On Tuesday 24 March 2020 the Commonwealth Parliament passed emergency laws responding to the COVID 19 Pandemic. [1]

Critically the Government has enacted amendments to the Corporations Act 2001 (Act):

COVID-19 presents the greatest challenge a generation of corporate managers will see in their lifetime.

This is not the first time the Australian economy has stared down the barrel of a severe economic downturn, but it is the first time the economic conditions that previously underlined robust business models have evaporated overnight due to a public health crisis.

The Australian Government has taken swift action to enact new legislation which significantly changes the insolvency laws relevant to all business as a result of the ongoing COVID-19 related developments.

Snapshot

As the CODIV-19 pandemic escalates and the Australian Government implements measures to address the ongoing health crisis, the toll on the Australian economy will increase.

The government has identified that the economic impacts of the COVID-19 pandemic and the public health measures to prevent its spread could see many otherwise profitable and viable businesses temporarily face financial distress.

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:

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: