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:
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.
From 26 March 2020, until 25 September 2020, bankruptcy triggers have changed:
See the Economic Response Package Omnibus Act 2020 (Cth) (Omnibus Act) for further detail.
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.
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.
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.
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.
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:
For more detail, see Lavan’s publication here.
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.
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.
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.
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.
On or after 25 March 2020, the triggers for issuing statutory demands changed until 25 September 2020:
The amendments do not affect or invalidate statutory demands that were served prior to 25 March 2020.
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).
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:
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.
[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.
