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:
Amendments to the Corporations Act 2001 (Cth) (Corporations Act) to implement the measures announced by Treasurer Josh Frydenberg on Sunday, 22 March 2020 to provide temporary relief for financially distressed businesses due to COVID-19 have now come into effect.
The Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (CERPO Act) amendments were passed by the Parliament on 2 March 2020. They will apply for a 6 month period, but may be extended or have impacts beyond that timeframe.
On the 22nd of March, the Federal Government announced a suite of temporary changes to insolvency laws to help struggling businesses dealing with the economic fallout of the coronavirus.1 These changes have been designed to act as a ‘safety net’, minimising the threat of actions that could unnecessarily push businesses into insolvency and, instead, allowing them to continue trading.
Changes to Demands from Creditors
*This information is accurate as of 9.00 am Wednesday 25 March 2020 and is subject to change as this situation evolves.
A tenant's solvency, or its risk of insolvency, is not a novel concern for landlords and tenants alike. But the unprecedented COVID-19 pandemic is putting corporate tenant solvency risk into the hot spotlight arguably like never before, and for good reason.
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.
The Federal Government has announced a package of changes to Australian insolvency and bankruptcy laws to provide some relief to businesses and individuals who may face financial distress from the economic impacts of the current health crisis.
The package is expressed to provide a safety net to ensure that when the crisis has passed, profitable and viable businesses can resume normal operations. This is in the form of changes to the Corporations Act to provide temporary relief to assist companies to manage through the current economic climate.
As part of its second stimulus package in response to the developing novel coronavirus pandemic announced on 22 March 2020, the Australian Government has extended a lifeline to individuals and businesses facing financial distress by way of temporary changes to the laws of insolvency. There are four key features of the changes.
1. Temporary changes to creditor's statutory demands laws
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 Australian Government has announced temporary measures to curtail the impact of COVID-19 on Australian businesses by lessening the threat of otherwise viable businesses being placed into external administration. In part, these measures seek to prevent the winding up of companies which are experiencing short term financial distress and protect company directors from potential personal liability in order to incentivise continued trade through the COVID-19 health crisis. Similar temporary relief measures extend to individuals in financial difficulty.