Insolvency landscape over the last 12 months and what the next 12 months may look like

It has been an interesting last 12 months in the world of insolvency in Australia.

 Law reform and the introduction of the most significant insolvency reform in 30 years

The Australian Government introduced a number of support measures for individuals and businesses in response to the COVID-19 pandemic such as the commencement of JobKeeper and JobSeeker in March 2020; the introduction of small business insolvency law reform introduced in January 2021 and other associated reforms such as insolvent trading relief and changes in statutory minimums and time periods for statutory demands and bankruptcy notices.

The small business insolvency law reform was billed as the most significant reform in the last 30 years and saw the introduction of a new streamlined debt restructuring and a simplified liquidation process.

The support measures such as JobKeeper and JobSeeker have generally been successful in assisting individuals and business during the last 12 months however they have now ended. Additionally, since January 2021, the take up from companies for debt restructuring or simplified liquidations has not been that high.

 Interesting insolvency matters in the last 12 months

The number of insolvency appointments have remained low as a result of the support measures however I have worked on a few interesting and notable matters in the last 12 months.

Here is a short summary of a few of them.

On appointment there were three (3) motor vehicles registered in the name of the Company. We issued the director of the company with several notices to hand the vehicles over to the liquidator however the director ignored all of the correspondence. Through our valuers we arranged to repossess the three vehicles and sell the vehicles for the benefit of the secured creditors.

The appointment by the Court was as a result of a dispute between a bankrupt husband and non-bankrupt spouse who had recently separated. There were difficulties with obtaining possession of the property from the non-bankrupt spouse who also had four dependent children residing at the property with her however time was provided for them to obtain alternative places to stay given the difficulties of moving during a pandemic. The property was sold $25,000 over valuation and net proceeds were split between the Trustee in bankruptcy of the husband and the non-bankrupt spouse.

Unfortunately, as a result of the coronavirus pandemic and restrictions in NSW the business struggled and eventually closed. The bankrupt was left with being personally liable for a number of trade suppliers of the business as well as to a major financier of the business. The bankrupts’ debts are now claims in the bankruptcy and the bankrupt has decided to hang up his boots and retire.

The company was part of a larger group of companies and recently had experienced some legal issues and adverse results. A Deed of Company Arrangement was proposed and accepted by creditors which will see an estimated return of ten cents in the dollar to participating creditors as opposed to an immediate liquidation and winding up which would likely provide little or no return to creditors.

What the next 12 months may look like

Sydney is currently in lockdown and both the state and federal governments have stepped in to assist both individuals and companies. However, the ATO has flagged that it will likely step-up enforcement activity in the collection of unpaid taxation debts near the end of this year which may result in a slight increase in the number of insolvency appointments.

Need help?

I recommend individuals and businesses who are experiencing financial difficulties to act early and obtain timely professional advice which I believe is key for all stakeholders involved.  The earlier advice is sought, the more options are available and there is no fee charged for initial consultations with the Vincents Insolvency and Reconstruction team.

At Vincents we are proud to be well-positioned across all touchpoints for insolvency and reconstruction reform, as one of Australia’s few, fully integrated mid-tier professional services firms.  We have a clear mission to work with our clients to give them greater clarity and direction – and right now this couldn’t be more pivotal.

Want to know more?

If you have any further questions about the issues raised in this article, please contact Alister Yee, our Insolvency & Reconstruction Associate Director, for assistance.

An Important Message

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents.  Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

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