The Government has announced 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.
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.
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:
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.
These key action points take into account the UK Pensions Regulator's recent statement on COVID-19. Trustees and employers should continue to monitor further updates from the Regulator.
Defined benefit (DB) arrangements
On 30 January 2020, the World Health Organization declared that the coronavirus outbreak constituted a public health emergency of international concern. The PRC and Hong Kong have been at the forefront of the coronavirus outbreak.
On 30 January 2020, the World Health Organization declared that the coronavirus outbreak constituted a public health emergency of international concern. The PRC and Hong Kong have been at the forefront of the coronavirus outbreak.
The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 was passed by both houses of Parliament on 5 February 2020, with an amendment made by the Senate to review the operation and effectiveness of the legislation after five years accepted by the House of Representatives.
The UAE has pioneered a new insolvency regime for individuals or natural persons with the issuance of the stand-alone Insolvency Law No. 19 of 2019 (Insolvency Law), which has come to effect as of 30 November 2019.
The Insolvency Law is intended to provide sufficient protections to natural or civil persons who are facing financial distress and are unable to settle their debts, unlike the UAE Bankruptcy Law which regulates commercial companies and individuals considered as traders under the Commercial Transactions Code.
The UAE has pioneered a new insolvency regime for individuals or natural persons with the issuance of the stand-alone Insolvency Law No. 19 of 2019 (Insolvency Law), which has come to effect as of 30 November 2019.
The Insolvency Law is intended to provide sufficient protections to natural or civil persons who are facing financial distress and are unable to settle their debts, unlike the UAE Bankruptcy Law which regulates commercial companies and individuals considered as traders under the Commercial Transactions Code.