Changes to Statutory Demands and Bankruptcy Notices during COVID-19 crisis
Earlier this week, as part of a raft of measures in response to the COVID-19 crisis, both houses of the Federal Parliament passed the Coronavirus Economic Response Package Omnibus Bill. The purpose of the Bill is to provide temporary relief for financially distressed individuals and businesses.
Relevantly, the Bill seeks to amend the Corporations Act/Regulations and Bankruptcy Act/Regulations to:
- increase the statutory minimum for a creditor to issue a statutory demand to a debtor from $2,000 to $20,000. This raises the thresholds for creditor demands that can push businesses into insolvency;
- temporarily provide debtors more time to respond to a statutory demand – the period is extended from 21 days to six months;
- temporarily increase the minimum amount of debt required to be owed before a creditor can initiate involuntary bankruptcy proceedings against a debtor from $5,000 to $20,000;
- temporarily provide debtors more time to respond to a bankruptcy notice – the period is extended from 21 days to six months;
- temporarily extends the timeframe in which a debtor is protected from enforcement action by a creditor following presentation of a declaration of intention to present a debtor’s petition – the period is extended from 21 days to six months; and
- provide temporary relief for directors from their personal duty to prevent insolvent trading.
These temporary changes will be in place for six months from 25 March 2020 (the day after Royal Assent was received).
These amendments will have far-reaching consequences in the insolvency law area, debt recovery, and the way in which directors can go about running their business more generally.
If you require legal advice in relation to a statutory demand or bankruptcy notice recently served or received, please contact our Insolvency Law Team via our contact form or directly on:
- Michael O’Brien – 03 8600 6018
- Paolo Tatti – 03 8600 6026