The Federal Government recently announced that the temporary changes to both corporate and personal insolvency law, introduced in March this year, have been extended to 31 December 2020 to try to further alleviate some of the adverse impact on business, of COVID-19. Victoria in particular has been hit hard by COVID-19. The temporary measures include extending the following (introduced in March 2020) to apply until at least 31 December 2020:
- increasing the debt threshold (minimum amount owing) upon which creditors can issue a Statutory Demand to corporate debtors (increasing from $2,000 to $20,000)
- increasing the debt threshold (minimum amount owing) upon which creditors can commence bankruptcy proceedings against individual debtors (increasing from $5,000 to $20,000)
- increasing the time period for responses by debtors to Statutory Demands (corporate debts) and Bankruptcy Notices (personal debts) – increasing from 21 days to six months
- temporary relief, in the absence of fraudulent conduct, for directors from the insolvent trading (personal liability) provisions of the Corporations Act 2001*
*However, it is very important that directors realize that all other provisions of the Corporations Act 2001 regarding director conduct STILL APPLY! Directors have a statutory duty to act honestly, with care and diligence, in good faith and for a proper purpose when exercising their powers and discharging their duties as a director. Recklessness and dishonesty is an offence!
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