover various types of technical claims, but most relevantly - the understandably unpopular unfair preference payment may be a thing of the past.
Less reporting to ASIC
The liquidator will only be required to report to ASIC where there are reasonable grounds to believe that misconduct has actually occurred.
Just as it says – there will be no meetings in the simplified process.
Finally! A sensible regime for use of modern technology to communicate with creditors, instead of reams of paper reports that creditors don’t want to read!
A simpler claiming and dividend process is promised to apply.
What Will it Cost?
Let us get back to you on that! Unfortunately it is still too soon to confirm actual costs. Our CVL costs and hourly charge rates are amongst the lowest in the Country, so have no doubt we will deliver best value solutions…
If you are interested in Simplified Liquidations or want to discuss your present circumstances generally, please don’t hesitate, and contact Bill Cotter immediately, by phone or via the “Contact Us” page of our website.
As always, we offer No Cost, No Obligation, confidential initial consultations. Given it will cost you nothing, just try us and we will be happy to share our many years of specialist knowledge. Even if it is only to get a Second Opinion to balance what someone else may have told you. This is a speciality - we will give you the time and talk you through these complicated areas and will not blind you with jargon!