1489313 - Hogan Lovells FIS Horizons 2021 update - Flipbook - Page 18
Hogan Lovells
18
Key components of the proposed regime are
as follows:
•
•
Directors of debtor companies owing less
than AUD 1 million (as currently proposed)
will be able to appoint a Small Business
Restructuring Practitioner (SBRP) (a registered
company liquidator, who must be and remain
independent), who will assist the directors
with the development of a “restructuring plan”.
The SBRP will then report to the company’s
creditors on whether to approve the plan.
A restructuring plan is to be developed within
20 business days of the appointment of the
SBRP. If satisfied with the plan, the SBRP will
“certify” it and submit it to the creditors for
consideration. Any employee entitlements
that are due and payable must be paid out
before the plan is put to a vote – this may
present an obstacle for many small businesses
which have made use of the Government’s
emergency Jobkeeper support measure since
the pandemic started.
•
The creditors have 15 business days to vote
on the plan electronically.
•
The plan may be approved by a majority of
creditors in value, with no class voting and
with related party creditors being prohibited
from voting.
•
If a majority of creditors vote for the plan,
the plan can commence and the SBRP will
oversee it. The plan is binding on all unsecured
creditors, and on secured creditors to the
extent their debt exceeds the realizable value
of their security interest.
•
If the majority of creditors vote against it,
the process ends and the directors may choose
to enter another insolvency process, such
as voluntary administration or using a new
simplified liquidation process to allow a faster
and lower cost winding up.
•
Directors will remain in control of the
management of the company (as opposed to
the traditional “creditor in possession” model
that applies in other Australian insolvency
regimes), except as to transactions which are
outside of the ordinary course of business
which will require authorization from the SBRP
or a court.
•
Once an SBRP is appointed, unsecured and
some secured creditors cannot take action
against the company, nor can a personal
guarantee be enforced against a director, or an
ipso facto clause be triggered. Rights of secured
creditors and the statutory priority afforded to
certain creditors such as employees will remain
unaffected.
•
Protections will be built into the framework
to prevent its potential misuse as a means of
“phoenixing”. Related party creditors will be
prohibited from voting on the plan, companies
and directors will only be permitted to use
the scheme once in a given timeframe (seven
years is currently being suggested) and powers
will exist to stop the process if deliberate
misconduct is identified (although it is not yet
clear who will conduct this process).
Further details of the new regime are still the
subject of submissions and discussion, including
the AUD 1 million debt threshold, what debts will
be included in that threshold (such as contingent
debts or related party debts), the specific
procedural obligations, the anti-phoenixing
measures described above, and the interaction
with other insolvency laws such as voidable
transactions and directors’ duties (including their
duty to prevent insolvent trading).
Public consultation on the exposure of this new
draft legislation and explanatory material has now
closed. The Corporations Amendment (Corporate
Insolvency Reforms) Bill 2020 was introduced
to Parliament on 12 November 2020, and the
corresponding Regulations and Rules (in which
much of the substance of the new regime will
be contained) are expected to be released in the
coming days.
