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During this unprecedented and difficult time for so many Australians the Morrison Government, as a direct response to the economic impacts of COVID -19, has introduced a number of temporary measures that provide a safety net to businesses that may face financial distress.

The temporary measures are:

  1. Directors will be temporarily relieved of their duty to prevent insolvent trading (insolvent means your business cannot afford to pay its debts as and when they fall due) with respect to any debts incurred in the ordinary course of the company’s business;
  2. Companies:
    1. When a company is owed debts it may issue a Statutory Demand to force a debtor company into liquidation.  The temporary amendment to Statutory Demands is:
      1. increasing the current minimum threshold for creditors issuing a Statutory Demand on a company under the Corporations Act 2001 from $2,000 to $20,000;
      2. extending the statutory timeframe for a company to respond to a Statutory Demand (the first step in liquidation proceedings) from 21 days to 6 months;
  3. Individuals:
    1. Increasing the current minimum debt threshold amount for a creditor to pursue an individual for bankruptcy has been increased from $5,000 to $20,000;
    2. Extending the time for an individual debtor to respond to a Bankruptcy Notice (first step in bankruptcy proceedings) from 21 days to 6 months; and
    3. When a debtor declares an intention to enter voluntary bankruptcy by making a declaration of intention to present a debtor’s petition, there is a period of protection when unsecured creditors cannot take further action to recover debts.  This period will be temporarily extended from 21 days to 6 months.

All of the above measures will apply for 6 months.

If you are being pursued for debts and are concerned about the life of your business because cash flow is low due to COVID-19 the changes to the laws may assist you but it is critical that you get legal advice as soon as possible.

If you need any assistance with the temporary changes to the law that have been implemented in relation to Insolvency and/or Bankruptcy law, please call the professional team at Clarke Hemmerling Lawyers for a no-obligation discussion on 08 8333 2130.

We will all get through this together!

This blog post does not constitute legal advice and should not be relied upon as such. It is a general commentary on matters that may be of interest to you.  Formal legal or other professional advice should be sought before acting or relying on any matter arising from this communication.