On 22 March 2020 the Federal Government announced temporary measures to assist financially distressed businesses. Such measures were included in the Coronavirus Economic Response Package Omnibus Act 2020 which was legislated on 24th March 2020. Some of the important measures include:
- increasing the minimum amount for a creditor to issue a statutory demand to a company from $2,000 to $20,000;
- increasing the threshold at which a creditor can initiate bankruptcy proceedings from $5,000 to $20,000
- increasing the time both companies and individual debtors have to respond to statutory demands or bankruptcy notices from 21 days to 6 months; and
- relieving directors from their duty to prevent insolvent trading in relation to any debts incurred in the ordinary course of the company’s business. Essentially, absent “egregious dishonesty or fraud”, directors may avoid personal liability for insolvent trading notwithstanding whether they have been taking “safe harbour” steps. Holding companies may also avoid liability for insolvent trading by subsidiaries.
These measures have been implemented with an estimation that they will apply for a period of 6 months from the commencement of the enabling legislation.