Temporary relief for financially distressed businesses and individuals
On 22 March 2020, the Australian Government, as part of its economic response to the Coronavirus, announced temporary relief measures for financially distressed businesses.
The economic impacts of COVID-19 could see many profitable businesses face financial distress, particularly in the fitness and hospitality sectors with more industries to follow.
The objective of the temporary relief package is to implement a safety net to ensure that when the crisis passes these businesses can return to normal operation. The effect of the package remains to be seen.
In summary, the relief offered includes:
a temporary increase in the threshold at which creditors can issue a creditor’s statutory demand on a company (from $2,000 to $20,000), and the time the debtor company has to respond to a creditor’s statutory demand (6 months as opposed to 21 days);
a temporary increase in the threshold for a creditor to initiate bankruptcy proceedings (from $5,000 to $20,000), and an increase in the time period for debtors to respond to bankruptcy notices (6 months as opposed to 21 days), and extending the period of protection a debtor receives after making a declaration of intention to present a debtor’s petition;
temporary relief from any personal liability for trading whilst insolvent is also now provided for 6 months; and
(broadly) providing flexibility in the Corporations Act 2001 (Cth) to provide relief for companies.
Key takeaways
Talk to us about the temporary relief measures and what they mean for you and your business.
If you trade on credit terms we recommend you review those terms in light of the measures described above.
Creditors still have the right to enforce debt by initiating court proceedings. Every judgement debt carries interest.
For further information or advice, please contact:
Richard Anderson
Principal
T: 03 5226 8524
E: randerson@ha.legal
Ali Erskine
Principal Lawyer
T: 03 5225 5208
E: aerskine@ha.legal
