Lifeline for small businesses in Australia with new 'Chapter 11' US-style ...

Huge changes to bankruptcy laws mean the way Australians do business will change FOREVER ... here's what it means for YOU Small businesses on brink of collapse could be saved by new bankruptcy laws Treasurer Josh Frydenberg has unveiled biggest insolvency change in decades Draws on features of the 'Chapter 11' bankruptcy code used in the United States

By Kelsey Wilkie and Stephen Johnson For Daily Mail Australia

Published: 23:03 BST, 23 September 2020 | Updated: 02:59 BST, 24 September 2020

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Struggling small businesses hit by COVID-19 shutdowns are being thrown a lifeline as JobKeeper wage subsidies are wound back.

Treasurer Josh Frydenberg has unveiled new laws allowing firms to trade while insolvent if they owe less than $1million to creditors.

The new rules, modelled on the American Chapter 11 bankruptcy code, will cover more than three-quarters of businesses that can't pay all of their bills. 

The announcement is being made just four days before JobKeeper is being significantly scaled back - taking wage subsidies away from two million workers.

Struggling small businesses hit by COVID-19 shutdowns are being thrown a lifeline as JobKeeper wage subsidies are wound back. Pictured is a deserted Cavill Avenue mall at Surfers Paradise on the Gold Coast

Struggling small businesses hit by COVID-19 shutdowns are being thrown a lifeline as JobKeeper wage subsidies are wound back. Pictured is a deserted Cavill Avenue mall at Surfers Paradise on the Gold Coast

The new rules, modelled on the American Chapter 11 bankruptcy code, will cover around three-quarters of businesses that can't pay all of their bills. Pictured is a closed bar at St Kilda in Melbourne

 The new rules, modelled on the American Chapter 11 bankruptcy code, will cover around three-quarters of businesses that can't pay all of their bills. Pictured is a closed bar at St Kilda in Melbourne 

Instead of having to appoint administrators, struggling small businesses will be allowed to restructure their existing debts while remaining in control of their business.

They will have 20 business days to develop a restructuring plan with a specialist accountant before creditors are given 15 days to vote on the plan.

Costly administrators would no longer be needed unless the creditors refused to accept the debt restructure plan.

Treasury modelling showed the biggest shake-up to bankruptcy rules in three decades would cover about 76 per cent of insolvent businesses, with 98 per cent of those have less than 20 staff.

Treasurer Josh Frydenberg has unveiled new laws allowing firms to trade while insolvent if they owe less than $1million to creditors

 Treasurer Josh Frydenberg has unveiled new laws allowing firms to trade while insolvent if they owe less than $1million to creditors

Instead of having to appoint administrators, struggling small businesses will be allowed to restructure their existing debts while remaining in control of their business

 Instead of having to appoint administrators, struggling small businesses will be allowed to restructure their existing debts while remaining in control of their business

Key elements of the reforms include:

 * The introduction of a new debt restructuring process for incorporated businesses with liabilities of less than $1 million

* Moving from a one-size-fits-all 'creditor in possession' model to a more flexible 'debtor in possession' model, allowing eligible small businesses to restructure existing debts while remaining in control of their business

* A period of 20 business days to develop a restructuring plan by a small business restructuring

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