Extension of temporary relief for financially distressed Businesses
On 7 September 2020, the Australian Government announced that the temporary insolvency and bankruptcy protections which were put in place on 25 March 2020 had been extended by a further 3 months to now end on 31 December 2020.
The protections, which were initially due to end on 30 September 2020, have been implemented to protect businesses that are facing temporary financial distress due to the economic impacts of Coronavirus and to provide a safety net to 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.
In summary, the protections which apply to both corporations and individuals include:
- a temporary increase in the minimum threshold at which a creditor can issue a Statutory Demand on a Company under the Corporations Act 2001 from $2,000 to $20,000;
- a temporary increase in the minimum threshold in which a creditor can issue a Bankruptcy Notice on an individual under the Bankruptcy Act 1966 from $5,000 to $20,000;
- extending the period time in which a Company has to respond to a Statutory Demand from 21 days to 6 months;
- extending the period of time in which an individual has to respond to a Bankruptcy Notice from 21 days to 6 months;
- extending the period of time for which a creditor cannot take further action against an individual who has declared an intention to present a Debtor’s petition under the Bankruptcy Act 1966 from 21 days to 6 months;
- extending the temporary relief for directors from any personal liability for trading while insolvent, however egregious cases of dishonesty and fraud will still be subject to criminal penalties.
It is important to note that any debts incurred by a Company or an individual during this moratorium period will still be payable to their Creditors once the temporary protections come to an end.
Simmons Wolfhagen are keeping up to date with all changes to corporate and personal insolvency laws and are able to assist creditors and debtors with any questions they may have.