The Federal Government has announced proposed changes to insolvency laws to assist with efforts to help vulnerable Australians and businesses in these unprecedented times.
What are the proposed changes?
The proposed temporary changes are as follows:
When will this take effect?
- The debt threshold to issue Creditor’s Statutory Demands (against a corporation) to be increased from $2,000 to $20,000. The timeframe to comply with or apply to set aside a Creditor’s Statutory Demand to be extended from 21 days to 6 months from the date of service.
- The debt threshold to issue a Bankruptcy Notice (against an individual) to be increased from $5,000 to $20,000. The timeframe to comply or apply to extend, set aside a Bankruptcy Notice to be extended from 21 days to 6 months form the date of service.
- Protection for directors from personal liability for trading a company whilst insolvent.
The proposed changes will be introduced via the Coronavirus Economic Response Package Omnibus Bill 2020.
The Government is working quickly, and the Bill may receive Royal Assent this week.
The proposed changes regarding Creditor’s Statutory Demands will only apply to Creditor’s statutory Demands served on or after the commencement of the Bill.
Directors will not incur personal liability for failing to prevent a company incurring a debt while insolvent if the debt was incurred in the 6 month period after the proposed changes come into force or for any extended period.
The above proposed changes will work hand in hand with the stimulus packages announced, lenders’ support and ATO tailored solutions.
This is a very difficult time, and providing support for struggling Australians, their businesses and their advisors is crucial.
The team here at Hicksons is on deck and ready to provide expert support in these challenging and fluid times.
Further updates to come.
Post by Marc Rossi