Insolvency News COVID-19 Changes – 23/03/2020
URGENT & TEMPORARY CHANGES TO INSOLVENCY LAWS
TO HELP COMPANIES AMIDST THE COVID-19 PANDEMIC
Updated 23 March 2020
The Federal Government has announced 3 major changes to the insolvency laws to address the pandemic.
The changes were “announced in a “Fact Sheet” at www.treasury.gov.au/coronavirus.
The changes are not yet law. When they are enacted we will let you know.
We summarise the (temporary) changes here:
1). Statutory Demand Thresholds
- The threshold for which a creditor may issue a creditor’s statutory demand for payment of debt will be increased from $2,000 to $20,000.
- The time to comply with a statutory demand will increase from 21 days to 6 months.
- The effect of this change will give businesses breathing space around all debts.
2). Bankruptcy Notice Threshold
- The threshold for which a creditor may issue a bankruptcy notice for payment of debt will be increased from $5,000 to $20,000.
- The time to comply with a bankruptcy notice will increase from 21 days to 6 months.
- The effect of this change will give individuals breathing space around all judgement debts.
3). Insolvent Trading
- Directors will be relieved of their duty not to trade whilst insolvent for 6 months (presumably during the pandemic).
- In other words, directors can continue to incur debts during the pandemic even if their company is insolvent.
If you are a business owner and you or your customers are experiencing financial distress, contact Baybridge Lawyers for a chat on how to navigate the times ahead.
Baybridge can assist you in a range of insolvency matters, including:
- applications to set aside bankruptcy notices and statutory demands
- applications to extend convening periods
- hearings of sequestration and winding up applications
- public examinations by liquidators and trustees
- applications in respect of voluntary administrations and deeds of company arrangements
- applications to set aside unfair or insolvent transactions
- applications to the Court for directions and judicial advice
Over the past 10 years, our insolvency partner Sundip Ghedia has conducted about 2000 cases for liquidators.
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