Treasurer Josh Frydenburg has announced a series of potential temporary economic measures in response to the fluid COVID-19 situation. This temporary package has implications for bankruptcy, insolvency and corporate law.

We have summarised the proposed measures below.

Bankruptcy changes

  • Increase in the minimum debt threshold for a creditor-initiated bankruptcy procedure from $5000 – $20,000;
  • The time to respond to a bankruptcy notice increased from 21 days to 6 months;
  • An extension of the protection period for individual’s declaring an intention to present a debtor’s petition extended from 21 days to 6 months.

Insolvency Changes

  • Increase in minimum amount for a statutory demand from $2000 – $20,000;
  • Increase in time to respond to a statutory demand from 21 days to 6 months;
  • Temporary suspension of directors’ personal liability for insolvent trading for six months (egregious cases of dishonesty will still attract criminal liability);
  • Insertion of s 588GAAA which provides an additional temporary safe harbour provision during the six-month period.

According to the Bill, the amendments to times for compliance will only apply to procedures commenced on or after the commencement of the amending Schedule. The temporary increase in the monetary threshold will be repealed at the end of the six-month period which starts on the date of commencement.

In addition to the above relief, the Australian Investment and Securities Commission has announced it has adopted a ‘no-action’ position in regard to company AGM’s including:

  • a two-month ‘no-action’ position in regard to entities with a financial year end of 31 December that have not held an AGM by 31 March 2020;
  • the holding of virtual AGM’s;
  • sending supplementary notices of AGM electronically;
  • non-compliance with section 249J of the Corporations Act.

ASIC encourages the use of technology to facilitate virtual AGMs and electronic communication, however the company constitution will determine whether or not this is possible. ASIC cannot amend the constitution to allow this, however irregularities may be addressed via other methods.

No changes to financial reporting obligations have been announced yet, however ASIC is monitoring the situation.

While ASIC is entitled to indicate that it will not exercise its regulatory powers in a certain way, this does not prevent third parties from taking action against a company or a Court ruling that conduct has breached legislation. It is highly advisable to seek legal advice prior to undertaking a course of action.