Australian Government’s announcement – Temporary relief for financially distressed businesses
The Australian Government has just announced temporary relief measures for financially distressed businesses in response to the impacts of COVID-19. These include:
- statutory demand threshold increase from $2,000 to $20,000 (and the timeframe for companies to respond to such a demand is increased from 21 days to 6 months);
- bankruptcy notice threshold increase from $5,000 to $20,000 (and similar extended time to respond: from 21 days to 6 months);
- temporary relief for directors from any personal liability for trading whilst insolvent (for a period of 6 months); and
- the ATO tailoring solutions for owners or directors of businesses.
The above measures will be available for 6 months from the date of the announcement (i.e. until 21 September 2020), unless otherwise advised by the Government.
Whilst businesses will face uncertain trading conditions over the short and medium term, these relief measures should assist businesses to continue to operate in this challenging environment and to be in a position to resume normal business operations when the crisis has passed.
We note, however, that these changes do not impact a creditor’s ability to initiate legal proceedings in the Courts against a company and its directors for claims generally (such as a breach of contract).
The full announcement can be found at: https://www.business.gov.au/risk-management/emergency-management/coronavirus-information-and-support-for-business/temporary-relief-for-financially-distressed-businesses.