Temporary relief for financially distressed businesses

On 22 March 2020, the Australian Government announced measures to assist businesses with the impact of the current economic conditions arising from the COVID-19 pandemic. These measures were passed on 23 March 2020, as a result, there have been some amendments to the Corporate and Personal Insolvency Laws to afford debtors some temporary relief over the next 6 months. An overview is outlined in the table below:

Area Implemented Changes 
Corporate Insolvency – issuing of Statutory Demands and Winding up applications

 

  • Statutory Demands are able to be issued in the usual course, however, changes have been made to the monetary threshold and the time for debtors to respond.
  • The monetary threshold to issue a Statutory Demand will be increased from $2,000 to $20,000. This means that there must be at least $20,000 owing at the time of issue and at the time of filing any winding up application.
  • The time to comply (i.e. attend to payment or negotiate a suitable payment plan) will be increased from 21 days to 6 months
Personal Insolvency – issuing of Bankruptcy Notices and Creditor’s Petitions

 

  • Bankruptcy Notices are able to be issued in the usual course, however, changes have been made to the monetary threshold and the time for debtors to respond.
  • The monetary threshold to issue a Bankruptcy Notice will be increased from $5,000 to $20,000. This means that there must be at least $20,000 owing at the time of issue and at the time of filing any Creditor’s Petition.
  • The time to comply (i.e. attend to payment or negotiate a suitable payment plan) will be increased from 21 days to 6 months. 
  • The above changes will be in place for the next 6 months.
Insolvent Trading
  • Temporary relief for directors in relation to insolvent trading over this 6 month period. It will not exempt insolvent trading liability prior to this period. Egregious cases of fraudulent or dishonest insolvent trading may still attract criminal actions.