The Australian Government, in response to the ever-changing COVID-19 pandemic, has passed the Coronavirus Economic Response Package Omnibus Bill which became law on 24 March 2020. The changes made by the Australian Government impact on the Corporations Act 2001 (Cth) and the Bankruptcy Act 1966 (Cth) as follows:

Statutory demand

  • This is a common way that companies fall into liquidation. Under the news laws, the minimum threshold for a statutory demand to be issued by a creditor on a company has been increased from $2,000 to $20,000.

  • Time limits to respond to a statutory demand: Changed from 21 days to 6 months.

Bankruptcy Notice

  • The threshold for a creditor to initiate bankruptcy notice: Changed from $5,000 to $20,000.

  • The time allowed to for debtors to respond to a bankruptcy notice: Changed from 21 days to 6 months.

Debtors petition

  • Temporary extension to period of protection for a debtor after a declaration of intention to present a debtor’s petition from 21 days to 6 months.

Insolvent Trading

  • Temporary relief for directors from any personal liability, under the Corporations Act 2001 (Cth), for trading while insolvent.

* The above changes will at this stage stay in operation until 25 September 2020.

We advise our current and future commercial clients to consider how the above changes will impact on cash flow and dealings with creditors. Additionally, in light of the prospect of a recession occurring, clients should now be assessing their businesses as they currently stand, develop a planned course of action, implement the plan, respond and check on how it is operating and make any required adjustments. The actions and mechanisms you put in place now will ensure your business will survive in the tough months ahead for the business market. We applaud the Australian Government for considering such temporary measures to assist financially distressed individuals/ companies so as to ensure their viability.

Please get in contact with our expert team of commercial lawyers on (03) 5821 0777, should you wish to obtain independent legal advice, on any of the points mentioned above.