In his opening remarks to Ch 32 the author notes that, as all the relief measures put in place by the Australian Government had either expired or were likely to expire in the coming months, from 1 January 2021 the Government introduced a debt restructuring regime and a streamlined liquidation process designed for small businesses. Whilst acknowledging numerous problems with these new measures, he points out that they offer directors the following benefits:

1. exemption from liability for insolvent trading during the restructuring process of about 35-45 days or more with court extensions;
2. the changes will save costs and expenses usually incurred in a voluntary administration or a liquidation through investigations, reporting requirements and meetings in formal external administrations;
3. the chance to retain control of the business while a restructuring plan is developed with the assistance of a registered liquidator;
4. a deferral of liability under guarantees given by the directors, their spouses and relatives; and
5. the ability to choose a registered liquidator as the restructuring practitioner.

He notes that although few small businesses might be saved through these procedures, it might be possible for directors to compromise their companies’ debts and make a fresh start using their companies’ most valuable asset, their own human capital.

He goes on to explain that it should be possible to develop a restructuring plan which enables unsecured creditors to be paid at least 10 cents in the dollar, leaving them to claim the balance of their debts as allowable deductions for bad debts that have been written off; using the losses to advantage and retain their business relationships with the company. The funds needed to pay out this dividend could be obtained from a "white knight" investor who would take shares in the company. If the company carried on exactly the same business, it would be possible to offset its tax losses against its future income, thereby giving the company a tax holiday for a period of time. The restructuring plan could be couched in terms which would exclude the operation of the commercial debt forgiveness provisions of the Income Tax Assessment Act 1997 (Cth) so that the company could take maximum advantage of its losses. These issues are explored further in the new Ch 35 addressing the contents of the restructuring plan.

The new simplified restructuring regime contemplates a resolution to wind up the company if the restructuring plan fails and the resolution may be carried simply by the majority in value of the creditors. There is no need to determine whether the numerical majority of the creditors support the resolution, and there is no need for the chairperson of the meeting to exercise a casting vote in the event of a deadlock between the numerical majority and the majority in value. This is an important concession to the majority in value creditors and it will facilitate the winding up of companies whose restructuring plans fail.

Further, there is no need for physical meetings of creditors and electronic forms of communication can be used to contact creditors. Nor is there any requirement for committees of inspection or for searching investigations and s 533 reports.

A resolution can be passed without a meeting of creditors of a company in the simplified liquidation process and 25% or more of the creditors in value cannot object to the proposal being resolved without a meeting of creditors because IPRs, s 75-130(2)(c) does not apply to a company that is subject to the simplified liquidation process. Additional requirements of the process are covered in the new Ch 37.

In addition to a litany of issues the author lists as concerns arising from the new regime (see Ch 39), he also points to the potential dangers of moral hazards. Referring to ARITA's Chief Executive, John Winter’s observations that “The biggest issue is going to be the expectation that creditors – from banks to suppliers, employees, subcontractors and the like – are going to keep allowing businesses to rack up more debt while this restructuring occurs, knowing that they may end up being owed more and getting nothing”, he concludes that the new regime will affect the provision of credit in the Australian economy, encouraging unsecured creditors to adopt more stringent payment terms.

The author envisages continuing to update these various areas as the law evolves.

Company Receivers and Administrators is the essential reference tool for insolvency practitioners, their appointors and their advisers. It provides a thorough analysis of case law, legislation and academic writing on private and court appointments and discussion of voluntary administration and deeds of company arrangement under Pt 5.3A and debt restructuring and simplified liquidation for small businesses under Pt 5.3B of the Corporations Act.