National Rugby League (NRL) was successful in setting aside a summons for public examination obtained by the liquidator of Newheadspace Pty Limited (Newheadspace). The Court also awarded NRL its costs. The Court found that the creditors’ voluntary winding-up of Newheadspace was an abuse of process, and that the summonses were obtained for an improper purpose.
Directors of Australian companies face significant personal monetary − and potential criminal and adverse professional - consequences if they allow the company to trade whilst insolvent.
Australian insolvent trading laws are harsher, and more frequently utilised to prosecute directors personally, than in many other jurisdictions including in the US and the UK.
Accordingly, frequent assessment of a company's solvency by its directors is crucial, particularly in financially difficult times, as are active steps to address any potential insolvency.
The Australian Federal Government has announced today (22 March 2020) that it intends to make temporary amendments to insolvency and corporations laws in light of the challenges COVID-19 poses to many otherwise profitable and viable businesses.
In particular, the government intends to relieve directors from the risk of personal liability for insolvent trading, where the debts are incurred in the ordinary course of business.
The Australian Federal Government has announced today (22 March 2020) that it intends to make temporary amendments to insolvency and corporations laws in light of the challenges COVID-19 poses to many otherwise profitable and viable businesses.
In particular, the government intends to relieve directors from the risk of personal liability for insolvent trading, where the debts are incurred in the ordinary course of business.
The Treasurer, the Honourable Josh Frydenberg MP, has today announced proposed temporary changes to Australian corporate insolvency laws which will vary the minimum requirements for statutory demands and provide some relief for directors from insolvent trading. These announcements form part of the Australian Government's measures to support otherwise profitable and viable businesses due to the economic impacts of COVID-19.
On 22 March 2020, the Australian Federal Government announced a raft of proposed temporary changes to insolvency laws in light of the financial distress and challenges COVID-19 has caused to Australian businesses.
The proposed changes are summarised below:
companies
Statutory demands
The Federal Government has recently introduced the Coronavirus Economic Response Package Omnibus Bill 2020 (Bill).
Schedule 12 of the Bill will provide relief to individuals and businesses facing financial distress due to the COVID-19 crisis by effecting temporary changes to the Corporations Act 2001 (Cth) (CorporationsAct), the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) and the regulations to those Acts.
Yesterday, the Federal Government announced the following temporary measures for financially distressed businesses:
The increasing spread of COVID-19, and now the unprecedented measures being taken by governments to slow that spread, is having and will continue to have a significant impact on economies around the globe, including Australia. As the situation has not been seen before, it is difficult for businesses and individuals to plan ways to limit the impact on their ability to continue trading – and pay their debts.
In recognition of the unique challenges facing businesses today, the Australian Government has responded by acting to relax laws relating to insolvency.
What a director wanting to enter the safe harbour must do
Directors in Australia have long had a statutory duty to prevent insolvent trading. The duty is engaged where: