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Financially Distressed Businesses - Temporary Relief

Written by Sarah Pogson . April 05, 2020
2 min read

With the impact of COVID-19 hitting Australian businesses hard financially, the Federal Government has introduced new measures around Bankruptcy rules and regulations. 

Below we will outline the measure, provide relevant resources and help you understand your eligibility.

See above for the most recent resources available from Treasury. This resource provides an overview of the measure, including examples to help gain an understanding on how the measure can be applied to your business.

Temporary Relief for Financially Distressed Businesses
  • Temporary increased threshold and time to respond for statutory demands from creditors – the minimum threshold has been temporarily increased six months from $2,000 to $20,000 for creditors to issue a statutory demand.

  • Temporary increase in the threshold for a creditor to initiate bankruptcy proceedings – the statutory time-frame has been increased for six months, changing the failure to respond bankruptcy notice from 21 days to six months.

  • Temporary relief for directors from any personal liability for trading while insolvent – directors will be temporarily relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company’s business. This will apply for six months. The debts incurred by the company during the period will still be payable by the company. Egregious cases of dishonesty and fraud will still be subject to criminal penalties.

  • Temporary flexibility in the Corporations Act 2001 – the Treasurer will be given a temporary instrument-making power in the Corporations Act 2001 to temporarily amend provisions of the Act to provide relief from specific obligations or to modify obligations to enable compliance with legal requirements during the Coronavirus crisis. This will apply for six months. Any instrument made under the power will apply for up to six months from the date it was made.

If you would like to discuss any of these measures and what they mean for you and your business, our team is available to assist you. Please don't hesitate to talk with us on (02) 4229 2211 or you can send your enquiry 

*The above information was correct at the time of printing and subject to change*
Written by Sarah Pogson . April 05, 2020
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