In response to the impacts of COVID-19 on the economy, the Federal Government has introduced temporary changes to rules affecting insolvency and bankruptcy processes.
Businesses and credit teams should be aware of the changes as the changes will have a significant impact on the operation of the normal credit function.
Summary of the changes are as follows:
- The threshold at which creditors can issue a Statutory Demand will increase from $2,000 to $20,000.
- The time within which a recipient of a Statutory Demand has to respond to a Statutory Demand will be extended from 21 days to 6 months;
- The threshold at which creditors can issue a Bankruptcy Notice will increase from $5,000 to $20,000.
- The time within which a recipient of a Bankruptcy Notice has to respond to a Bankruptcy Notice will be extended from 21 days to 6 months;
- Directors will be relieved of their duty under the Corporations Act to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company's business.
- At this stage, the changes are in place for a 6 month period.
During these unprecedented times, many businesses will be severally impacted by loss of revenue and productivity.
Holman Webb stands ready to assist with:
- Restructuring (including informal work outs, administration, and liquidation);
- Working with account and credit teams to navigate collection processes;
- Employment issues (including redundancies and temporary stand-downs); and
- Renegotiation of contracts and commitments (including 'force majeure' clauses).
If you have a query with regard to any of these changes, please don't hesitate to get in touch with Chris Hadley, Partner within Holman Webb's Commercial Recovery & Insolvency Team.