The economic impacts of COVID-19 are unexpected and significant. While the Australian Government has announced a number of temporary reforms to address these impacts, there remains risk for directors of companies that are unable to pay their debts as and when they are due.
With Australia facing a likely shut down of non-essential services in the next 48 hours, many otherwise profitable and viable business are unfortunately facing financial distress. As part of the Federal Government's second economic stimulus package, it has been announced that the Morrison government will make temporary changes to insolvent trading laws including providing directors from temporary relief for insolvent trading.
The key measures (all to apply for the next six months only) are as follows:
As the Novel coronavirus (COVID-19) pandemic continues to spread across the globe, people and businesses are facing unprecedented challenges, both immediate and strategic. Governments in various jurisdictions have announced various measures to try to alleviate the distress caused by the numerous issues that have arisen and continue to arise, particularly around cashflow and employees.
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.
It distresses me to even contemplate how many businesses operating in the construction industry will eventually succumb to some form of insolvency as a result of the coronavirus (COVID-19) crisis (event).
These are extraordinary times and as such, it cannot be ‘business as usual’ in terms of how the construction industry is regulated in terms of insolvency.
In an article in the Financial Review dated 17 March 2020, it is stated: