UPDATE | Changes to statutory demands from 1 January 2021
Marc Baddams and Sean Greenwood provide an update following on from the recent article Changes to statutory demands from 1 January 2021 posted on 23 December 2021.
The Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (Cth) (the Act), commenced on 1 January 2021. The Act provides, among other things, that for a three month period from 1 January 2021 to 31 March 2021, an eligible small business will be able to declare its intention to access a new small business restructuring process (itself part of the Act) to its creditors through ASIC’s published notices website.
Following such a declaration, the existing temporary insolvency relief that was place until the end of 2020 (relief from insolvent trading liability under section 588GAAA of the Corporations Act 2001 (Cth) and the restrictions on the issuing of statutory demands) would then apply to the business for a maximum period of three months (or four months if the company has obtained an extension), until they are able to access a small business restructuring practitioner or other insolvency practitioner. The company will cease to be eligible for the temporary relief following the expiry of this time period, if the directors withdraw the declaration, or if the company enters external administration.
As noted above, this additional period of relief only begins when the directors have made a declaration about the company’s eligibility for temporary restructuring relief and published notice of making the declaration on the ASIC’s published notices website. So, if the directors of an otherwise eligible company do not make a declaration and publish a notice until (say) 1 February 2021, the company will not be eligible for temporary restructuring relief for the period 1 January 2021 to 31 January 2021. This means the increased thresholds and time periods for statutory demands ($20,000 and 6 months respectively) will not apply during that period.