The temporary changes to insolvency laws under schedule 12 of the Coronavirus Economic Response Package Omnibus Act 2020 have been extended to end on 31 December 2020.
The temporary measure were originally set to end on 25 September 2020.
A recap of the changes are as follows:
Bankruptcy
The time for a debtor to comply with a bankruptcy was extended from 21 days to six months. The threshold for initiating bankruptcy proceedings increased from $5,000 to $20,000.
The same six month time extension applies to the time within which a debtor is protected from enforcement action by a creditor, following their presentation of a declaration of intention to present a debtor’s petition, under s 54A Bankruptcy Act.
Liquidation
The time for a debtor company to comply with a statutory demand was extended from 21 days to six months. The threshold to issue a statutory demand increased from $2,000 to $20,000.
Safe harbour
The temporary s 588GAAA ‘Safe harbour—temporary relief in response to the coronavirus’, of the Corporations Act 2001 provides that the existing civil penalties for directors failing to prevent insolvent trading under ss 588G(2) do not apply in relation to a debt incurred by a company if the debt is incurred in the ordinary course of the company’s business and until 31 December 2020.
The By Lawyers Dealing with COVID-19 legal issues commentary has been updated to reflect the revised end date of 31 December 2020 for the Commonwealth government’s insolvency measures.