Key changes to insolvency and bankruptcy processes in light of COVID 19 ||| MTECC News 20.05
Key changes to insolvency and bankruptcy processes in light of COVID 19
The Australian Government has announced temporary changes to the Corporations Act 2001 and the Bankruptcy Act 1966 to release pressure on businesses and individuals in the wake of COVID 19.
The proposed changes will increase the:
- current minimum threshold debt for creditors issuing a statutory demand or bankruptcy notice to $20,000;
- timeframe for responding to a statutory demand or bankruptcy notice from 21 days to six months; and
- period of protection against action taken by unsecured creditors to recover debts (for debtors entering voluntary bankruptcy) from 21 days to six months.
The proposed changes also relieve company directors from their duty to avoid trading while insolvent. While egregious cases of dishonesty and fraud may still be subject to criminal penalties, directors will not be liable for debts incurred “in the ordinary course of the company’s business”, even if those debts were incurred after the company became insolvent.
The proposed changes will be in place for six months. More information is available from the Australian Treasury’s website, which can be accessed here.
The proposed changes come shortly after the CEO of one of Australia’s leading construction companies warned that the construction industry was “on the brink of collapse“, highlighting the unprecedented financial risks affecting the building and construction industry in the wake of COVID 19.
Liability limited by a scheme approved under Professional Standards Legislation.
COVID-19 and the Courts
It is unclear what effect, if any, yesterday’s announcement that “non-essential” services will be shut down over the next 48 hours to help staunch the spread of COVID 19 will have on courts and the legal profession.
While we anticipate that further information will be available later today, we have collated the most recent announcements from relevant courts and tribunals below:
Regardless of the changes affecting our profession, however, we encourage any and all subscribers in need of legal assistance in the coming weeks to reach out to MTECC’s barristers.
In addition to providing advice in respect to ongoing technology, engineering and construction matters, our barristers are also available for mediation, arbitration or adjudication, including by video conference or phone.