March 2020 | Scott Freidman
On 22 March 2020, the Morrison government announced that it will relax the insolvency and bankruptcy laws to keep businesses alive.
We understand these measures will last for 6 months and will be passed by Parliament urgently.
Here’s what you need to know:
- The government will increase the threshold at which a creditor can issue a statutory demand from $2,000 to $20,000.
- The threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings will increase from $5,000 to $20,000.
- The time required to respond to each demand will increase from 21 days to 6 months.
- The period of protection a debtor receives after making a declaration of intention to present a debtor’s petition will increase from 21 days to 6 months.
- Directors will be temporarily relieved of their duty to prevent insolvent trading for debts incurred during the ordinary course of business.
- Powers have been given to the Treasurer under the Corporations Act 2001 (Cth) to provide targeted relief for companies from certain provisions to deal with unforeseen events that arising from the health crisis (e.g. social distancing).
For specialist advice on these latest developments or to discuss your situation, please contact our director, Scott Freidman on (02) 9023 9131. We have access to insolvency experts to help you.