The Coronavirus (COVID-19) pandemic is a health crisis like no other and it is significantly affecting our community, businesses and individuals. On 22 March 2020, the Federal Government introduced a stimulus package which amends the insolvency regime in the Corporations Act 2001 (Cth) (the Act) and provides some relief to directors and businesses from the usual timeframes for payment of debts that could ultimately result in liquidation or bankruptcy.
A summary of the package includes:
- A temporary increase in the statutory threshold for which creditors can issue a statutory demand on a company from $2,000.00 to $20,000.00.
- A temporary extension to the timeframe companies have to respond to a statutory demand from 21 days to 6 months.
- A temporary increase in the statutory threshold for a creditor to initiate bankruptcy proceedings from $5,000.00 to $20,000.00.
- A temporary extension to the timeframe for an individual debtor to comply with a bankruptcy notice from 21 days to 6 months.
- There will be an extension of time to the protection a debtor is afforded after making a declaration of intention to present a debtor’s petition, so that unsecured creditors cannot enforce their debts against the debtor for 6 months (extended from 21 days).
- Temporary relief for directors from any personal liability for trading while insolvent for debts incurred in the ordinary course of business over the next 6 months. However, debts which are incurred by the company will still be payable by the company.
- Providing temporary flexibility with respect to the Act so as to provide specific relief for companies from certain provisions of the Act in order for the companies to deal with unforeseen events that arise as a result of the COVID-19 health crisis.
- The Treasurer will also be given a temporary instrument-making power under the Act for the next 6 months to temporarily amend provisions of the Act in order to provide relief to companies and individuals from complying with certain obligations or to modify certain obligations so as to enable compliance with legal requirements during this crisis.
We hope that our clients, their families and colleagues stay safe and well. If you have any queries, please do not hesitate to contact us.