Insolvency laws for small business are changing

29 December 2020

  • New insolvency reforms apply to incorporated small businesses with liabilities of less than $1 million.
  • Reforms include new debt-restructuring and simplified liquidation processes.
  • Government is creating a new ‘class’ of registered liquidator who can only undertake the debt-restructuring process.
Open sign on business door

The Australian Government has introduced further insolvency reforms for small businesses, to come into effect on 1 January 2021. These reforms follow the temporary measures introduced in March 2020 in response to the COVID-19 pandemic. These measures only apply to eligible incorporated small businesses with liabilities of less than $1 million.

The reforms include a new:

Do these insolvency reforms apply to my small business?

These reforms apply to your small business if it:

  • is incorporated (structured as a company)
  • has liabilities of less than $1 million.

If you are a sole trader or in a partnership, these reforms do not apply to your business.

If you (in your role as company director) wish to access these measures:

  • for a debt-restructuring, you are required to make a declaration that your company is eligible to access the new process. To be effective you must publish it on ASIC’s Published Notices Website and give a copy of this to ASIC.
  • for a simplified liquidation, you are required to give the liquidator you appointed a declaration that you believe the company will meet the eligibility criteria for a simplified liquidation. This declaration must happen within five business days after appointment.

More information

ASIC is Australia’s corporate, markets and financial services regulator.

Last updated: 29/12/2020 12:00