In response to the COVID-19 pandemic and the catastrophic effects that this event has already had on our economy, the Federal Government has announced a range of immediate, temporary changes and moratoriums on certain corporate insolvency and bankruptcy laws in Australia.
The key measures introduced and discussed below are aimed to assist businesses in managing the sudden and unexpected economic shocks and preventing business failure where possible.
Insolvent trading moratorium:
The Government has provided temporary relief for company directors in relation to their duties to prevent insolvent trading for any debts incurred in the ordinary course of the company’s business. This moratorium in relation to insolvent trading is effective immediately and is expected to apply for a period of six (6) months from March 2020.
Statutory demand increases:
The Government has temporarily increased the threshold amount at which creditors can issue a statutory demand on a company from $2,000.00 to $20,000.00, effective immediately. Further to this, the timeframe for companies to respond to a statutory demand (if received) will be increased from 21 days to six (6) months. These temporary measures are expected to apply for a period of six (6) months from March 2020.
The minimum amount of debt required for a creditor to initiate bankruptcy proceedings has been temporarily increased from $5,000.00 to $20,000.00, effective immediately. This temporary threshold increase is expected to apply for a period of six (6) months from March 2020.
The effects of COVID-19 pandemic are already far reaching and not like anything we have seen before. The strain on business is enormous, particularly those who were already struggling.
Peter Lucas has published a short, practical video to assist clients and referrers to show some simple ways businesses can plan around the COVID-19 pandemic. There is an opportunity for businesses to continue and bounce back with careful planning, negotiations with all stakeholders and available relief from the Government and Banks. Our knowledge and expertise can help your clients prepare a workable plan to get through these uncertain times.
If you are aware of any clients who need assistance, please contact us for a no obligation first consultation.
P A Lucas