Insol­ven­cy Update  Statu­to­ry Demands, Bank­rupt­cy and Insol­vent Trading 

With COVID-19, the Coro­n­avirus Eco­nom­ic Response Pack­age Omnibus Bill 2020 (the Bill) has some sweep­ing changes to statu­to­ry demands, bank­rupt­cy and insol­vent trad­ing including:

Statu­to­ry Demands:

• the min­i­mum debt for a statu­to­ry demand will be $20,000 (instead of $2,000)
• the time for com­pli­ance by a debtor com­pa­ny is now 6 months (instead of 21 days)
• This will apply to statu­to­ry demands that are served on or after the com­mence­ment of the Sched­ule (s 1669 of the Bill)
  

Bank­rupt­cy:

• the statu­to­ry min­i­mum is now $20,000 (instead of $5,000)
• the time for com­pli­ance is now 6 months (instead of 21 days)
• This will apply to bank­rupt­cy notices issued on or after the com­mence­ment of the Sched­ule and peti­tions and dec­la­ra­tions pre­sent­ed on or after the com­mence­ment of the Schedule

Direc­tors relief from insol­vent trading:

• there is now a safe har­bour for direc­tors and sec­tion 588G(2) does not apply if the debt is incurred: 
  1. in the ordi­nary course of the company’s busi­ness; and
  2. dur­ing:
     1. the 6 month peri­od start­ing on the day this sec­tion com­mences; or
     2. any longer peri­od that starts on the day this sec­tion com­mences and that is pre­scribed by the reg­u­la­tions for the pur­pos­es of this sub­para­graph; and
  3. before any appoint­ment dur­ing that peri­od of an admin­is­tra­tor, or liq­uida­tor, of the company.

Update: The Bill received roy­al assent on 24 March 2020 and is now the Coro­n­avirus Eco­nom­ic Response Pack­age Omnibus Act 2020. The changes out­lined above are now effec­tive from 25 March 2020. 

It is impor­tant to note that the time for com­pli­ance for statu­to­ry demands served and bank­rupt­cy notices issued before 25 March 2020 (i.e. on 24 March 2020 or before) is still 21 days.

See the leg­isla­tive update here: https://​www​.aph​.gov​.au/​P​a​r​l​i​a​m​e​n​t​a​r​y​_​B​u​s​i​n​e​s​s​/​B​i​l​l​s​_​L​e​g​i​s​l​a​t​i​o​n​/​B​i​l​l​s​_​S​e​a​r​c​h​_​R​e​s​u​l​t​s​/​R​e​s​u​l​t​?​b​I​d​=​r6521