Corona-virus health crisis introduces flexibility in insolvency laws

As you may already know, last night a number of announcements were made by the Prime Minister, Scott Morrison, including some important temporary changes in insolvency laws that are aimed to assist individuals and business to survive during the current Coronavirus Crisis.
 
My preliminary summary of such insolvency law announcements are as follows:

Company Insolvencies

- The Government is increasing the minimum threshold for creditors issuing a statutory demand on a company under the Corporations Act 2001 from $2,000 to $20,000, applicable for the next 6 months.

- The statutory time-frame for a company to respond to a statutory demand will be extended from 21 days to 6 months.

Individual Insolvencies

- The threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will increase from its current level of $5,000 to $20,000, applicable for the next 6 months.

- The statutory time-frame for an individual to respond to a Bankruptcy notice will be extended from 21 days to 6 months.

Insolvent Trading

- Temporary relief for directors from personal liability where the company is trading whilst insolvent (if business is impacted by Coronavirus Crisis).

General Corporations Act Points

- As a result of health related restrictions being put in place, it will not be possible for companies to comply with certain provisions of the Corporations Act - i.e.  holding general meetings in person, accordingly temporary flexibility will be allowed in the Corporations Act to provide targeted relief for companies from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis.

Of course the ATO, banks and various other bodies are also providing assistance and relief to owners or directors of a business that may be struggling due to the Coronavirus.

We are yet to see the legislation enacting the above, so watch this space for changes and further developments.

We understand that these are only an initial relief package available during this unexpected and challenging time and more announcements are likely as the crisis progresses. I will be monitoring this space for updates and circulating details.  It is vital that owners and directors get advice on these issues early and often. I am available at all times and with no obligation, to discuss implications and to provide assistance.

Economic response to the Coronavirus fact sheet regarding a temporary relief for financially distressed businesses is available here: Enter your content here: https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Providing_temporary_relief_for_financially_distressed_businesses.pdf

If you need to chat, contact us today for a free, no-obligation discussion.