In the bankruptcy world, not all claims are created equal. Rather, certain special categories of claims have priority status and are not only paid ahead of other claims, but are also often paid in full. One such category of claims is found in Bankruptcy Code § 503(b)(9), which grants priority claim status for goods which were sold in the ordinary course of business and received by a debtor within the 20-day window leading up to the bankruptcy filing. The code section is very clear, however.

Some private providers may face pressure in coming months, now that the temporary changes to insolvent trading laws and the statutory demand regime have come to an end. This may particularly be the case if challenges to the international student regime continue.

Key takeouts

Many small businesses are structured as pass-through entities for federal income tax purposes.[1] Well known examples include partnerships, limited liability companies, and corporations that elect “S Corporation” status under 26 U.S.C. Section 1362.[2]

Australia's largest corporate insolvency reform in 30 years is set to be introduced at the beginning of 2021. Draft legislation, which applies to small businesses, was released last week. Organisations need to familiarise themselves with the information ahead of an anticipated wave of insolvencies in 2021, as COVID-19 related government incentives cease.

Key takeouts

What's next for Australian businesses after the temporary COVID-19 insolvency law relief expires at the end of 2020? The government's new announcement sheds light on the next steps.

Key takeouts

The Australian Government has announced proposed major reforms to corporate insolvency laws for incorporated businesses with liabilities of less than $1 million that are facing financial distress.

COVID-19 Key Developments __ Top Story | COVID-19:Temporary amendments to insolvency laws extended to 31 December 2020 On 7 September The Treasurer and the Attorney General issued a joint statement announcing that the government plans to extend temporary insolvency and bankruptcy protections for businesses impacted by the COVID-19 pandemic until 31 December 2020. MinterEllison's Michael Hughes has released an article providing an expert summary of the changes. This can be accessed on our website here.

On 7 September 2020, the federal government announced that the temporary changes to the creditors' statutory demand and insolvent trading laws have been extended to 31 December 2020.

Key takeouts

In March 2020, the Commonwealth Government's early responses to the economic consequences of the COVID-19 included temporarily suspending and changing important elements of Australia's insolvency laws. These temporary changes were due to expire on 25 September 2020. The government has now announced that this period will be extended to 31 December 2020.

The Government has implemented significant temporary measures to ensure that our insolvency laws and processes do not expose companies and individuals to undue risk. This will hopefully avoid a potentially unprecedented wave of insolvencies.

Key takeouts

The Government announced a six month suspension of insolvent trading laws.

The relevant debts will still be due and payable by the company in the normal way.

Egregious cases of dishonesty and fraud will still be subject to criminal penalties.

The Federal Budget update focused on Australia's economic position and the impact of the Government's response to COVID-19 and the 2019 – 20 Bushfires. Though no new measures were specifically announced, there were some additional items for certain existing programmes.

Key forecasted Budget figures

Two recent bankruptcy court cases remind counsel of the great importance of knowing the proclivities of the presiding panel of judges who will hear your client’s case. Experienced practitioners know the law and the best advocates also know the assigned judges. Both cases discussed below illustrate the importance, at least in bankruptcy practice, of arguing the law in a fashion that addresses the court’s sense of what is fair and proper under the case’s unique circumstances.

Voluntary Retirement Plan Contributions Are Required for Maintenance or Support?