To our valued clients and friends of the firm,
We are continuing to monitor the impacts of COVID-19 on all our clients, and the greater community. Those impacts are diverse and we are committed to keeping you abreast of changes that will directly affect your businesses.
The Coronavirus Economic Response Package Omnibus Bill 2020
Yesterday the Federal Government announced its economic response to COVID-19 and released the following fact sheet: https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Providing_temporary_relief_for_financially_distressed_businesses.pdf
This will be implemented via the Coronavirus Economic Response Package Omnibus Act 2020 which at this stage we expect to be passed in Parliament this week.
Relevantly, key elements to the package are set out in the fact sheet as being:
• Statutory Demands (temporary changes):
- an increase in the threshold at which creditors can issue a statutory demand. This will be an increase from $2,000 to $20,000;
- an extension of the usual 21 day timeframe for acting on a statutory demand (to avoid a presumption of insolvency arising) to six (6) months.
• Bankruptcy Notices (temporary changes):
- an increase in the threshold for a creditor to initiate bankruptcy proceedings from $5,000 to $20,000;
- an extension of time for a debtor to respond to a bankruptcy notice (failure of which constitutes an act of bankruptcy) from 21 days to six months; and
- upon presentation of a Notice of Intention to Present a debtor’s petition the debtor’s usual moratorium from actions by unsecured creditors is increased from 21 days to six (6) months.
• Company Directors:
- temporary relief for directors from personal liability for trading whilst insolvent.
A further element is described as "temporary flexibility in the Corporations Act 2001 to provide targeted relief for companies from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis". To facilitate this the Treasurer is being given a temporary instrument-making power in the Corporations Act to temporarily amend provisions of the Act to provide or modify relief from specific obligations. This will also have application for up to six (6) months.
These new thresholds and extended time periods will be in effect from the day after commencement of the Coronavirus Economic Response Package Omnibus Act 2020 (subject to the Bill being passed in its current form).
What should you be doing?
For many businesses that have otherwise enjoyed profitability and viability there are some very real, and scary, issues that are going to be impacting them adversely. At the outset, debt collection practices should be ramped up, and strict credit controls put in place for suppliers. Over time, as businesses become more and more under financial stress, those practices of collections will become more difficult, and impact our supplier and professional services clients. Protecting your business’ financial stability starts with this focus.
Creditors are still able to :
1. Issue letters of demand and initiate court proceedings in the state and federal courts;
2. Enter / obtain judgments (by default or otherwise);
3. Lodge caveats over property to secure interest;
4. Register security interests on the PPSR; and
5. Enforce judgment debts by way of warrants of execution, writs over property, enforcement hearings etc.
Of course, statutory demands and bankruptcy notices can also still be issued, however, they will be subject to the new thresholds and periods.
Changes to the Courts
There are (almost daily) changes happening within the court systems. Generally, however, the Courts appear to be adapting well to an online environment and our expectation is that they will continue to evolve as required and settle into new normalised operations to ensure that the legal system continues to operate at an optimum level.
We are here to help
The team at Cronin Miller Litigation is committed to local business and supporting our community. In that regard we are in a position to provide you with a free consultation with a view to supporting all businesses that are challenged at this time. Please do not hesitate to contact us and we will arrange telephone or video-conferencing facilities to deliver that service to you.
T: 07 5592 6633
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Cronin Miller Litigation is a Gold Coast based law firm specialising in resolving commercial disputes, and providing effective results for persons who have a claim of a commercial nature.Contact us today