Temporary relief for financially distressed individuals and businesses
On 24th March 2020, the Federal Government’s Coronavirus Economic Response Package Omnibus Act 2020 came into force. This legislation aims to provide temporary relief for financially distressed businesses by lessening the threat of actions that could unnecessarily push them into insolvency and force the winding up of the business.
The changes only apply for the six months from 25th March 2020 to 25th September 2020.
The four main differences are:
- Changes to statutory demands made by creditors
The minimum amount for which a creditor can make a statutory demand has increased from 21 days to 6 months. Also, the response time for a debtor responding to a statutory demand has increased from 21 days to 6 months.
- Individual bankruptcy
The minimum debt that allows a creditor to initiate bankruptcy proceedings against an individual debtor has increased from $5,000 to $20,000. Also, an individual now has six months, instead of 21 days, to respond upon receipt of a bankruptcy notice.
- Protection for director’s liability for trading while insolvent
Directors have temporary relief from any personal liability for trading while insolvent.
- Treasurer’s temporary flexibility to amend the Corporations Act
Amending the Corporations Act gives the Government power to provide targeted assistance from the provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis.