Earlier this year, in an article we published in March 2020 (read the article here), we briefly outlined changes made by the Federal Government to laws in the corporate insolvency and bankruptcy areas as a result of COVID-19.
These changes were initially scheduled to be in place for 6 months only, finishing on 25 September 2020.
Today, the Federal Government has announced an extension to at least some of these protections until 31 December 2020.
In announcing the extension until 31 December 2020, the Federal Government said:
- Regulations will be made to extend the temporary increase in the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive.
- The changes will also extend the temporary relief for directors from any personal liability for trading while insolvent.
- These measures were part of more than 80 temporary regulatory changes the Government made designed to provide greater flexibility for businesses and individuals to operate during the coronavirus crisis.
- The extension of these measures will lessen the threat of actions that could unnecessarily push businesses into insolvency and external administration at a time when they continue to be impacted by health restrictions.
- These changes will help to prevent a further wave of failures before businesses have had the opportunity to recover.
Whether there is any further extension to these protections past the new 31 December 2020 deadline, and exactly which of the original changes made by the Federal Government will be extended, remains to be seen.
For example, whilst not specifically mentioned in the Federal Government’s announcement today, we presume that the temporary changes made to the threshold at which creditors can issue a bankruptcy notice to an individual, and the time an individual has to respond to any bankruptcy notice they receive, will also be extended until 31 December 2020.
In the current economic climate, it remains more important than ever that businesses and individuals develop a clear strategy and plan to manage the issues that may have arisen over the past 6 months, including in respect to the solvency of their businesses or themselves, and obtain expert advice about those issues prior to 31 December 2020.
If you would like more information or advice about the matters raised above, please contact our insolvency experts at Murdoch Lawyers on 1300 068 736.
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.