The Australian Federal Government has now passed temporary amendments to insolvency and corporations laws in light of the challenges COVID-19 poses to many otherwise profitable and viable businesses.
It distresses me to even contemplate how many businesses operating in the construction industry will eventually succumb to some form of insolvency as a result of the coronavirus (COVID-19) crisis (event).
These are extraordinary times and as such, it cannot be ‘business as usual’ in terms of how the construction industry is regulated in terms of insolvency.
In an article in the Financial Review dated 17 March 2020, it is stated:
With Australia facing a likely shut down of non-essential services in the next 48 hours, many otherwise profitable and viable business are unfortunately facing financial distress. As part of the Federal Government's second economic stimulus package, it has been announced that the Morrison government will make temporary changes to insolvent trading laws including providing directors from temporary relief for insolvent trading.
The key measures (all to apply for the next six months only) are as follows:
As the Novel coronavirus (COVID-19) pandemic continues to spread across the globe, people and businesses are facing unprecedented challenges, both immediate and strategic. Governments in various jurisdictions have announced various measures to try to alleviate the distress caused by the numerous issues that have arisen and continue to arise, particularly around cashflow and employees.
On 24 March 2020, the Coronavirus Economic Response Package Omnibus Bill 2020 received Royal Assent, meaning that the changes proposed in that bill to "lessen the threat of insolvency" for individuals and businesses in the current coronavirus pandemic have now become law. The changes will be in place for a period of six months starting from today and ending on 25 September 2020, unless this grace period is extended in the future.
By way of summary, the legislative changes involve the following measures:
With the proactive changes announced over the weekend by Treasurer Josh Frydenberg to the Corporations Act and the country’s insolvency laws, Australian businesses (and in particular small businesses) have been extended a lifeline for, at least, the next 6 months.
In short, the main changes are:
In an unprecedented move the Federal Government has announced temporary changes to some aspects of existing insolvency laws as part of the plan to try and keep businesses operating during this unique health crisis time.
Insolvent Trading
The Federal Government yesterday announced a package of temporary measures to assist financially distressed companies. The package is intended to allow distressed businesses (and individuals) time to weather the uncertain storm of Covid-19 and resume normal business once the immediate crisis is over.
Each element of the package will apply (at this stage) for 6 months.
Statutory demands and bankruptcy notices are powerful tools used by businesses seeking payment. For 6 months they will be much weaker. What options remain?
The Government has announced proposed changes to personal and corporate insolvency laws to provide temporary relief to debtors in connection with compulsory insolvency processes.
Changes to statutory demands and bankruptcy notices
The Australian Government has passed the "Coronavirus Economic Response Package Omnibus Bill 2020". The new legislation was announced on Sunday 22 March 2020 and was fast tracked through parliament as part of the Australian Government's response to the economic impact of COVID-19.