Restructuring your business during COVID-19. An overview of what to consider

For companies and directors navigating restructure, the raft of legislative measures designed to counter the economic impact of COVID-19 can provide immediate relief to the financial strain for business and individuals (especially director-guarantors).  A summary of the key measures benefiting business and director-guarantors is below:

Australian Taxation Office (ATO)

The ATO has announced measures and tailored solutions for individuals and businesses affected by COVID-19, including temporary reduction of payments or deferrals and/ or withholding enforcement action i.e. Director Penalty Notices.

Bankruptcy Proceedings

From 26 March 2020, until 25 September 2020, bankruptcy triggers have changed:

  • The threshold to issue a bankruptcy notice is increased from $5,000 to $20,000.
  • The period for compliance with the bankruptcy notice is increased from 21 days to six (6) months.

See the Economic Response Package Omnibus Act 2020 (Cth) (Omnibus Act) for further detail.

Commercial Leases

Landlords’ rights to evict tenants, terminate a lease and gain possession of commercial, leased premises have been constrained in Western Australia between 30 March 2020 to at least 29 September 2020.

For more detail, see Lavan’s publication here. For residential landlords, see below.

Contractual Obligations, Force Majeure 

Has COVID-19 hindered your business’ ability to perform and meet its contractual obligations? Contracts often include provisions designed to address matters outside of your control or expectation. If the breaching party can show this is the case, they may be able to avoid paying damages through the operation of a force majeure clause or pursuant to the legal doctrine of frustration.

For more detail, see Lavan’s publication here.

Corporate Governance

In spite of its challenges and business disruption, COVID-19 presents no excuse to overlook continuous disclosure requirements. Listed companies must continue to take care to ensure compliance with reporting requirements, regulations and industry guidelines during the pandemic. Companies should mitigate any issues and ensure continuing compliance by confirming the company’s obligations under ASX Listing Rules, under the Corporations Act and to its shareholders. 

For more detail, see Lavan's publication here.

Debt Recovery

At the time of this publication, there have been no changes to a creditor’s ability to commence simple debt recovery proceedings, but this is subject to the Court’s availability to deal with hearings and matter management during the pandemic.

Directors' Duties

While directors can avail themselves of COVID Safe Harbour relief (see below), this temporary relief is no substitute for the proper exercise of director’s duties and properly informed business judgment to avoid and minimise any personal exposure for insolvent trading.1


Federal and State governments have issued recommendations and relief schemes for impacted businesses and the management of their employees. Employers should work to determine their employee’s individual situation and requirements as this will enable them to:

  • ensure that they are remaining compliant with their statutory obligations;
  • ensure that the employee is awarded the correct entitlements; and
  • confirm the availability of grants or relief for the business and its employees.

For more detail, see Lavan’s publication here.

Foreign Investment

Effective as at 29 March 2020, the Australian Foreign Investment Board (FIRB) has extended its statutory review deadline from 30 days to up to six (6) months. It is important for foreign investors to understand these changes and its impact, especially for the next 6 months.

For more detail, see Lavan’s publication here.

Land tax

On 23 April 2020, the WA Government announced a land tax relief package that provides eligible commercial landlords may with land tax relief grant.

For more detail, see Lavan’s publication here.

Loan repayments

On 30 March 2020, the Australian Banking Association (ABA) announced a third round of stimulus which followed the ABA’s previous announcement that banks would offer deferred loan repayments for six months to small businesses affected by COVID-19.

Australian banks have since announced that there will be an extension to the six-month deferral period of loans for more than 30,000 businesses to help them cope with the economic stress of COVID-19.

Companies will need to advise their bank that their business has been affected by COVID-19 to ‘opt-in’ to the relief.

For more detail, see Lavan’s publication here.

Safe Harbour from COVID Insolvent Trading

Companies are encouraged to continue trading with additional, temporary protection for directors from insolvent trading for debts incurred during 25 March 2020 to 24 September 2020. Directors can only rely on this protection if the debt incurred is in the ordinary course of the company’s business.2 The exercise of proper business judgment, the interests of the company and transactions negotiated on commercial, arms’ length terms remain necessary.

Statutory Demand

On or after 25 March 2020, the triggers for issuing statutory demands changed until 25 September 2020:

  • The threshold to issue a statutory demand is from $2,000 to $20,000; and
  • The period for compliance with the statutory demand is increased from 21 days to six (6) months.

The amendments do not affect or invalidate statutory demands that were served prior to 25 March 2020.

Residential Tenancy

Residential landlords should be aware that from 30 March 2020 to 28 September 2020, a moratorium has been placed upon evictions in Western Australia, and other outcomes introduced including moratoriums on rental increases; changes to how and why default notices can be issued, etc.

See the Residential Tenancies (COVID-19 Response) Bill 2020 (WA) (Bill) for detail on the amendments to the Residential Tenancies Act 1987 (WA) and Residential Parks (Long-stay Tenants) Act 2006 (WA).

Voluntary Administration

During voluntary administration, the administrator may apply to Court to seek relief personally and for the period of the administration for challenges arising from COVID-19. Courts have indicated a willingness to look favourably upon applications where:

  • COVID-19 is cited as the primary cause of disruption;
  • there are reasonable prospects of continuing the company once the disruption is stabilised; and
  • there is sufficient funding to enable the administrators to continue trading the company.3

Lavan comment

The reforms at all levels of government are numerous and ongoing. They are all broadly designed to reduce the economic impact to business. In many instances, the reforms end during September 2020. The temporary relief measures present an opportune time to restructure for the long-term outlook.

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.
Joseph Abberton
Dean Hely
Managing Partner
Lawrence Lee
Restructuring & Insolvency


[1] Corporations Act 2001 (Cth), sections 180 – 182.

[2] Economic Response Package Omnibus Act 2020 (Cth), see Schedule 12, Parts 2 and 3.

[3] See Strawbridge (Administrator), in the matter of CBCH Group Pty Ltd (Administrators Appointed) (No 2) [2020] FCA 472.