Covid-19 – Temporary Amendments To Insolvency Laws Extended To 31 December 2020
8 September 2020
In March 2020, we reported about the measures the Federal
Government took to protect Australian businesses from the fallout
from the Covid-19 Pandemic. Amongst the suite of measures
introduced –
- Directors were to be relieved from trading whilst insolvent in
respect of debts incurred in the normal course of business for a
period of six months (however noting that the company will still be
liable for incurring debts and the incurring of debts involving
dishonesty and fraud would still be subject to criminal
penalty);
- Creditors were not able to issue any statutory demand on a
company unless the debt owed by the company exceeds $20,000;
- Those companies served with a statutory demand were to have six
months (not the usual twenty-one days) to respond to or deal with
the demand; and
- The bankruptcy threshold to initiate a bankruptcy notice
against an individual debtor were to be increased to $20,000 and
the debtor was to have six months (rather than twenty-one days) to
deal with the notice or present a debtors petition.
These measures were all due to end on 25 September 2020. On 7
September 2020, the Federal Treasurer and Attorney General issued a
joint media release to announce that these measures will now be
extended until 31 December 2020.
Whilst these measures and initiatives received wide spread
support when they were first announced in March this year, a
growing number of commentators and organisations have become
increasingly critical of the extension of these measures past
September for a number of reasons including the fact that -
- Landlords, financiers, suppliers and other creditors who
themselves have suffered through the Covid-19 fallout will be
unable to enforce their debts and agreements they have entered into
with debtors for a longer period of time and crucially through the
usually busy Christmas period; and
- With so many businesses on “life support” through the fallout,
many who have accessed government programs such as JobKeeper and
Covid-19 rent relief will inevitably fail leading to an even larger
number of insolvencies once these government support programs come
to an end.
In this time then it’s critical that businesses seek the
assistance of professional advisors to take a temperature check and
to discuss plans to determine whether they can possibly trade on
into the future or to attempt to minimise the damage and loss
should it not be able to resuscitate or restructure the business
once these measures come to an end.
Should anyone need to discuss any of these Covid-19 relief
measures or require assistance, they can contact either Howard
Chait on 0417 344 184 or hc@meerkinapel.com.au or Hugh
Maclaren on 0418 373 060 or hm@meerkinapel.com.au at any
time.