Government Safety Net for Financially Distressed Businesses

Like most businesses, Lavan has had to act quickly to respond to COVID-19 and, as a result, our people are now working from home.  Having gone through that transition, it is business as usual and all of our 13 practice areas and 152 staff are ready and available to assist our clients in dealing with these uncertain times.

In response to COVID-19, the Government has delivered an unprecedented package of measures to support businesses which are temporarily facing financial distress as a result of the economic impact of the current crisis.

Lavan’s team will be constantly evaluating the meaning and impact of the Government’s measures to support businesses through the COVID-19 pandemic.  We will send regular updates summarising these announcements so that you know what the Government is doing to support your business and others across Australia.

The recently announced measures, which will apply for a period of six months, include:

  • A temporary increase in the current minimum threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000.
  • A temporary increase in the timeframe for a company to respond to a statutory demand from 21 days to six months. 
  • A temporary increase in the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings from $5,000 to $20,000. 
  • A temporary increase in the time period for debtors to respond to a bankruptcy notice from 21 days to six months. 
  • Temporarily extending the period of protection a debtor receives after making a declaration of intention to present a debtor’s petition from 21 days to six months. 
  • Temporarily relieving directors of their duty to prevent insolvent trading with respect to debts incurred in the ordinary course of the company’s business during the crisis.  
  • Giving the Treasurer a temporary instrument-making power in the Corporations Act1 to temporarily amend provisions of the Act to provide relief from specific obligations or to modify obligations to enable compliance with legal requirements during the crisis.

The Government’s full announcement can be read here.

If you would like to talk to us about the relevance of these announcements to your business, please call partner Lawrence Lee on (08) 9288 6936.

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.