In the current climate, many businesses will suffer from financial difficulties, though this does not necessarily mean that the businesses are insolvent. There are a number of indicators that may suggest that a company is insolvent, rather than just suffering temporary financial issues. Whether you are a creditor, a company director or other stakeholder, you should be aware of these indicators and what a company’s insolvency could mean for you.

What Does it Mean to be Insolvent?

There is no bigger fan of adjudication than me. While not perfect, I nevertheless believe that adjudication has changed the construction industry for the better since its inception in 2004.

High Court provides guidance on voluntary administration and creditors’ meetings under COVID-19 Alert Level 4

A recent decision of the High Court provides helpful guidance for insolvency practitioners on how aspects of the voluntary administration regime should operate in the context of the COVID-19 pandemic.

It is clear that there are going to be incredible impacts to businesses and companies of all sizes as a result of the COVID-19 pandemic. No business will be immune to the impact of this health epidemic. Across the globe, governments have responded in various ways to change insolvency laws in an attempt to provide assistance to those businesses affected directly or indirectly by COVID-19. Australia is no different and the Federal and State Governments have responded quickly to the crisis.

The Australian Government has introduced new laws which are intended to avoid unnecessary corporate insolvencies in light of the challenges presented by the unfolding COVID-19 global pandemic. The new laws came into effect on 25 March 2020 and include:

The impact of the COVID-19 crisis and the health-related measures implemented by the government to contain the spread of this deadly virus will unfortunately result in the economy going into recession.

In an article in the Financial Review, the results of a survey of economists revealed that even taking into account all the government’s stimulus and job-saving measures, the Australian economy will be in recession until June 2021.

NON-FISCAL POLICIES TO HELP BUSINESSES OUTLAST THE COVID-19 VIRUS

In non-coronavirus news for the insolvency sector, the 26 March judgment of the NSW Supreme Court in Aardwolf Industries LLC v Riad Tayeh provides reassurance to insolvency practitioners who take on the (often understated and unprofitable) work of being a court appointed liquidator.

The Court has restated the principle that its leave must be sought prior to commencing proceedings against a court appointed liquidator for the way in which the liquidation was conducted. The Court identified two reasons.

This week’s TGIF examines the recent changes to Australia’s insolvency regime, the potential implications for business and considerations for creditors in light of the impact from COVID-19.

The Australian Government has now passed theCoronavirus Economic Response Package Omnibus Bill 2020. The bill was fast-tracked through both houses of parliament with bipartisan support on 23 March 2020 and makes significant changes to Australia’s insolvency regime over the next six months.

What happened?

With the impact of COVID-19 rapidly being felt by businesses, 2020 is likely to see a number of Australian insureds face insolvency. While this presents a number of challenges for (re)insurers in the Australian market, there are steps that (re)insurers can take to manage the situation and their exposures.