The Corporations Amendment (Corporate Insolvency Reforms) Bill 2020 (pending approval) will come into effect on 1 January 2021 and introduces a ‘Simplified Liquidation’ process.
The new liquidation process simplifies Australia’s current insolvency framework by simplifying the process and removing certain procedures.
Changes to Liquidation Process
The key changes of the Simple Liquidation process include the following:
(1) The requirement to provide a report on offences to ASIC has been removed.
(2) The obligation for liquidators to convene meetings has been removed.
(3) Creditors can no longer appoint a committee of inspection to monitor the liquidation.
(4) Creditors may no longer appoint a reviewing liquidator to review the liquidation.
(5) Reducing the circumstances in which a liquidator can pursue unfair preferences and voidable transactions.
(6) Improving the overall efficiency of the process for proving debts.
To be eligible for Simple Liquidation, your company must meet the following eligibility criteria:
(1) The company must have passed a special resolution of members that the company be wound up voluntarily.
(2) The liquidator must be given a report from the directors outlining the company’s affairs and containing a declaration that the company will be eligible for the Simple Liquidation process.
(3) The company is insolvent.
(4) The company’s total liabilities do not exceed the amount prescribed in the regulations (as of 9 December 2020 it is $1 million);
(5) No director has been a director of a company that has previously used the Simple Liquidation process or a debt restructuring process.
(6) The company’s tax lodgements are up to date.
The liquidator must not adopt the process if:
(1) more than 20 days have passed since the relevant triggering event that brought the company into liquidation; and/or
(2) the liquidator has not notified members and creditors of the company that they have a reasonable belief that the company is eligible for the simplified liquidation process and provided an opportunity for creditors to opt-out of the simplified liquidation process.
If you would like advice or assistance in relation to the above or any other Commercial matters, please contact our accredited business law specialists and Partners Justin Thornton on email@example.com and Rahul Lachman on firstname.lastname@example.org or otherwise by calling them on (02) 4626 5077.
The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.