Insolvency Update | Statutory Demands, Bankruptcy and Insolvent Trading | 26 March 2020
With COVID-19, the Coronavirus Economic Response Package Omnibus Bill 2020 (the Bill) has some sweeping changes to statutory demands, bankruptcy and insolvent trading including:
- the minimum debt for a statutory demand will be $20,000 (instead of $2,000)
- the time for compliance by a debtor company is now 6 months (instead of 21 days)
- This will apply to statutory demands that are served on or after the commencement of the Schedule (s 1669 of the Bill)
- the statutory minimum is now $20,000 (instead of $5,000)
- the time for compliance is now 6 months (instead of 21 days)
- This will apply to bankruptcy notices issued on or after the commencement of the Schedule and petitions and declarations presented on or after the commencement of the Schedule
Directors relief from insolvent trading:
- there is now a safe harbour for directors and section 588G(2) does not apply if the debt is incurred:
- in the ordinary course of the company’s business; and
- the 6 month period starting on the day this section commences; or
- any longer period that starts on the day this section commences and that is prescribed by the regulations for the purposes of this subparagraph; and
- before any appointment during that period of an administrator, or liquidator, of the company.
Update: The Bill received royal assent on 24 March 2020 and is now the Coronavirus Economic Response Package Omnibus Act 2020. The changes outlined above are now effective from 25 March 2020.
It is important to note that the time for compliance for statutory demands served and bankruptcy notices issued before 25 March 2020 (i.e. on 24 March 2020 or before) is still 21 days.
See the legislative update here: https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r6521