Our recent article outlined proposed changes to insolvency laws as part of the response to the COVID-19 pandemic. Those changes have now come into effect, as the Coronavirus Economic Response Package Omnibus Act 2020 received royal assent and passed into law on 24 March 2020.
To recap, the position, now and for (at least) the next 6 months, is that, inter alia:
- The minimum debt thresholds for issuing statutory demands to companies or bankruptcy notices to individual debtors have been lifted to $20,000 in each case;
- The time for compliance with statutory demands (in the case of companies) and bankruptcy notices (in the case of individuals) issued on or after 25 March 2020 has been extended to 6 months;
- Directors of companies are temporarily (for the next 6 months) relieved from personal liability for trading whilst insolvent in relation to debts incurred in the ordinary course of business – however the company will still be liable for the debts incurred and egregious cases of dishonesty and fraud will remain subject to criminal penalties. It is also to be noted that there is otherwise no effect on the requirement for directors in all other respects to continue to comply with their statutory and general law duties.
- Creditors are still able to pursue debt recovery and enforcement action through the Courts.
This publication has been carefully prepared, but it has been written in general terms and should be viewed as broad guidance only. It does not purport to be comprehensive or to render advice. No one should rely on the information contained in this publication without first obtaining professional advice relevant to their own specific situation.