Attack of the zombie companies; However, the prospect of many small businesses slowly but surely turning into zombie companies is a very real one – especially since the Treasurer, Josh Frydenberg, took action to reform the insolvency sector and allow companies to pursue US Chapter 11 style corporate bankruptcies, allowing directors to keep the company going rather than appointing administrators. Interestingly, the insolvency industry itself has been hard hit by the seeming drought in company failures with JobKeeper now keeping many of them afloat. However, many insolvency practitioners warn that as business begins to return to more normal times next year, there is likely to be a very long list of zombie companies ready to emerge from the shadows and go into administration. Once creditors, banks and the ATO start to go searching for their money, they may find that the zombies simply can’t pay and quite possibly, debts are now larger than any assets remaining. As part of this false dawn, the number of companies going broke this year has fallen dramatically and is currently running well behind the usual number of around 8000 companies that are liquidated. That makes sense because the COVID-19 protections in place are shielding many businesses that would otherwise collapse once they encountered the harsh reality of failure.
-JobKeeper is allowing small businesses to keep staff on even as debt builds up and work dries up. -Bank holidays on loans and leniency by landlords to struggling companies has created an artificial picture of business viability that will quickly evaporate in more normal times. -The Australian Tax Office has not been nearly as active as usual in issuing wind up applications. -Temporary rules first put in place in March and extended for six months in September relieve directors from personal liability for trading while insolvent.- The same rules make it harder to issue a statutory demand for unpaid bills, increasing the threshold from $2000 to $20,000 and giving debtors six months to respond to a statutory demand. -The number of companies entering administration has been falling very quickly, suggesting a backlog of struggling zombie businesses will emerge next year. http://www.google.com/search?source=hp&ei=lox_X_77DdCRsAeC4ZHICw&q=Attack+of+the+zombie+companies&oq=Attack+of+the+zombie+companies&gs_lcp=CgZwc3ktYWIQA1CGmQFYhpkBYKacAWgAcAB4AIABgAGIAYABkgEDMC4xmAEAoAECoAEBqgEHZ3dzLXdpeg&sclient=psy-ab&ved=0ahUKEwj-nr33_6XsAhXQCOwKHYJwBLkQ4dUDCAg&uact=5
