The consultation paper released last week explores ways to clarify how trusts, which are commonly used by small businesses, are treated under corporate insolvency law.
The paper on trusts follows recent consultations concerning schemes of arrangement, as well as the independent review of the insolvent trading safe harbour, expected to report by the end of the year.
Measures arising from these consultations will build on the government’s small-business insolvency reforms, which came into effect on 1 January 2021. By establishing a new small-business debt restructuring process and a simplified liquidation pathway, it is hoped to strengthen the insolvency system and help small businesses recover from the COVID‑19 crisis.
The government has also doubled the minimum threshold at which creditors can issue a statutory demand on a company from $2,000 to $4,000 from 1 July 2021, to help prevent distressed but viable companies from being pushed into liquidation over relatively small debts.
All stakeholders are encouraged to have their say on the next stage of reform. The consultation paper is available on the Treasury website and is open for submissions until 10 December 2021.
