Australia yesterday unveiled its biggest shakeup in bankruptcy laws in nearly three decades, allowing small businesses to trade while insolvent and take more control over debt restructuring, in a bid to help firms through the coronavirus crisis, Reuters reported. The new rules will help manage an expected avalanche of insolvencies when wage subsidies introduced to help companies survive the virus-triggered recession start to wind down early next year. Under the proposed rule changes, businesses with liabilities of less than A$1 million ($708,000) will be able to keep operating for 20 business days while they come up with a debt restructuring plan, rather than be placed in the hands of administrators. The changes, effective from Jan. 1, 2021, aim to move the system “from a rigid, one-size-fits-all creditor in possession model to a more flexible debtor in possession model,” Federal Treasurer Josh Frydenberg said in a statement. The government would adopt some rules from the U.S.-style chapter 11 process, he said, which gives struggling companies a window to restructure debt while being protected from the threat of legal action by creditors.
