On Sunday 22 March 2020, the Australian Federal Government announced that it will make temporary amendments to
The Federal Government has stressed that it is important for businesses to have a safety net to make sure that when this pandemic has passed, they can resume normal business operations.
The Federal Government has proposed the following temporary changes:
Statutory Demands
- Increasing the current minimum threshold for creditors issuing a statutory demand on a company from $2,000.00 to $20,000.00. This will apply for six (6) months.
- The timeframe for a company to respond to
a demand will be extended from twenty-one (21) days to six (6) months. This will apply for six (6) months.
Bankruptcy Proceedings
- Increasing the current minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor from $5,000.00 to $20,000.00. This will apply for six (6) months
- The timeframe a debtor has to respond to a bankruptcy notice will be extended from twenty-one (21) days to six (6) months. This will apply for 6 months.
- Extending the period of protection a debtor receives after making a declaration of intention to present a debtor’s petition from twenty-one (21) days to six (6) months. This will apply for six (6) months.
Insolvent Trading
- Directors will be relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company’s business. This will apply for six (6) months.
- Egregious cases of dishonesty and fraud will still be subject to criminal penalties and will still be payable by the company.
Tax
- The ATO will assist businesses struggling as a result of the COVID-19 pandemic tailoring solutions for their circumstances, including a reduction of payments or deferrals, or withholding enforcement action.
Powers given to the Treasurer
- The treasurer will be given instrument-making power in the Corporations Act 2001 (Cth) to amend provisions of the Act to provide relief from specific obligations or to modify obligations to enable compliance with legal requirements during the COVID-19 pandemic. This will apply for six (6) months.
These proposed changes do not yet have legal effect, however, given the urgency in providing relief to Australian businesses we anticipate that the amendments to legislation will take place shortly.
The proposed amendments apply to statutory demands and bankruptcy notices issued on or after the date of commencement of the Coronavirus Economic Response Package Omnibus Act 2020.
Hunt & Hunt Lawyers national insolvency team will continue to monitor the changes to insolvency laws and provide further updates as new information becomes available.
Please contact Hunt & Hunt Lawyers if you require further information, or to discuss your specific circumstances.
