On the evening of Monday 23 March, 2020, the Australian Federal Government passed a broad range of stimulus measures under the Coronavirus Economic Response Package that is said to come into force immediately. The Coronavirus Economic Response Package is a temporary (six-month) relief package to combat the economic impacts of the coronavirus disease 2019 (COVID-19) outbreak and to provide public health measures to prevent its spread.

Summary

On 23 March 2020, the Federal Parliament passed the Coronavirus Economic Response Package Omnibus Bill 2020 (the COVID Act).

The COVID Act received Royal Assent on 24 March 2020 which amended, amongst other things, the Corporations Act 2001, the Bankruptcy Act 1966 and the Bankruptcy Regulations 1996 to temporarily release directors from a risk of personal liability for insolvent trading, as well as increase the minimum amount and time-frame for both statutory demands and bankruptcy notices.

While there is some relief for Victoria and Northern Territory associations, all associations should be aware of penalties that may apply in their own State or Territory. Registered charities must still ensure their Committee members do not allow the charity to operate while it is insolvent.

The COVID-19 pandemic has placed immense strain across the whole of the economy and raises the issue of how company directors should balance their obligations to shareholders and creditors while ensuring that they protect themselves from any personal liability.

Companies and their directors in the following sectors of the economy face difficult decisions:

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.

This week’s TGIF considers the Coronavirus Economic Response Package Omnibus Act 2020, which was passed in response to the economic impact of the coronavirus. Amongst other things, the Act makes significant changes to creditor’s statutory demands and insolvent trading laws.

The Act

As part of the its efforts to stem the effects of the COVID-19 pandemic on the Australian economy, the Federal Government has recently introduced a number of ‘safety net’ provisions designed to avoid financially distressed individuals and companies being forced into, respectively, bankruptcy and liquidation.

The objective is to allow them to continue trading where possible.

The reforms

If ever there were times challenging enough for boards to be considering the financial lifeline that is safe harbour from insolvent trading, these are they.

On a daily basis we are reading news of businesses having to shut down and lay off employees and seeing footage of lengthy Centrelink queues. Boards are working harder than ever to govern their organisations in incredibly uncertain times.